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The Financial Market
 That Few Understand

"A loss never bothers me after I take it. I forget it overnight. But being wrong - not taking the loss - that is what does damage to the pocketbook and to the soul."
Jesse Livermore

The average investor finally, has gotten the wake up call that they have been ignoring. It required a dramatic drop after weeks of steady decline. Some analysts call it a free fall, while the more astute view it as the ultimate insider opportunity. Yes, serious money can be made from the relics of the duped. If your timing is correct, shorting the index is pure joy. Ever hear of a zero sum gain? Well, welcome to the realm of financial misery for the many and glee for the few.

While Jesse Livermore was the most famous short seller, he died broke and at his own hands. How many of the believers in the American dream will befall the same fate? Mutual funds, the 401 K and IRA's are a way of life for most investors. They bought into the rising market theory and plunged in with both feet. Now the reality of the corporate mirage, sinks into their consciousness, just as their last quarterly report tanks.

What most fail to grasp is that those phantom gains were always funny money, that only existed in the expectations of the apparition. When a stock price far outpaces it's true value, not everyone can sell at its peak. There would never be enough new buyers, to take them out at the apex. The short seller knows this fact very well. Their technique is to sell the rebound dream, while they drive the prices even lower.

The financial community has never been a level playing field, nor should sensible people ever expect it to become one. Manipulation is the art of the conductors in this orchestra - chanting the requiem for fiscal suicide for the uninformed. When a trade closes as the price drops for a stock, it means that there is a gain for the buyer who sold short. This occurs because there is a settlement or reconciliation at the end of the day. But what happens when the owners of the stock refuse to panic and maintain their position? The carnage should stop, right? But what we have is a system that gives great latitude to the fund manager to make the portfolio look good for the next report. A task that only the rare fund can accomplish since they are invested in the ownership of a wide range of securities, as the prices for most indexes continue to fall.

When nervous investors run for the door and demand redemption, the fund manager is forced to sell from his holdings which continues the downward momentum. The short seller smiles all the way to the bank . . . He loves the frenzy and often feeds the scare.

Have you ever wondered why so many savvy traders love crashing markets? The pigeons are easy pickings. But when a company goes bankrupt, it's stock value evaporates because no new buyers are available at any price. At that point and only under this circumstance, is wealth truly destroyed. Under normal conditions, it is a game of musical chairs, scored by Mozart and played by your local high school band. Liquidation is the real danger of a deflating economy. Bankruptcy is the danger we all should rightly fear.

While the scheme can still be held together, the financial markets reward handsomely, the practitioner of the 'Rothschild Piller' strategy. "one cause of his [Nathan's] success was the secrecy with which he shrouded, and the tortuous policy with which he misled those who watched him the keenest."

This lesson from history needs to be understood today, if the American public wants to retain some marginal vestige of independent control over their own financial destiny. During the uncertainty about the outcome of the Battle of Waterloo, the London Stock Exchange became the focal point of a colossal transfer of wealth. Because of the fear that Napoleon won the battle, the selling turned into a panic as people rushed to unload their 'worthless' consuls or paper money for gold and silver in the hope of retaining at least part of their wealth. Consuls continued their nose-dive towards oblivion. After several hours of feverish trading the consul lay in ruins. It was selling for about five cents on the dollar. At that point on the cue from their director - Nathan, dozens of Rothschild agents made their way to the order desks around the Exchange and bought every consul in sight for just a 'song'!

Can history be repeating itself once again? Well, any astute market student would conclude that we have just gone through our own version of TULIPOMANIA. No doubt that historic price earning ratios has been out of sync for well over a decade. A significant downturn has long been overdue. All that talk about a new paradyne for a different economy seems to have fallen flat. Just look at the failure of the AOL - Time Warner model. But there are many serious and somber enterprises that still remain and will continue to function, as long as the domestic economy requires their products and services. The actual functional disconnect that drags down the economy is caused by the international trade deficits.

The short seller knows this all too well. They will talk up the need to have Free Trade while they launch their assault on domestic companies. Might there be a little of Rothschild blood flowing in their veins? Well, we will see if the recent wake up call, can be converted into a musical ballad, or will the public continue to hear with a tin ear? No decent person would take enjoyment in the dramatic eradication in value of their neighbor's portfolio. But when was acting morally and proper a trait of Wall Street colluders?

Hedging may be too late for most, but panic may well have you working for Nathan's. Maybe you won’t need to be serving up hot dogs, but will you be employed by an inheritor of that other Nathan? Jesse Livermore viewed the markets as sport. Accumulators of short positions see investors as marks. And the typical share holder is befuddled by their sinking investment statement. Maybe now you can begin to understand who is building all those multimillion dollar estates!


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Prices are important not because money is considered paramount but because prices are a fast and effective conveyor of information through a vast society in which fragmented knowledge must be coordinated.
Thomas Sowell

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