Without for one moment trying to sound like I have any call to tell you or anyone else what to do wrt investing....
I believe that it is de facto impossible to be a prudent investor in today’s stock market. Not because of intervention, and not because of high-frequency or other computer-driven trading.
I believe that it is impossible to make the case that one can be long this market because:
1: Because the normal requirement for mark to market accounting on the part of the banks has been eliminated. This overarching change in accounting rules is beyond dramatic. The class of banks above the regionals but below the “gods” (GS & JPM) would be flat out insolvent if their bad loans were brought onto their books. I mean, implode right now, today. Wells Fargo has bad debts on their books (partly from their own operations and partly from their takeover of Wachovia) about ten times their market capitalization!
One day, on a day nobody can predict, this might matter. What do you think would happen on that day if WFC, BAC, GE (Capital) and 30% of GS and JPM just kind of vaporize? My view is that it would be kind of like that “flash crash” we had 5-6 weeks ago except *there would be no snapback* on the back end. Given the pure mathematics that a loss of X% must be made up by a gain of 2X% in order to break even, I don’t consider the LT stock market (long) investing environment to be favorable.
2: The SEC’s monitoring and prosecuting activity is simply nonexistent. There is in effect no regulatory authority being exerted over the markets. None, zero. And the banks know this.
So I just don’t think one can be a complacent long. Trade all you want.