Tags: Crudele | stock | market | rigged

NY Post's Crudele: Yes Investors, 'Stock Market Is Rigged'

By    |   Friday, 27 March 2015 06:20 AM

Financial author Michael Lewis has made quite a bit of hay over the last year with his argument that the stock market is rigged against average investors.

New York Post's John Crudele agrees. "When I started making that claim years ago — and provided solid evidence — people scoffed. Some called it a conspiracy theory, tinfoil hats and that sort of stuff. Most people just ignored me," he writes.

"But that’s not happening anymore. The dirty secret is out."

Lewis' theory is based on the impact of high-frequency trading. But Crudele sees it a bit differently. He notes that economist Edward Yardeni sees Federal Reserve easing as rigging the market for gains.

In addition, "The Bank of Japan — and other central bankers around the world — could easily be purchasing shares of American companies to help out the US stock market," Crudele says.

"The rigging of U.S. stock markets by foreign entities has likely been going on for some time."

Finally, companies themselves are rigging the market through massive share buybacks, he maintains.

By reducing the number of shares outstanding, "this accounting trick boosts the calculation of profit-per-shares because the numerator of the equation (earnings) remains the same while the denominator (outstanding shares) is reduced."

S&P 500 company buybacks totaled $553.3 billion in 2014, according to S&P Dow Jones Indices.

"Basically everyone agrees" that the markets are rigged, Crudele adds.

"The bigger problem is this: If stock prices are artificially inflated, nobody can tell what a company is really worth. And banks are going to be hesitant to lend money to companies with fuzzy valuations."

Meanwhile, the S&P 500 index has dropped this week, and more declines are coming, says Peter Boockvar, chief market analyst for the Lindsey Group

The Federal Reserve's move toward a tighter monetary policy is pushing stocks down, he tells CNBC. "QE [quantitative easing], for example, enlarges the bubble, and once the air stops going into the bubble, the bubble starts to deflate again," Lindsey said.

The Fed ended its third round of QE in October and is now considering when to raise interest rates. Many experts expect the first move to come in September.

Boockvar sees the S&P 500 heading back to its November levels. The low for that month was 2,001, reached Nov. 4.

The Fed's easing hasn't created true economic growth, and it has been too slow to raise interest rates, Boockvar notes. "We can get out of this if the Fed had any guts, but they don't." The economy grew 2.4 percent last year.

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Financial author Michael Lewis has made quite a bit of hay over the last year with his argument that the stock market is rigged against average investors.
Crudele, stock, market, rigged
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2015-20-27
Friday, 27 March 2015 06:20 AM
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