The business Model of Wall Street is Fraud

The business Model of Wall Street is Fraud

While it is easy for the developed world to point fingers at China and demand more regarding reforms; we need to remember that not too long ago, it was the Wild West in New York.    A significant portion of the transactions conducted years ago would be deemed if one were too kind as questionable by today’s standards. In fact, one could argue that the USA has done nothing to address the issue. We had the Savings and Loan scandals in the 1980’s; then we had the dot.com scam, where any company with a dot.com was allowed to give Nine projections on what they hoped and dreamed off without programme illustrating how these illusions were going to become a reality.  Another instance is the financial crisis of  2007-2008; the real term should be financial fraud as the banks essentially swindled the poor and middle class. For the record, not one banker was arrested or put in Jail, even though there is conclusive proof showing that most banks encouraged their clients to lie on loan applications. Banks came out with no income verification loans before the housing market collapsed. This meant that you could state any income you wanted to qualify for the credit and the banks encouraged people to do this. So when it became that easy to get a loan, everyone started to buy a house.  The idea moved from owning a home to speculation. No longer were people interested in owning; it; the only goal was to become rich overnight.

It would be nice if things ended in 2007-2008, but fraud is still the order of the day in Wall Street as depicted very clearly by the story below.

JPMorgan Chase & Co. knew federal authorities were investigating the largest drug-testing lab in the U.S.

But the New York-based bank didn’t share that information about Millennium Health LLC with the people who were about to lend the company $1.8 billion in April 2014 because Millennium said it wasn’t material, according to a person with direct knowledge of the matter.

In most markets, such an omission would be regarded as unethical or worse. But JPMorgan was playing in the $800 billion market for leveraged loans, where just about anything goes — and often does. 

 The case of Millennium is the latest example of the pitfalls in a market where no one regulates trading. Borrowers can limit who can access their financials, control the type of data they get and even blacklist certain investors from ever buying the loan.  Full story 

This is what took place with the Chinese markets this year.  Everyone wanted to become rich overnight, so they borrowed money and jumped into the markets.  This is all fine when the markets are rising, but when the markets start to pullback, things get ugly. You start to take on losses on money that is not yours. So you have to pay back the original sum of money, plus interest and worst of all this money does not belong to you.  Leverage is good when the markets are going up; it is the trigger fro euphoria when the markets are falling it is the trigger for panic, and that is why the Chinese markets crashed.

At least we can say that China is doing something to address, this issue.  Seven years later and Wall Street has done nothing to address the real problem that triggered the financial crisis.  The banks that caused the problem were rewarded instead of being punished. Every major Bank was bailed out, and it was the Major Banks that brought about this crisis that affected the whole world; not one banker was sent to prison and don’t expect anyone famous ever to be sentenced.  Worse yet, it is the banks that have made the most money after the crisis, while the Middle Class has been destroyed.

This is like the pot calling the kettle black.  China is moving in the right direction and, in the long run; we think China makes for a great long-term investment.

The video below does a decent Job of explaining how the Fed operates, though the conclusion calling for a collapse is not something we ascribe to now. Why?  Simply put, the masses believe that the Fed is part of the Government, getting them to accept that it’s not, will be a daunting task on its own. Trying to get them to understand that the Fed has been defrauding them from day one well that will take a very long time.  So the system will collapse, but you might not be around to see it. We believe in following the trend; the trend does not yet call for a demise of the Fed.

Other Stories of Interest:

Gold on the verge of a breakout rally? (Nov 24)

Nine ways to build wealth in the stock market  (Nov 24)

China stock market reforms and long-term outlook   (Nov 24)

Bonds will not crash in 2015 (Nov 23)

Dr Copper, economy and the markets no longer dance to the same beat (Nov 23)

Is Crude oil headed higher or lower? (Nov 20)

Is the Dow going to crash in 2015 (Nov 18)

predictions for wild weather, end of Multiculturalism & religious wars (Nov 14)

The Dow Industrials are not going to crash (Nov 11)

Oops we did it again- The Fed is setting up the masses for another stimulus program (Nov 9)

Palladium Bulls are getting ready to sprint  (Nov 7)

Dow industrials set to defy naysayers and trend higher  (Nov 6)

 

  • stroke33

    Before ’07-’08 you could and they did loan on fake ID’s, without buying a real house, everyone on Wall Street knows that, some made 50 million a day and lost 49 of it to strike 100 million ad term’s end, and nowadays all fraction’s on Wall Street still do buying and selling each others air, like all stock market’s around the world. There is on paper ten times more money, than there is real money and assets together.
    Stock market’s are like slot-machines! The stock market always win, even if the German bank falls they win big.