Financial geniuses are the root cause of our problems

On January 2, Joe the Speculator, purchased a short-positioned stock contract. He figured that Acme Plumbing Corp.'s stock was worth only $50 per share. Short selling consists of borrowing someone else's Acme stock and selling them. You would do this since you believe that the stock will drop in price, which will allow you to buy it back at a cheaper price. It is the same concept as "buy low, sell high" but in reverse order. Joe did not really understand what this transaction was all about but since his broker at the firm of Tipit, Ripit and Dumpit recommended it to all their clients, he went along with it.

At the same time as Joe bought his short position, his neighbour, Pastor Billy-Bob Schwartz, leader of the Church of Perpetual Agony, contributor to countless charities and parent to twelve foster children, decided to get into the stock market in a small way, investing a portion of his meager savings. The Pastor bought 100 Acme Plumbing shares at $50 each.

In the meantime, the Bank of Somewhat Dodgy Returns, commonly called BSDR, had purchased 1,000,000 shares of each of Acme Plumbing and Greasy Donuts about a week before a fateful lunch of TR&D's principals.

On January 10, Acme announced a major contract with a large building contractor and the news appreciated their stock value from $50 to $55 per share. The Pastor was happy but Joe was not. You see, if the price continued to rise and Joe's short-position was not sold at a price below $50 per share, then Joe would be a loser - and so would all the suckers.. er, I mean... clients of TR&D.

What to do, what to do?

"I know", says Tipit, seated between Ripit and Dumpit at the Cigar Bar on Bay Street "We know that the firm of Jumpup and Dy holds 1,000,000 shares of Acme as a hedge against potential losses on a short position in Greasy Donuts, which has been appreciating ever since Greasy decided to eliminate trans-fats, what ever to hell they are. And since we hold 1,000,000 shares of Greasy and have already made our profit, we sell Greasy at the same time as J&D sell Acme. Both stocks will go down and we can all cash in out short positions." "Brilliant", says R &D of TR&D. "We all win on both stocks. There is no downside that I can see. Let's do it."

So, TR&D sold their positions in Greasy, while J&D sold all their Acme shares. The result? Both stocks took a nose-dive because no-one really understood why holders of large block of each company are were dumping. "Do they know something that we don't?" ask the panicking investor?

In short order Greasy shares had dropped to penny stock and Acme did no better. To make things even worse, the Acme big building client canceled their deal with Acme fearing that the company was not viable, due to the share price plummet, putting 50 people out of work.

The bottom line? TR&D and J&D, and their clients, had successfully manipulated two stocks on the Exchange and made a wonderful profit. Joe was elated. He had made over $5,000 in less than two weeks.

But what of Pastor Schwartz, Joe's neighbour? With the meltdown of Acme, the Pastor had to file for bankruptcy, which, in turn, resulted in his Parish demanding his removal as their Pastor. His wife of 10 years walked out on him and finally Social Services came in to remove all the foster children from his care - because he could no longer feed them. Pastor B-B Schwartz was a broken man who took to a life on the streets. Neighbour Joe bought his house for the taxes-owing.

And what of the Bank of Somewhat Dodgy Returns? When the market fell and they lost their liquidity the government stepped in to keep them viable with loans of taxpayer money at a very low interest rate. William C. Lomax Jr., the Chairman of BSDR, was so elated that he gave himself a $1,000,000 bonus and went out and bought a new Porsche. One night after drinking a bit to much, Chairman William C was driving home when an object appeared in his headlights. He swerved but could not miss hitting the object. The object turned out to be a street bum, later identified as former-Pastor B-B Schwartz, who died at the scene.

The moral of this story? I have no idea what the moral is here! In fact I find the whole thing immoral.

But it is what is going on all around us right now!