Draining Away Our Collective Wealth

I have written about this before. Several years ago, one of the fastest computers in the world was designed to do one thing only and to do it very well. Every put and take, every single transaction that takes place electronically on Wall Street is now being jumped. It is only by microseconds, but imagine how this might look at the farmer's market. We all know that the stock market deals in vagaries. The traditional way of making the system work for you, "building wealth" is to buy and hold. The entire concept is based on the idea that others know best how to invest your money than you do. If you loan them money (by buying their stock or bonds) they will spend it in ways that, with luck, will  grow. The story has been the same since the beginning, but a whole new chapter opened up when the biggest player found a way to cheat the system. That system relies on time, and the fact that no matter how fast computers seem, there is now one faster and it cost billions to design and build. Back to my farmer's market example. Say you are standing in front of a stand with beautiful peas and you are tempted to get some. You only need a pound for the next night's dinner, but as you reach out to the peas, another "hand" sweeps in and removes some of them. Or, in another example, you pick up a few peas and inspect them, but after a few moments, you decide, no, these peas are a bit wilted or perhaps they are showing other signs that lead you to think there are better choices out there...the hand disappears, putting their peas back before you can bend your arm.

Microseconds multiplied by thousands of transactions turns out to be a long, long time. especially when millions of transactions are being jumped. See the real nature of the stock market is that it is psychological. Nothing physical has ever been created by the stock market, just "wealth" which, in some respects, is arbitrary. when you begin to speak with investment experts you start to hear psychological terms like confidence and fears. Very human traits that point to the fact that the entire house of cards is designed to help us feel better about risk, think we have better information than others and to make us feel secure because of the "value" of our portfolio. Here's the rub. It is not a confidence game for those who capitalize on your decisions even before you make them.

Since the inception of the system, it has been known that if you could get in before others who felt confident were able to buy, you could get in more cheaply than they would b able to, because even mere desire for shares has the effect of driving up price, so you would by definition make more than they would. consequently, when they decided to sell, you could sell firs, reducing demand for that stock and lowering the price they could sell for. When you are always jumping the buying and selling, your take might be tiny on each transaction, but collectively, you would skim off many hundreds of billions and this is now completely "legal". It has been being done for years now. Each and every stock, bond and commodity market purchase you try to make is now per-purchased by the biggest player on Wall Street. The difference between my farmer's market example and real life is that when the "peas" in the stock market are purchased, it drives up the cost of peas to everyone else and when they start to wilt, the people who put them down first also save the most money because the longer you wait, the less they are worth.