YOUR MONEY

Stock Markets – open capitalism or a rigged game?

If you are a small investor, picking your own stocks and bonds is probably your wisest choice.

If you rely on any, world-wide, Stock Exchange Index fund or on a diversified Mutual Fund with ‘expert’ analysts and managers, you should know the deck is stacked against you.

I have regularly bemoaned the fact sovereignty funds, derivative funds, banks and a few super rich control too much of the world’s stocks and bonds, that they in fact “control’ the world’s markets and distort Capitalism 101. In good times they can ratchet up valuations and reap billions of dollars of profit from even pennies of value changes, and if they get into trouble, all hell will follow.

David Rosenberg in his February 2, 2016 column for the Globe and Mail, “The story behind the equity-oil link”, reveals that just 7 oil- pumping countries control some US $4 trillion in market assets.

These sovereignty funds, of course, include the petrodollar states of the Arabian Peninsula as well as Kazakhstan and, surprisingly, Norway – which turns out to be the “largest sovereign wealth fund in the world”.

So, as Rosenberg points out, when the price of oil falls, these countries must withdraw money from their worldwide stock market holdings to cover their finances at home or risk huge deficits and internal social and political chaos.

Mr. Rosenberg could also have mentioned Nigeria, Africa’s biggest economy and a major oil producer, which is now asking for US $3.5 billion in low cost loans from the World Bank and others as it faces a currency crisis and possibly political collapse (G&M, Feb. 2, 2016 B1).

So, world stock markets, as Rosenberg stresses, no longer reflect the realities of daily economic activity of corporations, small business and  farming of most countries.

Put simply, a few super-powerful players control the stock markets, their ‘paper value’ rises and sudden falls.