Why I am NOT jumping into the stock market

If you have been watching the current DJIA you would have seen it hit record highs lately.

 But most of these gains have been with little substantial data to back them up.   In fact everything contrary to gains has occurred

• ObamaCare is set to kick in less than a year and it is known to be a business-killer
• REAL unemployment (not the number the Commerce Dept puts out) is said to still be in double digits (over 11% nationally).
• The US federal government is not addressing the increasingly out of control spending and debt problem which will eventually require draconian levels of taxes on business and citizens.

So what gives?

To me there are 2 things at play here.

1. Gaming the system.

     First of all the Dow (or DJIA)  consists of only 30 major industrial companies.  Companies such as 3M, Intel, WalMart, GE and others are "weighted" to compute a sum (or average).  Therefore concentrating on these 30 companies a group of heavy investors could push the DJIA to levels not in keeping with the rest of the world.   This creates a hysteria type of effect that causes the other indexes such as the S&P500 to follow suit and inflate as well as the DJIA is the most watched index on earth.

2. Computer Stock Purchases

      I am not talking here about you going on-line to buy stocks.  Instead I am talking about what is commonly called High-Frequency-Trading (HFT) or Algorithmic Trading.  Maybe you have not heard of this before but its quite common and growing in size.  In 2006, it was estimated that nearly 1/3 of all stocks bought and sold were done using HFT's.   These are high-end computer server-farms that watch stocks at the millisecond level.  If you remember Superman-II (most of us would rather forget it) the villain (Richard Pryer) makes a bunch of money using computers to confiscate rounding errors into a single account thus ending up with over a $100K.  These computers also, watch stocks and make money using algorithms to buy and sell stocks at such a rapid pace that they make fractions of a cent increases thousands of times a day.  Of course the stock market does not differentiate these buys and sells from those done by REAL people investing or divesting their money.
 

How to erase wealth from the earth

     These 2 issues can possibly cause a perfect-storm in the stock-market and could be used by those with computer skills and a desire to destroy us from within.  By causing people to think the worst is over and to put all their money into the stock-market, that wealth could be effectively "erased" by a sudden and unexpected collapse of the DJIA.   Of course those creating this panic will be the FIRST to get out and would be left with all the money.  Those who wait it out, will be decimated forever.