As the stock market plods along, slowly regaining much of its losses, the real danger remains out of sight. Like an iceberg awaiting the Titanic, the market’s lack of a solid foundation has the potential to sink many small investors, still reeling from massive losses earlier this year. Yet, many of those same investors have begun to re-enter the fray, sensing the market’s recent gains as an indication of economic stability. But, a danger lurks just below the surface, and it has the potential to wreak equally as much havoc and steal as much wealth as the financial collapse of just a few months ago.
While reports of “green shoots” and recovery from both the media and many financial “experts” have assuaged the fears of many, much of the savvy money has remained on the sidelines or is now quietly being withdrawn. A recent article in Fortune reported that corporate “insiders” are now pulling billions of dollars from the market, and the reasons may be obvious. This is the same group that jumped into the market immediately following the crash, buying huge blocks of their companies stocks and pocketing millions in profits as the market rebounded.
And these corporate tycoons have all been beating their rally drums, joining in the victory dance, proclaiming that the worst is over, the recovery has begun. It seems obvious why they would want to encourage others to return to the market; doing so only drives up prices and creates a false image of prosperity. As prices increase, they can take their profits and wait for the next drop, ready to play their game once more. But if the recent actions of these insiders are any indication, the market may be preparing for a significant correction.
While individuals and small investors will never have the resources to play with the “big boys,” we can observe them at their own game. And we can be wary of their tactics. With everything to lose, betting against the “house” can prove to be a dangerous game, and one in which the loser does not get to pass “go” or collect their $200. While I’m no stock market expert, I do watch both the markets and the players, and don’t think I want to contribute to more stock profits and bonuses for the fat cats on Wall Street.
Sources: Chris Martenson Blog - Yahoo Finance - Yahoo Finance/NY Times
The Housing Guru: The one source for all your housing questions
