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Stock Market and Casinos Share a Common Fate

Most intelligent people understand that when it comes to casinos, “The house always wins”.  Unfortunately in our society, these same intelligent people have been throwing all their savings into the stock market with the belief that it is a level playing field and that everyone has an equal chance of winning or losing.  Nothing could be further from the truth.  Even the phrase “insider information” has become a joke.  The idea of a free and open stock market has evolved into a calculated gaming house.  Those in the know simply sat there smiling during the 1980’s and part of the 90’s while Americans pushed their life savings into the stock market.  The small investors even gave their money to “mutual funds” to gamble for them.  What they found out is that giving their money to a mutual fund was much like giving their money to a gambling addict.   The mutual fund did not leave the Wall Street Casino until most of the money was gone.

What we have seen in the past couple of years is a wake-up slap in the face for small investors.  Time and time again they have been caught holding pieces of paper worth half what they paid for them.  They seem to finally be getting the point.   When it comes to Wall Street, ” The house always wins”.

A recently published article in the New York Times stated that tens of billions of dollars are flowing out of mutual funds instead of being deposited.  “Small investors are “losing their appetite for risk,” a Credit Suisse analyst, Doug Cliggott, said in a report to investors on Friday.”   In other words, Americans are pulling their money out of high risk investments.

The stock market lost 32 Billion dollars of mutual fund investments in the first 7 months of 2010.  Add that to the typical $70 billion that should have been added over those same 7 months and you get a grand total of $100 billion dollars that the small investor has pulled from the Wall Street casino.

Casinos are seeing the same trend.  Atlantic City is down 7.9% for 2010 and Las Vegas was down 7.6% in June.

Look for Wall Street and U.S. casinos to be bellwethers for each other in the coming years.  Investors on Wall Street and gamblers in U.S. casinos have had the same “bad luck” in both gambling outlets in recent years and are starting to act in sync.  With every new downswing in the economy investors/gamblers will face the same question as to whether the money they are placing bets with is disposable cash or if they should hold back on their risk.

To further illustrate this trend on a global basis, Boomberg recently reported “Macau Casino Sales May Rise 40% This Month”.   As the dollar falls against the RMB and the HK Dollar, the disposable cash for many Chinese citizens is increasing.  The willingness to risk cash at their casinos shows the inverse truth of economic swing and gambling.

Unlike the U.S. stock market, however, the Chinese stocks have many more restrictions on how their value can fluctuate and how much outsiders can manipulate the market for those shares.  Their stock market cannot be compared to casinos in the same was as Wall Street.  Only we “free” Americans can claim that sad honor.  We indeed have an investment system that is a mirror of the model of our casinos.

Help I am ITIA

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