WHITBY FREE PRESS, WEDNESDAY, OCTOBER 28, 1987, PAGE 7 PAGE SEVEN HE OTHER SIDE-1l o. he FENCE By Doug Anderson O RA BETTING ON WALL STREETQ October is one of the peculiarly dangerous months to speculate in stocks. ...The others are July, January, September, April, November, May, March, June, December, August and Febtuary. Mark Twain To put it in a few blunt words, our stock markets are giant gambling casinos which are populated by sharks prepared to fleece their unsuspecting clients - and it's all done in pin-stripe suits on thick pile rugs in flashy high-rise office buildings. So what happened last week? Has anything really changed? Did the price of milk go up? Did you lose your job? Maybe you have to sell your Ferrari. Although we were regularly told that billions, even trillions of dollars had been lost. it was only a paper loss. The real value ' of the companies that those stocks represented didn't change. They still had the sane assets, the same cash reserves, the same staff, the sane production schedules and the same markets. So why should the market suddenly decide they're worth less? ~ The first stock markets were gentlemen's clubs in England in the 17th century. Explorers on their way to China or India or Hudson's Bay would raise money for their voyages against a share of the profits on their return. The investments were assumed to be longterm. As markets developed into institutions'in their own right, a brokerage industry emerged - people who would advise what and when to buy and sell. Although the brokers did not cause the collapse last week, they certainly are responsible for creating the environment that made it possible and perhaps inevitable. Today, only a small proportion of the transactions on the stock exchange are true investments - the exchange of capital for a share of future profits. For most, short term gain is the name of M, the game. Computers which can track several different exchanges at once and can buy and sel automatically are now a key element in the market. They can highlight minor differences in price between two exchanges, then buy stocks on the cheaper and sell on the other at a slight profit - aIl within minutes. That kind of activity has nothing whatsoever to do with investment and is simply legalized parasitism. Our stock casinos are peopled with fairy-tale characters called "bulls" and "bears". There are market "gurus" called chartists who attempt to plot the future from myriads of graphs of past fluxions. The current darling of the markets follows something called the Elliot Wave theory which has more to do with ladies' hem lines than the economy. Is this sanity or have we fallen down the rabbit hole into Wonderland? Last week's crash was a crisis of confidence not so much in the economy as in the market itself. Whereas the market is frequently considered an indicator of the state of the economy, the market lost its nerve - it couldn't decide what the state of the economy was. Having lost its nerve, it panicked. Last week's carnage was only in small part a reaction to growing concerns about the state of the world and American economies. Those .concerns were nothing new and in no way accounted for the extent of the slide. To their credit, the leading world powers reacted swiftly and decisively to restore confidence. Economic concerns may have started the slump but it fed on the market's own lack of faith in itself. As stock promoter Andy Sarlos opined, "The best way to get a mule's attention is to hit him over the head with a two by four THOMAS ALLAN FISHER'S - I think we got their attention." The flaw in that analysis is thatThAsurGeeaStristlat13yasodanhsbenheieofhevlgesps it implies that there was something deliberate or planned aboutofiesc182TemnathletisorkprTomsAanFsewodedn189 the market tumble, which of couirse there wasn't. Even as theOtestrkeesaAsbrhveenAW.ElFedPiadRssBte.Teig market dropped, nobody had the foggiest idea where or when it oe h orsy htM îhri elri r odgoeisbosadsos would stop. In the aftermath, you can get any opinion you want from "new market highs before the end of the year" to a 1 ER G depression like the 1930's. The "bulls" regard the drop as afomheW nsdyOtbr26197dionfth "long-overdue correction" (whatever they mean by that) while theWHTYFE PRS "bears" view it as the self-fulfillmient of their prophecy of doom.*WityAt cispangisGrdBal"neTosdadOeNgh",nNv.4 Will it result in a recession? The stock market in itself is *BikEasrcie naadfr2 r fpretatnac tWib' iai lb only paper transactions - how governments, banks, and *TeRgo fDra o' lo nidsra rat eetbihdi htyna h individuals react to the plunge will determine how fast thingsOsaaArot bounce back. In 1929, interest rates were raised and baniks*Thrwee2OnaiScorstteAdronClgieCmecmntEriss foreclosed on loans putting otherwise viable and profitable companies into bankruptcy - that's what started the depression. 2 E R G So far, in the 1987 "crash", governments around the world have lowered interest rates (three cheers) and if our incredibly fo h hrdy coe 5 92eiino h conservative banking system can resist its gut .instincts to *Nwbidn rjcsicueteSdrFriuepato itraSrea diint foreclose against these paper bosses, we should emerge chastenedKahenRwSholadaureseiecetteOtroHspt. but ealhy.Theonl loersshold b th gables ad is hrde BrA shbr cGoedea stho rot est 130er s onstrctindo has een bthde siteo the ilage'spos to feel sorry for them. * --- -pre n okt hl to ~ ~ ~ ~ ~~ u stelcsoraykeorîthem.m,* Fur homes have been entered by a sneak thief who steals from pre n okt hl The unfortunate reality about our stock market investment the occupants of the homes are asleep. system is that the true investors and entrepreneurs have to use Mary McKnight is the first Ontario Scholar at Anderson Collegiate. the same casino as the speculators. Although the recent gyrations of the market MAY leave no permanent damage, the 100 YEARS AGO lack of stability certainly saps investor confidence which in turn froin the Friday, October 28, 1887 edition of the interferes with the intended function of the market. Clearly pure WHITBY CHRONICLE speculation has to be eliminated. A simple solution is to impose turnaround rules so a security purchased today cannot be resold *Agn f4 e scern h ice fteCRa yteSain frsaaee.(vnaturnaround lui o eurt urh dt of aif a daoter even * The WCTU (Women's Christian temperance Union) free reading room is to be open for the for, say, a week. (Even a turnaround limit of half a day or even itreryvnngbinn O.29 an hour would eliminate a lot of the abuse.)*wfteeing benigOctA29. Of course, eliminating speculation on the stock market* boboad o rased from h e brer rikhnk would wipe out most of the brokerage industry and put isabeingspedsowohn rydesMapead fars n eoklin. thousands out on the street. Perhaps we could soften the blow by legalizing bookmaking at the sanie time.