The Stock Market is Cheating Us All—and Here’s by How Much

The stock market is cheating people out of trillions of dollars in retirement money every year. The problem is that there are no honest accounting standards for how much a stock company, trader, or broker is able to count in revenues, whether from investments or from revenues only coming from transactions.

As long as there is no total accounting standard, people will lose tens of billions of dollars each year because of accounting manipulations in order to keep more money in the pockets of executives and brokers.

Here’s the story

The average person thinks that they understand all about stock markets. As an example, suppose you have a stock worth $1,000. The stock rises in value over time. You then pay your tax bill and your brokerage bill and you bring home a $1,001 stock, representing a 15% profit. You then use your cut to pay for the new car you want to buy.

If you put that same stock in your 401k plan, you’ll only earn 8%. Then the stocks in your 401k and your other investments lose out as your investment adviser will take that $1,000 and spend it, writing an expensive book on investing or investing for social causes.

The stock is now worth $1,002, and you have lost 25% of your investment—a bigger percentage than if you had simply kept all the $1,000. You are now a hopeless loser in the market.

This is just one example of how many people lose their money because of accounting machinations that have nothing to do with actual investment decisions. But that isn’t the only way this dishonest and unfair rigging takes place.

Misuse of Black-Swan events

Because the stock market is fundamentally corrupt, this is not about people losing out. It’s about a big percentage of the money we all have invested getting ripped off by companies and brokers that are making profits based on distortions that actually benefit their own bottom lines.

The stock market manipulators include companies, brokers, and stock exchanges themselves. As a direct result of this hijacking of the market, over 35% of the value of investors’ stocks is automatically “aborted” every day. Companies and brokers that do this massively raise their bottom lines, and by doing so raise the price the rest of us pay for their products.

In fact, this accounting fiction is so widespread that even the people who set the rules for making money on the stock market, the SEC, only consider the market to be profitable when the stock market is growing. The SEC is willing to overlook the enormous waste of money to keep the market growing. In fact, in April 2018, the SEC told Wall Street firms that it had to take into account their perverse accounting practices even in deciding whether to continue investigating abuses that occur on a regular basis.

This is clear evidence that the SEC is willing to forgo prosecuting fraud in order to allow the market to grow. Big players in the market, with mountains of lobbyists, can convince the SEC to change it’s mind whenever there is a problem. It is common to hear SEC officials casually say that the SEC is “collaborating” with some firms in order to keep the free market growing. But the EPA and other government agencies have never been given such special treatment.

Here is another scary revelation about the stock market. Although the SEC does not share confidential material that shows firms cheating the market with fraudulent accounting, some large brokerage firms have been careful to hide these accounting abuses from the SEC. If any SEC employee wants to see this illegal accounting tricks, they have to spend a total of 180 hours upon “inspection” trying to find them.

To stop this cheating, we have to make sure that companies pay an honest price for giving stock to individual investors, and we have to keep businesses honest by putting a stop to accounting practices that benefit their own bottom lines.

In other words, we need to change the nature of the stock market so that it works for ordinary investors, not just for the big banks and hedge funds that rule the market.

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