WIUM Tristates Public Radio

No Sure Bets for Wall Street

Oct 29, 2014

Wall Street seems like a casino where the problem gamblers ARE the House, and they only bet on sure things. “Wall Street hates uncertainty,” analysts say.

So, this month’s stock-market volatility supposedly stemmed from worries over falling oil prices, or weakening economies in China and Europe, or a dip in retail sales, or tensions in Ukraine, or ISIS, or Ebola…

Isn’t such uncertainty the New Reality in the 21st century? In fact, wasn’t it ALWAYS?

Credit Wiki Commons

Wall Street dates to 1792, when 24 New York merchants and stockbrokers signed an agreement and the New York Stock Exchange was born, according to the Library of Congress. There certainly were many diseases, wars, financial anxieties and unknowns during those 222 years.

Besides calling BS on Wall Street’s excuses, here are two other points. First, the U.S. economy – viewed as a whole and not as a system that serves most Americans – is in its best shape in years. Next, OIL?

In mid-October, the Dow Jones Industrial Average had declined about 6 percent for the year. Also, the price of oil by the barrel had fallen about 13 percent just since early summer, due to more fuel-efficient vehicles and technologies, less driving by us penny-pinching motorists, competition from shale oil, etc.

But fuel prices at the pump dropped, too. The average gas price of $3.59 per gallon fell to less than $3 in most of this area. So consumers are expected to start spending that new-found $20 or $50 a month.

Busey Bank vice president Ed Scharlau recently told the Peoria Journal Star, “For every 10-cent decrease in the price of gas, it adds about $11 billion to the national economy.”

Stock prices for trucking, airline and other companies in the transportation sector have improved, and in other recent economic news, industrial production was up significantly, and initial unemployment claims fell to their lowest level since 2000.

Bill Knight

Oil prices seem more like an effect than a cause, and if there is a cause it may be Wall Street greed stacking the deck. Please be tolerant with the following barrage of numbers, but consider this spot-check comparison of oil prices and Wall Street based on four S&P 500 “milestones” in the last year, showing the stock market has NOT suffered from plunging oil prices:

  • From August 1, 2013, to Nov. 22, 2013, oil had dropped 12.4 percent but the Dow improved +2.8 percent, the S&P +5.7 percent and NASDAQ +8.5 percent.
  • From Nov. 22, 2013, to May 23, 2014, oil had dropped 11 percent but the Dow improved +3.3 percent, the S&P +5.3 percent and NASDAQ +4.8 percent.
  • From May 23 to August 26, oil had dropped 8.4 percent but the Dow improved +3 percent, the S&P +5.2 percent and NASDAQ +9.1 percent.

This correlation looks to be the OPPOSITE of recent instability, with Wall Street RISING when oil prices fall. The stock market (like gas prices at the pump, arguably) is being manipulated. Oil or terrorists or natural disasters are excuses that are less significant than cooking the books for quarterly data, CEO raises, etc.

Viewing the stock market as a human being (like corporations, according to the Supreme Court, right?), it should be in therapy for pathological dishonesty or multiple personalities. Or possibly it should be treated as a sociopath, someone without a conscience who in this case thinks it’s a high roller although it’s really just a gambling addict.

If Wall Street wants certainty, maybe it should be subjected to the “shock therapy” of real financial regulations – or even price controls like Republican President Richard Nixon imposed in 1971 for a few years.

Such treatment may not fully heal Wall Street’s troubled personality, but it could protect from manipulations neighbors hurt by its actions: all the rest of us.

The opinions expressed are not necessarily those of Western Illinois University or Tri States Public Radio. 

Contact Bill at Bill.Knight@hotmail.com; his twice-weekly columns are archived at billknightcolumn.blogspot.com