CRAZY MARKETS

Dear John: I’m just an ordinary investor. I’ve had my assets in a “stable fund” for over a year now due to the wild ups and downs in the stock market. But what happened recently just defies comprehension unless you believe in conspiracy theories. The market was down 950 but recovered 900 of that.

What is going on here? Did the same investors who fled to safety one day suddenly come charging back the next? Or is this a rigged market, fixed to prevent it from going below a certain point? Is this market “safe” for the ordinary investor like me? K.C.

Dear K.C.: No, I don’t think the market is safe for people who buy and hold – unless you are able to hold whatever stocks you purchase for an open-ended amount of time.

Back in early September I did a column with the headline “Marts seem to be setting us up for another fall.” Despite the fact that nearly everyone else was looking for a rally, I thought that was an obvious call.

The nation’s banking system was clearly in distress, and more bad announcements were inevitable. The economy was obviously weak but Wall Street’s “experts” were looking for solid corporate earnings gains, especially from financial companies.

Were the analysts lying to you, or were they just wrong? I think the “experts” were engaging in voluntary self-deception.

Is the market rigged? I’ve told readers for many years that I believe the government steps in to provide support under the stock market in times of crisis – although what a “crisis” really is can be open to interpretation. Federal Reserve Governor Robert Heller proposed as much in 1989 and I believe this tactic has been used.

And current Treasury Secretary Hank Paulson has admitted that he talks with “market participants” on a regular basis. What exactly would they be talking about if not the markets and the direction in which Washington would like them to move?

Do you, as a small investor, really want to get involved in this sort of game? If you aren’t an insider why bother?

This doesn’t mean you should sell all the stocks you currently own. There could be tax consequences that are far greater than the market losses you might incur if Wall Street continues to stumble. But you have to think seriously about risking any new money in the market at this time.

Dear John: I am trying to digest the gross domestic product numbers and make some sense of them. I understand that there was a stimulus package that juiced GDP in the second quarter, but the increase just seems too big. Here is what I see from the Bureau of Economic Analysis Web site: Real exports of goods and services increased 13.2 percent in the second quarter, compared to an increase of 5.1 percent in the first quarter.

Meanwhile, real imports of goods and services decreased 7.6 percent compared to a decrease of 0.8 percent the previous quarter. The price index for imports of goods and services increased 28.6 percent in the second quarter, so adjusting for the inflation in import prices, real imports declined although the actual cost of them increased.

On the other hand, the GDP implicit price deflator, the rate of increase of prices of goods and services produced within the US, only rose at an annual rate of 1.3 percent. I find all of this a bit baffling. Do you understand any of this any better? Does this make any sense to you? H.M.

Dear H.M.: The Commerce Department’s GDP figures are B.S. for the reasons you stated and many, many more. And when the final numbers come out for the second quarter, and for the whole of 2008, the numbers will make even less sense.

Send your questions to Dear John, The N.Y. Post, 1211 Ave. of the Americas, N.Y., N.Y., 10036, or [email protected].