We all know there’s manipulation on Wall Street. There are companies that are much stronger than their fundamentals would suggest, and it laughs in the face of free market capitalism as it was originally intended.
But it’s not just Wall Street that’s to blame…
The concept of free markets suggests that they work best when they’re run from the bottom up, not top down. “The invisible hand” was first brilliantly explained by Adam Smith in The Wealth of Nations in 1776.
Before that, countries, economies, and townships were controlled by the very visible iron hand of kings, queens, nobles, and sheriffs.
Talk about manipulation…
These tyrants completely hijacked the economy from a limited perspective in their ivory towers — mostly to their benefit, not to the average peasant who worked unbelievably hard for a tiny portion of his production.
That’s why the masses eventually revolted. It started in the U.S., then filtered its way into Europe through France.
Just like that, democracy became the wife of free market capitalism and the greatest period of economic progress in history followed. I call this “when Harry met Sally.”
Business people, politicians, and everyday households all tend to praise the virtues of free market capitalism… but they constantly contradict themselves.
The truth is, most people secretly hate it and have fought it for all of history.
Free market capitalism imposes a discipline on governments, businesses, and workers.
If you aren’t efficient, you get eliminated. If you lose touch with your customers, the same. If you aren’t competitive, you lose market share. If new businesses don’t hit the nail on the head, they fail. If workers don’t produce enough, they get fired. If countries or states and provinces aren’t competitive, they lose wealth and power. If politicians don’t deliver results, they get voted out.
It’s stressful! So many people talk big about celebrating the free market system, but no one wants to play the game by its rules.
What everyone wants is some sort of unfair competitive edge so that they aren’t the ones that get their asses kicked in this ever-challenging system.
Workers want more pay for less work. More breaks, more benefits. Assurance they won’t get fired, or at least not easily. They form unions to protect themselves, and in doing so often kill the industries they were a part of.
Businesses want a politician in their pocket. They want to be able to lobby for their special interests, and they do constantly.
They want political rules that will give them an advantage, so innovative competitors can’t take away their seat in their industry. They want patent protection. They want a monopoly, or an oligopoly at minimum.
Politicians want to encourage monetary growth and increased lending to expand their economy and tax revenues. They want to push down their currency to give exporters an unfair advantage. They want to lower interest rates and print money to stave off necessary recessions and deleveraging, as that is also very painful.
No one really likes competition or struggle — they’re very difficult. And we secretly hate innovation, too. It’s the greatest enemy of complacency.
Eventually the free markets win… but only after they’re very heavily fought.
All of this suggests it’s not just Wall Street playing the manipulation game, though they play a heavy and very visible hand in it.
For the next several days, we’ll be covering the impact that market manipulation has on our economy, but also on your portfolio… and why how so much of what we’re sold on Wall Street is merely covering a deeper, more sinister truth.
You’ll also hear from the newest member of my team of editors who will explain why he actively bets against companies, and how to pick an actual “Wall Street Winner” from one that just knows how to play the game.
Stay tuned tomorrow, and thanks for reading.