Your last remaining edge on Wall Street

Jewish World Review ^ | June 21, 2013 | Morgan Housel

[expat1000]

Individual investors have a giant advantage over professional investors, and they might not even know it

JewishWorldReview.com | Wall Street's edge over you seems to tighten by the hour. Insider trading is rampant. High-frequency traders can see your trades before they're even executed. CNBC reported last week that Thomson Reuters sells the results of consumer confidence reports to select professional investors as little as half a second before the data is made public -- that's all they need to gain an edge.

[babble-on]

His analysis is good, but his prescription is not.

The way to make good money in the stock market is buying stocks when they are priced attractively. That mean, in recent history, buying them in the height of an economic crisis, like late 2008 early 2009. Very few people were willing to do that, so very few people profited from the financial crisis, but some very smart folks did.

[CGASMIA68]

thats why a % of cas(in case) is a good thing and being fully invested is not.

[CGASMIA68]

cas=cash

[Age of Reason]

In other words: Don’t sell your stocks now, suckers, so we’ll get a better price for selling ours.

[yefragetuwrabrumuy]

You can easily prove to yourself a simple notion: that if someone was *invisibly* able to pump or pull billions of dollars into or out of stock index companies, that it could manipulate those stock indexes to prevent them from dropping outside a narrow range.

The FED can do this, and likely has, for a long time.

However, it only has to do this rarely, because of another observed phenomenon. Usually in the middle of the night, massive, invisible trades are made in the market, that are canceled within half a second. But market software just sees that they are buy orders, not that they were canceled.

This pushes a market whose index was heading deeply lower, to instead move in a positive direction. Something only noted by other computers.

And the FED can do this invisibly as well.

However, such grotesque manipulation only works for a while, like putting a cork in a bullet hole in someone’s abdomen. Inside, the pressure builds up, in this case severe pressure.

So, when Bernanke announced that the FED was going to ease up on its quantitative easing, this was also interpreted as the FED easing up on its market manipulation.

We can but hope that the FED is prepared to involve itself again with *some* manipulation, or the markets may be heading for a wild ride.