Financial Markets Will Not “Shake” Frauds Or Fools, Ever
$FB, $TWTR, $GOOGL
Economist Robert Shiller of Yale University warns that much like a carnival runway, the financial world will never be rid of “fraud and fools” since free markets creative incentives for businesses to sell bad products or promulgate misinformation to consumers.
“Free markets have generated unprecedented prosperity for individuals and societies alike. But, because we can be manipulated or deceived or even just passively tempted, free markets also persuade us to buy things that are good neither for us nor for society,” he wrote.
And in a recent interview Prof. Shiller admitted that he ate cat food to see if the different flavors marketed to cat owners really tasted any different and to prove the point. He said he could not detect a difference.
“Most of us have suffered phishing: unwanted emails and phone calls designed to defraud us,” he wrote. “A phool is anyone who does not fully comprehend the ubiquity of phishing. A phool sees isolated examples of phishing, but does not appreciate the extent of professionalism devoted to it, nor how deeply this professionalism affects lives. Sadly, a lot people have been phools including me,” he wrote.
“Routine phishing can affect any market, but our most important observations concern financial markets, timely enough, given the massive boom in the equity and real-estate markets since Y 2009, and the turmoil in global asset markets since last month,” he wrote.
“As too many optimists have learned to their detriment, asset prices are highly volatile, and a whole ocean of phishes is involved. Borrowers are lured into unsuitable mortgages; firms are stripped of their assets, accountants mislead investors, financial advisers spin narratives of riches from nowhere, and the media promote extravagant claims,” he wrote.
But the losers in market downturns are not just those who have been duped. A chain of additional losses occurs when the inflated assets have been purchased with borrowed money.
In that case, bankruptcies and fear of bankruptcy beget an epidemic of further bankruptcies, reinforcing fear. Then credit dries up and the economy collapses. This vicious downward spiral for business confidence typically features phishes.
For example: the victims of Bernard Madoff’s Ponzi scheme discovered only after the period of “irrational exuberance” has ended.
The dictionary meaning of Phishing: the attempt to acquire sensitive information such as usernames, passwords, and credit card details and sometimes money, often for malicious reasons, by masquerading as a trustworthy entity. The word is a neologism created as a homophone of fishing due to the similarity of using fake bait in an attempt to catch a victim. Phishing is a continual threat that keeps growing to this day. The risk grows even larger in social media such as Facebook (NASDAQ:FB), Twitter (NYSE:TWTR), and Google+, (NASDAQ:GOOGL)
Be alert, be prudent, its your money (assets), learn to manage it.
Have a terrific weekend.
HeffX-LTN
Paul Ebeling
The post Financial Markets Will Not “Shake” Frauds Or Fools, Ever appeared first on Live Trading News.