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Thursday, May 3, 2012

Stating the obvious: willful blindness or pure greed?

Every day a barrage of financial analysis is released, most of which derides the idea that world markets are managed and manipulated.

We have Free Markets, according to the conventional wisdom, and anybody who think that commodities like Gold and Oil and risk assets like Stocks and Bonds are being manipulated by governments. central banks, sovereign wealth funds  and large speculators are just alarmist, sour, uninformed, fringe voices crying out in the wilderness.

Let me point out the obvious:

A) If it became accepted wisdom that all risk markets are manipulated a crisis of confidence would ensue that would destroy all risk markets.  Who would invest in manifestly crooked markets?

B) If it became accepted wisdom that all risk markets are manipulated then all forms of technical analysis would become worthless, and even fundamental analysis would be worthless in the short and intermediate term.  Therefor every financial adviser would become redundant.

Does this mean manipulation is a certainty?  No.  What it means is that there is an enormous value to the financial establishment to ridicule the idea of manipulation.  If that idea ever took hold in the broad popular consciousness, the Financial Establishment would be finished.

I'm not proving anything here.  Just stating the obvious. 

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