[I am by career a social/political/legal philosopher.  By chance as a college student I also wrote ‘short stories of enterprise’ for Fortune Magazine.  However, my real training in the tricks and treats of the stock market was initiated when I used to read the stock results from the Wall St. Journal aloud to my father as he drove me to school as a 12 and 13-year-old.  My father was one of those rare individuals who as a broker and investment counselor was totally _honest_ — and somewhat horrified by the games played by the stock market crew — insider information, selling bum stuff to people, not telling the whole story, getting in and out before the crowd, exploiting underdeveloped nations (there was one of the poor smaller South American ones — which I am not sure — that supposedly guaranteed 25% returns on concrete and beer — the national drink there).

Rules, then, of this game:

If you are going to invest in the market:

1) DON’T BE GREEDY!

I imagine quite a few this past day and possibly with some to come are going to be hit hard, wiped out perhaps, by investments that promised high returns.  If one invests or has to manage things individually along the way as we academics do with our TIAA/CREF pensions which allow us to make changes in allocations — stocks to bonds to guaranteed return things, overseas investments etc. — one can be more speculative early in one’s career.  However, as one approaches retirement, if one can, one should lock in enough to get by along with social security in totally safe things.  We have traditional TIAA which guarantees interest rates reset quarterly which are currently at about 5.25%.

The general rule of thumb here is that things can crash at any moment which one cannot specifically anticipate such as the 9/11 event — which will probably have some sort of repeat — or the current Chinese over investment problems.  One should only speculate with what one can afford to lose.  Unhappily corporations now dumping people often only to enhance the holdings of CEOs rather than cultivating loyal employees make this calculation more difficult!  I have had too many intelligent students starting again who found themselves dumped in middle age when one cannot as readily adjust by finding new employment or careers.  I did not invent the current greedy approach along such lines, but it must be taken into consideration.  I recall when one of the best paid unions — printers — realized that their futures were dim and became major movers here in NYC for open enrollment in the City University of NY so that their kids could find new kinds of careers.

2) DON’T TRUST THE EXPERTS — particularly those who bill themselves as ‘personal financial advisors’.  These types make money from you however things turn out.  They are likely to get it wrong, as the stock market is unpredictable.  It took WW2 — more than a decade later — to pull us out of the depression which began in 1929.  So things can stay bad for quite some time.  The symptoms today are much like those just prior to that crash.  Beware those hedge funds or small scale comparables that promise massive returns.  They are the ones most likely both to crash and to bring on a general depression in doing so.

My archetypal example was the sad story of the father of one of my students several decades back.  He had owned a small photography store and had had the good fortune to accumulate $300,000 of Eastman Kodak stock, a sufficient sum to retire comfortably even though his business had been made worthless by the big discount operations.  Unhappily a neighbor persuaded him to sell his stock (not a bad idea as Kodak was facing stiff competition then) and let him invest it for him (a road to disaster).  This personal financial advisor with legal power to buy and sell proceeded to “churn” the stock holdings (buying and selling rapidly which gave the advisor a steady cut) until the father began to get notices that his account was now negative and that he had to pay in more monies.  His advisor kept telling him that these were mere office errors.  But finally the truth dawned and my student asked me if I knew of any way his father could recoup his total losses.  I told him to get legal advice, but I doubt that there was any recourse if he had signed away his nest egg.  The bottom line here is that Bush’s Social Security plan would have opened the door to the numerous vultures out there.  Each day on my email a dozen or more are trying their hits and there are always naive people who can be suckered.

Sorry to say, the big guys — big reputation investment houses, etc. — have their interests which all too often conflict with those of the smaller investors (and sometimes with the big ones too).  TIAA which is the largest investor in the nation lost a bundle to the Enron fix which was being pushed by big Wall Street operatives.

The bottom line here is that hopefully we will pull back from the brink this time, but down the line the U.S. is far too deeply into debt and vastly over committed to expensive military operations such as Iraq which may pull us down the way the Soviet Union was hit by its over investments in military solutions.  It was driven out of Afghanistan by the same tactics that are now hitting us in Iraq and Afghanistan and g-d forbid that Bush start a war with Iran which can easily sink our ships over there and block the exit route for oil from Saudi Arabia, Iraq, and Iran — while gas goes to up $10.00 a gallon and our economy belly up.

If you want to protect your investments, vote smart — and don’t let anyone snooker (a British term meaning ‘con’) you.  Paul Krugman in the NY Times — a Princeton economist — is one of the more trustworthy voices these days — and his is not in an optimistic mode right now:

http://web.mit.edu/krugman/www/

http://www.wws.princeton.edu/~pkrugman/

Ed Kent]

………………………

http://news.bbc.co.uk/

Last Updated: Wednesday, 28 February 2007, 13:13 GMT

World stock slump hits second day
The markets were surprised by the speed and size of recent declines
Worldwide share prices have continued to fall, triggered by Tuesday’s 9% losses on the Shanghai stock market.

The UK’s FTSE 100 index fell 1.2% by midday trading. That took declines in the past two sessions to 3.4% and knocked £55bn off its total value.

France’s Cac 40 index dropped by 1.1% and Germany’s Dax lost 1%. Earlier, markets in Asia, Australia and India had all suffered substantial losses.

Investors are questioning the outlook for economic and earnings growth.

The current global stock sell-off was fuelled by speculation that China’s government would try to clamp down on illegal share trading and might impose a capital gains tax on stock market earnings.

Stock prices and indexes had climbed to record levels in a number of key world markets, prompting some analysts to fear that shares may have gone too high, too fast.

After a flurry of activity at the start of trading and a large drop, the FTSE 100 rebounded slightly and was recently 61.80 points lower at 6,224.30.

In Japan, the Nikkei 225 share index closed down 515.8, or 2.9%, lower at 17,604.1, while in Hong Kong the Hang Seng index fell 496.36, or 2.5%, to 19,716.5.

More declines?

The question facing many investors is how far and how long the fall in prices will last and whether or not the bull run that has driven stocks and indexes higher has now broken.

“I see it as a correction within a bull market,” said James Hong, head of equity derivatives trading at Dresdner Kleinwort.

This sort of move by the market is a little worrying, and it looks like it has been caused by a build-up of concerns in recent days
Angus Campbell, Finspreads

Send us your experiences
Q&A: World stocks slump

“We were looking for some sort of correction overall. It is a little bit surprising to have it all happen at the same time.”

Even if a market’s upwards trend is not broken, a market correction can still be significant, analysts said.

In May last year, the UK’s FTSE 100 lost more than 9% as concerns about high oil prices and political global instability combined to impact on world markets.

Wide impact

China has been one of the main emerging markets for many investors, and its main stock index had more than doubled in value during the past year.

At the same time, key indexes in Asia such as Japan’s Nikkei 225 were pushing to their highest levels in seven years.

Some analysts fear the fall in share prices may last a number of weeks rather than days.

“This sort of move by the market is a little worrying, and it looks like it has been caused by a build-up of concerns in recent days,” said Angus Campbell, a trader at Finspreads.

“Memories of last May’s correction have sent shivers through investors’ spines as many market participants have used futures contracts to run for cover.”

The worries hammered China’s Shanghai index by nearly 9% on Tuesday, giving it its worst day in a decade.

Bounce back?

The China wobble rippled out across Europe on Tuesday, and hit the US later in the day where it coupled with disappointing economic figures to push the Dow Jones 3.3% lower by the close of trading.

The shocks of the market correction set off by China are still being felt around the world as the hangover continues
Matthew Bristow, Pacific Continental Securities

Asian markets picked up on this negative sentiment, and India’s Sensex fell more than 3.8% on Wednesday.

Australia’s main stock index shed as much as 3.5% and at one point was trading at a five-week low, before closing down 2.7%.

Despite the declines, by lunchtime on Wednesday there were signs of a recovery in the US markets and stock futures indicated that the key indexes would open higher.

A lot will depend on the strength of the US economic figures due out later today, analysts said.

“The shocks of the market correction set off by China are still being felt around the world as the hangover continues to dampen investor mood,” said Matthew Bristow of Pacific Continental Securities.

“This will mean that investors will be more critical of economic data as the current state of the economy is still of uncertainty and the perfect storm caused panic within the markets,” he added.

“A war is just if there is no alternative, and the resort to arms is legitimate if they represent your last hope.” (Livy cited by Machiavelli)

Ed Kent  718-951-5324 (voice mail only) [blind copies]
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