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News Link • Economy - Economics USA

Consumer Confidence: As If We Needed More Reasons To Stop Bogus Valuations

Nothing like destroying consumer confidence with a stock market crash, right? That's the weakest confidence reading going back something like 30 years! Liquidity in the market is terrible right now. I've been paying close attention to this of late - while volume is very high liquidity is extremely poor. I'm seeing half or less of the bids and offers in the futures markets that are the usual for the trading day. A recent report put the "share" of the total volume in the market by high-frequency traders, otherwise known by me as "quote-stuffers" and other disreputable names, at three-quarters of all trades during the plunge. As I've repeatedly pointed out trading the same 100 (or 100,000) shares back and forth a dozen times does not add to liquidity - the actual liquidity is only the original 100 (or 100,000) shares no matter how many times you trade it. The retail investor has given up and left the market - with good cause. How many times does he have to lose monstrous amounts of money before he figures out that Wall Street is simply ripping him off with lies and schemes? And how did all this that happen? As I've been repeatedly pointed out, it happened because we failed to force banks and other financial institutions to stop lying about asset valuations, putting a stop to the hiding of both risks and losses. The very acts that led to the crash of 2008 are back in play, and they're doing the same thing to market volatility. Banks are still hiding derivative exposure, claiming that they need these "customized" products for customers (and refusing to exchange-trade all of them.) Banks are still holding assets on their balance sheets at what the market judges to be a fantasy value - not only is their stock price half of book value or less in many cases, but we know there's nobody with actual money who believes the claimed valuations on the balance sheet are real, as if they did they'd buy up all the stock and get the assets at half price - an instant 100% (or more) capital gain. Who wouldn't do that, if they believed the banks? Every one of these institutions with deeply-underwater balance sheets - Bank of America and Citibank in particular - would be bought out tomorrow. The fact is that nobody believes these marks are real. Nobody. It would only take one "somebody" with money who would pounce on such an opportunity - if it was real. And there are lots of people with money. I repeat: There is not one entity with funds that believes these banks are honestly reporting asset values. NOT ONE.

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