Stock market conspiracies that are actually true and how to invest in the truth!
Hey Bow Tie Nation, Joseph Hogue here with the Let’s Talk Money channel and a fun video for you today.
Now conspiracy theories range from the absurd and wild to some that make sense but there are more than a few that are actually true! I saw some of these first-hand working as an analyst in venture capital and for wealthy investors and being on the outside of these could cost you a LOT of money!
I’m not talking about the newest memes or just some of the weird shit you read online but real ways the market is rigged and how the cards are stacked against you!
Because Nation, understanding how the market really works is how the 1% protect their wealth while keeping Main Street investors at a disadvantage!
Knowledge is power so with that, here are the top three stock market conspiracy theories that are actually true!
People know of stock investing as an ideal way to build wealth continuously. Well, that's true. But how does the stock market works, what makes it different from a stock index or a stock exchange? Let's start from the basics though. The stock market makes the buy and sell of stocks possible between independent investors, companies and institutional investors, but most of the stock trades are done by investors.
And because of this vast opportunities to create wealth in stocks, several conspiracy theories in money emerged. But which of these theories are actually true?
True Conspiracy Theory: Big Money Traders Control the Stock Market
Our first market conspiracy theory is that big money traders are manipulating the stock market!
The conspiracy here is that big money traders are able to push prices in the direction they want by just the sheer size of their purchases and by fake orders to buy or sell.
To understand how it works, let’s look at the order book for shares of Apple on the Webull app. Now the order book is all the current buy and sell orders for a stock, so all the prices investors are trying to buy and sell the stock for at that moment.
For example, you see here that Apple is trading for $136.36 per share and we have someone offering to buy 7,700 shares, that’s the Bid price on the left, at that price. But we also have all these other investors in the market with orders to buy or sell at different prices. We have someone with a limit order to buy 1,166 shares at $116.32 and another investor with an order to sell 3,984 shares at that Ask price of $116.45 per share.
And we don’t see it right now in shares of Apple but sometimes you’ll see some really weird orders like hundreds of thousands of shares for a stock just below or above the current market price.
So using this example, if we saw an order to sell 50,000 shares at $116.40 a share which is just above the current price.
Traders do this to create a false illusion of supply and demand for a stock to influence the price. Think about it, if traders look and see there is someone that’s going to be selling a big block of shares at that price of $116.40 per share, that could swamp the market with supply. That might convince the market there will be a ceiling on how high the stock can go because it’s going to hit that price and this huge wave of shares will be sold. Just this perception of the shares can cause a stampede of sellers to get out of the shares and drive the price lower.
So maybe this is a short-seller that wants to scare the market and drive share prices of Apple lower or maybe they just want to see the stock lower to buy more shares cheaply.
The problem is, and this should totally be illegal because it is manipulating the market, but this isn’t a real order for that 50,000 shares. What happens is if the price gets close to that order, the trader just cancels it. The trader has either drove those share prices lower with the fear of that big wave of supply or they just cancel the order and never have to make good on it.
Knowing this, what you can do, is if you notice shares of a stock are moving higher or lower, take a look at the order book and ask yourself if the move is for real or market manipulation by a trader.
True Conspiracy Theory: Banks Control the Federal Reserve
Our second true market conspiracy, how the banks control the Federal Reserve.
This one goes all the way back to 1913 when the Federal Reserve was created and understand, the nation’s central bank is supposed to be totally independent. The Fed and its committee sets the target interest rate at which commercial banks borrow and lend which helps determine all other interest rates in the economy.
The idea is the Fed does this to fulfill its mandate of full employment and low inflation…not to make the bankers happy through interest rates. And to do this, the Fed is supposed to be independent.
But supposed to be and reality are usually about as likely as a unicorn pooping ice cream.
The fact is that the banks own stock in the regional Federal Reserve banks and get a portion of their profits from that stock. Those profits last year amounted to $1.6 billion from the Fed paid out to the banks.
Again, the Fed is supposed to make its decisions based on unemployment and inflation, not on the whim of bankers or where they want rates to go but another fact gives the banks more control over our nation’s monetary policy. The banks nominate six of the nine members on regional bank boards of directors, which nominate the bank presidents that serve on the Federal Reserve’s market committee that controls all this…so yeah, this conspiracy theory isn’t so much a theory but the truth!
There’s not much you can do about this one but it goes to prove, if you want to know why something is happening, just follow the money!
True Conspiracy Theory: The Government Hides Real Unemployment
The next crazy but true market conspiracy theory is that the government is hiding sky-high unemployment!
This one was made popular back in 2009 when Rush Limbaugh accused the Obama administration of skewing the unemployment numbers in November and there are actually a few ways it happens.
First is that the Bureau of Labor, the federal bureau that puts out the unemployment numbers, uses a seasonal adjustment number when it reports. According to the BLS, this is because, over the course of the year, the size of the labor force and unemployment, bounce around a lot due to seasonal changes like the weather, harvests, major holidays and the school year.
Because these seasonal events happen more or less regularly every year, the government tries to change the trend by adjusting the numbers from month-to-month.
The problem is, this seasonal factor can change from year-to-year, other factors can come into play and the long-term trend changes. For example, this year, it was found the unemployment picture was off by as much as 130,000 people because the government was adjusting the number a certain way.
Besides this ‘massaging’ of the numbers to paint a different picture, the government reports seven different measures of unemployment…of course only one of these, the U-3 number, one of the lowest, is what you hear each month for the unemployment rate.
The official unemployment rate is based on the percentage of the labor force that has no job and is looking for work, called the U-3 measure here.
But what about the people that haven’t been able to find work for so long that they’re not looking anymore? What about the people that were forced to take a part-time job because they can’t find a full-time gig? These are measured with the U-5 and U-6 and show a completely different picture.
For example, the government recently reported the “official” unemployment rate at 8.4%…which is pretty bad but not even close to the 14.5% that includes all the unemployed and marginally employed.
So you have to take what you hear with a bucket of salt, understand how the numbers can be manipulated and make your own decisions about the economy.
Most conspiracy theories are total bull but knowing which have at least a kernel of truth will help you make money and avoid the myths all around society. Learn how to spot these stock market conspiracies and how to profit from them!
About the Author
Joseph Hogue is a financial expert and investment analyst. After serving in the Marine Corps, he started his career investing in real estate before becoming an investment analyst for some of the largest private investors. He's appeared on Bloomberg and on CNBC as an investment expert and has published ten books in personal finance. Now he helps investors reach their financial goals and invest in the stock market with some of the same advice he used when working for the rich.