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June 12, 2019 | How the Stock Market Actually Works

Rick Ackerman

Rick Ackerman is the editor of Rick’s Picks, an online service geared to traders of stocks, options, index futures and commodities. His detailed trading strategies have appeared since the early 1990s in Black Box Forecasts, a newsletter he founded that originally was geared to professional option traders. Barron’s once labeled him an “intrepid trader” in a headline that alluded to his key role in solving a notorious pill-tampering case. He received a $200,000 reward when a conviction resulted, and the story was retold on TV’s FBI: The Untold Story. His professional background includes 12 years as a market maker in the pits of the Pacific Coast Exchange, three as an investigator with renowned San Francisco private eye Hal Lipset, seven as a reporter and newspaper editor, three as a columnist for the Sunday San Francisco Examiner, and two decades as a contributor to publications ranging from Barron’s to The Antiquarian Bookman to Fleet Street Letter and Utne Reader.

Here is the best explanation I’ve seen to date of how the U.S. stock market works.  It is from John Jay, who posts regularly in the Rick’s Picks Forum: “The stock market is the primary bag-man the Federal Reserve uses to transfer the U.S. Dollars they create from thin air to the .01%.” Just so. When you consider how many hundreds of billions of dollars find their way into the pockets of the very rich when just a half-dozen mega-cap stocks rally sharply, you begin to understand how the U.S. economy actually works.

“Compare this to TARP,” writes Jay. “It was a check written directly to the .01% without a money laundering intermediary like the stock market.  You and I are like seagulls picking up the scraps after a killer whale pod consumes a school of herring. We can make a nice little living doing just that!”

‘Get Out of Jail’ Card for $10 Million

My colleague Alan Newman, editor of Crosscurrents, used to track the total dollar amount each day of all NYSE transactions. If memory serves, it once amounted to more than three times America’s daily GDP. Newman’s conclusion was that the main business of America was not making and selling actual things, but trading stocks.  As much could be said of the global financial system, which has amassed a quadrillion dollars worth of derivatives for paper-pushing deal-makers to play with. Does a world economy that produces $100 trillion dollars worth of actual goods and services really need a financial edifice ten times that size to facilitate business? It’s akin to provisioning a Monopoly game with a $100 billion bank, and making a hotel on Baltic Avenue sell for $50 mil.

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June 12th, 2019

Posted In: Rick's Picks

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