Who's Really Watching the Stock Market?

Federal Reserve Board Chairmen

Alan Greenspan, Ben Bernanke, Federal Reserve Board chairmen
Alan Greenspan, Ben Bernanke, Federal Reserve Board chairmen

Federal Reserve Board -- 1914

The Federal Reserve Board, 1914, l-r standing: Paul M. Warburg, John S. Williams, W.P. G. Harding, Adolph C. Miller; Seated: Charles S. Hamlin, William G. McAdoo and Frederick A. McAdoo,
The Federal Reserve Board, 1914, l-r standing: Paul M. Warburg, John S. Williams, W.P. G. Harding, Adolph C. Miller; Seated: Charles S. Hamlin, William G. McAdoo and Frederick A. McAdoo,

When I studied public relations at New York University's School of Commerce, Accounts and Finance (now the NYU Stern School of Business,) a sage old professor told a story about a financial magnate who stopped to get his shoes shined on the way to his Wall Street suite.

The garrulous shoeshine man waxed poetic about the stock market, eagerly talking about how everybody was making a killing in the market that was headed sky-high. He even offered the financier a few stock tips.

A Clear 'Sell' Signal

The magnate couldn't get to his broker fast enough -- to sell! When optimism about the market reaches the man on the street, the theory goes, that's as clear a sell signal as you can get.

Some market watchers say there's a new economic paradigm -- the old rules no longer apply. They talk about the Internet, computers -- anything with a tinge of technology -- turning the economy upside down. Maybe.

Certainly computers, the Internet, et al, are here to stay. They are improving productivity by leaps and bounds, and they're developing at an astronomical rate. There's little doubt that many of the top companies will grow rapidly in the years to come, at least those who offer new, innovative services or provide the hardware or software for companies that do. A lot of investors in these businesses will find themselves filthy rich.

But, the red flag is waving.

What Goes Up Must Come Down!

As the saying goes, what goes up must come down. That hasn't changed and never will. Neither will the various other economic fundamentals: Supply and demand, inflation, deflation, disinflation, recession, depression and the rest.

Wise investors have little to fear. America remains strong and continues to be the world leader, not only politically but economically. Long-term investments in our country's leading corporations are as much of a sure thing as you'll ever see.

But, I believe, Federal Reserve Board Chairman Alan Greenspan and the U.S. Treasury Department are not doing enough to protect the growing number of sheep-like investors from the growing number of financial wolves. They need to do more than jockey interest rates around while the potential for abuse of unsophisticated investors grows by leaps and bounds.

Market Played Like an Accordion

Any casual market-watcher can see there's more than normal "market forces" affecting stocks -- and the overall market. There's no way to prove it, of course, but it's clear the "big money interests" play the market like an accordion.

I've been watching the ups and downs of the market for some time. I've been following a number of Dow 30 stocks, the technology companies and various other market leaders. I've learned, more than anything, that the current price of any stock is not based on earnings, the competence of management or its potential for profit. Rather, a stock's price is based on whether the "money men" want it to go up or down.

Big investors can't make money on a stock market that doesn't move significantly. They make their money either way -- up or down -- provided they know, and can influence, the direction.

One thing's for sure. You, and I, will only know when it's too late!

I wrote this column as a "My View" for The Hour newspaper of Norwalk, Conn., on Sept. 4, 1999. I now write my views on a wide variety of topics on HubPages. To view my HubPages Profile Click Here

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Comments 12 comments

Chef Jeff profile image

Chef Jeff 8 years ago from Universe, Milky Way, Outer Arm, Sol, Earth, Western Hemisphere, North America, Illinois, Chicago.

My fear is that the people who keep an eye on things do not understand the nature of governmental balance. I fear they will always err on the side of Big Business and conservative politicians as opposed to being for the nation, the People and what is better in the long run.

Who counter-balances Bernanke? Who is the watch dog on his back? Is that person or group effective, or like the airlines industry, are they solely interesting in maintaing the ability of the wealthy to get more wealthy?

William F. Torpey profile image

William F. Torpey 8 years ago from South Valley Stream, N.Y. Author

It may be a little early to size up Bernanke, Chef Jeff, but we have a long history of Alan Greenspan. Your fears were already realized with him. There is no question that Greenspan always erred on the side of big business and the hedge funds. When he testified before Congress it was clear to me (and others, including, I believe, Joe Biden) that Greenspan lives in an Ivory Castle (as a disciple of Ayn Rand.) Neither the Federal Reserve nor the Securities and Exchange Commission do an adequate job insuring that the stock market operates on the up-and-up.

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pgrundy 8 years ago

I agree with Chef Jeff and also with the excellent point you make in this hub. What bothers me is, the Fed does not answer to the American people. It's not a governmental agency. So if regulation is left to the Fed, you've got the wolves patrolling the wolves. If the U.S. is going to be regularly expected to bail out huge financial organizations that means you and I are bailing those organizations out with our tax dollars. We also suffer the consequences of fiduciary irresponsibility on the part of the banks---look at how the subprime mess has hurt all of us, not just people who lost their homes, but everyone. So we should get a say.

Having said that, I know from working in a bank that most people don't understand finance or the stock market and don't want to. That's why it is so easy to steal from them. The notion of privatizing social security scares me to death for this reason--it's a way to let Wall Street directly into all of our pocketbooks, bypassing the federal government. I assure you it will be a rob-old-folks free for all, and young people will not be immune either.

I was hired in the final year that pensions were offered at my last job, so I have a small pension, maybe, if they can't find a way to default on it. But now almost no one offers pension plans, it's all 401K. That's great for business, but a 401k can be halved overnight through no fault of the person owning it.Most of the people I work with don't even look at their 401k.

I'm disgusted by the new "keep the profits, socialize the losses" mentality on Wall Street and at the Federal Reserve. Great hub, Fred. Thank you for it.

William F. Torpey profile image

William F. Torpey 8 years ago from South Valley Stream, N.Y. Author

Good points, pgrundy. We bailed out Chrysler. We bailed out the Savings & Loans. We bailed out the hedge funds, and now we're bailing out the mortgage lenders. We pay the bill, but the executives responsible for these financial failures got rich on the backs of investors. What price have they paid? They're all living the Life of Riley somewhere in the South Sea islands. Will we never learn?

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pgrundy 8 years ago

Heck I still think Ken Lay is alive and well and living in luxury on some little island off South America! I wanna see the body!

William F. Torpey profile image

William F. Torpey 8 years ago from South Valley Stream, N.Y. Author

A most convenient death, pgrundy. Or a hoax?

02SmithA profile image

02SmithA 8 years ago from Ohio

Bailouts seem to more the norm rather than the oddity now. I worry that a culture of bailouts could just delay the inevitable. Nice hub!

William F. Torpey profile image

William F. Torpey 8 years ago from South Valley Stream, N.Y. Author

Thanks for visiting, 02SmithA. Bailouts end up costing taxpayers money, but the executives responsible for them are rarely called to account.

marisuewrites profile image

marisuewrites 8 years ago from USA

well said! We need to have watchdogs and we need to teach financial courses about wall street, and investments 101 etc in our schools. We are growing up ignorant and trusting too easily and too many. They have the power and the unsupervised path to greed...we spend so much money bailing out big power that took from us in the first place it's frightening. They take advantage of our ignorance.

excellent hub!

William F. Torpey profile image

William F. Torpey 8 years ago from South Valley Stream, N.Y. Author

Thanks for your interesting and nice comments, marisuewrites. I'd love to see our schools teach financial courses at every level.

Ajay 8 years ago

Well done, you made some real good points here. I think financial investment is something that is really over looked by many general every day people, not many people pay focus to it! And it is so essential to do so.

I think bring this education into schools would be fantastic, it would help people get a much better understanding and help our economical state! I am currently making a website on how to invest in stocks and shares and this info has really struck me, I may link to this page if your ok with that from my website at http://www.howtoinveststock.net ! :)

Good luck and thank u again

William F. Torpey profile image

William F. Torpey 8 years ago from South Valley Stream, N.Y. Author

Thank you, Ajay, for your comment. I have written four other hubs about various aspects of the stock market that you may be interested in. They may be accessed through my profile page or by clicking on "Read more hubs by William F. Torpey" on the upper right side of this page. You, and anyone who is interested in the stock market, are welcome to link to any of my hubs at any time. I appreciate your interest, and you may consider signing up with HubPages as a writer yourself.

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