replays on the 27th if you totally missed the boat
Its says the 22nd in my viewing area...at 4am. Ugh.
The reason the stock market is falling apart right now is because it is such a joke. The major lack of regulation is killing the market - because brokerage firms are never hardly (until very recently) reprimanded for putting 'buy' recommendations on stocks they're selling and 'sell' recommendations on stocks they're buying...
While I agree with your essential criticism that more regulation of accounting methods and brokerage firm conflict of interests is needed, the stock market isn't 'falling apart' right now nor were these things the fundamental reasons for the stock market 'falling apart' between 2000 and 2001. The market is going through a bit of a shake-up, but I think 'falling apart' is a bit too strong.
What lead to the "Big Crash" between 2Q/2000 - 2Q/2001 year was pure and unadulterated investor greed and nobody who lost money can escape their own culpability. Out of about two dozen people I know who had any investment in the stock market large enough to speak of, only one didn't lose money during the Big Crash. In fact, not only did he not lose any money, he cleaned house in a disgusting way.
So where did he go right where all these others went wrong? Simple, he bailed out in time, and put the money into recession proof areas like bonds. He bailed because he knew a crash was coming. How did he know that?
If you ask him, his answer would be "How could anyone NOT know a crash was coming?" You'll have a very difficult time finding a single investor, broker, analyst, fund manager, and consultant who is not asking themselves the same question, in retrospect. The evidence of impending doom was patently obvious for anyone who wanted to see it. He was one of the few who were not so intoxicated and drunken with the promise of riches and unprecedented returns that he wasn't deliberately blind to the warning sings.
This is Investing 101 here, the stuff you learn on DAY ONE, the kind of lessons our grandmother and mother tried to teach us when we were 10 years old: if it sounds too good to be true...
The kind of elementary lessons that Enron employees are as guilty as anyone else of ignoring, such as putting your entire life savings into A SINGLE STOCK. How utterly stupid is that? Nobody 'coerced' them to do this, as some have suggested. They were totally free to put their money where ever they wanted, only they wouldn't get a matching contribution unless they put it in Enron's 401K. Intoxicated with greed and seduced by high returns, they chose an investment strategy that is the highest risk known...and they reaped it. "Enticed" is not the same as "coerced".
High returns = high risk: Page One of Investing For Dummies. Put all your money in one stock = insanity: Page Two of Investing For Dummies. If one doesn't understand this or isn't willing to accept it, they have NO BUSINESS investing. I have to laugh when I hear a former Enron employee crying and whining that "had I known I would lose my life savings, I wouldn't have put it into Enron's 401K."
DUH! Is there anyone else besides me who finds the utter stupidity in such a statement? Please say yes.
Who on earth would invest one thin dime in something they believed would lose their money? Nobody but the insane would do such a thing!
The premise behind such thinking is obvious: 'I lost my investment, therefore, I was somehow cheated or defrauded.' This is FALSE! It assumes investments are supposed to be a 'sure thing', and if it is a bust, some impropriety or wrong-doing MUST have taken place. It is a fundamental denial of one's responsibility for their own decisions.
My point being, nobody can 'protect' people from their own greed. It is the obligation of no one but the investor to protect his own interests or to understand the nature of his own decisions. You CANNOT 'make it' by mandate the obligation of anyone but the investor to protect his own interests and produce a result that will be as remotely beneficial to the investor as when the obligation is purely his own.
Attempting to 'shift' obligation and risk from the investor to another party will produce a climate where the only result will be that the investor finds no incentive or need to understand the nature of what will invariably impact upon him because he believes its not his responsibility. The result of that is a lot of uninformed people who are ripe for the taking.
I'm all for making full disclosure and accurate information the mandate of all those offering investment opportunity. However, you can give a disclosure notice to a fool, but you can't make him read it. The burden of ensuring he does read and understands it should be purely his own.
The friend who made booty on the stock market TRIED to tell people within his circle of family and friends that a crash was inevitable and he explained why. He says that he was laughed at, scoffed at, 'can't you see, we're all getting rich, it keeps going higher and higher and its never going to stop!'
How can you protect people from their own foolishness?
