The stock market today is once again in a febrile state. After the calamitous near-collapse of the financial system, courtesy of the contagion of credit derivatives, the last year did see upward price movement return to the stock market. It looked like the worst of the recession was over, we were told there would be no double dip; China was going to motor the world economy forward. But starting this spring, the stock market has been knocked back by a slew of events, and volatility has returned big time.

Where have the long term investors gone?

Quite possibly the best way to invest money in 2009, after the stock market crash of 2008 when investors - who ran from all markets bearing any sort of credit risk - becoming desperate for returns, begin flooding back into that perennial volatile vehicle – was to put it into stocks. Except the performance has since fizzled, as investor confidence was knocked by the Euro zone crisis, a continued mixed bag of economic news, and a final dawning that realization that the double dip may be just round the corner. This has left the stock market today in a confused state. Investors seeking fundamental value might want to learn how to invest in silver.

So some top no load mutual funds have flooded back out of stocks in the last two months, leaving the stock market today choppy and directionless. They would do well to stay away, and so would you according to traditional stock technical analysis. Much of the so called outstanding performance of stocks, as an asset class in historic terms, can be seen as something of a mirage. The illusionary aspect is a result of the endless possibilities for balance sheet manipulation, a genie let of the bottle consequent on the deregulation of the financial system in the 1980s and 1990s. But with political patience wearing thin, at the shenanigans of the corporate world, and its collateral damage on the rest of society, it may be that the time is about to be called on the con game in the stock market today.

The greed game

That game has involved a symbiotic fusing of accountants, investment bankers and corporate executives, with the basic objective of enriching the top management. By a series of financial innovations, accountants have successfully allowed management to present balance sheets as they wish to their prospective investors, making investing in stocks a highly risky venture. This has allowed the careful manipulation of share prices to enable takeovers and acquisitions – the froth of which has driven much share trading, helped satisfy, and fuel boardroom greed.

Sure, all three groups have flirted with fraud and misrepresentation, and the more arrogant have become ensnared in obviously fraudulent acts. But stock prices boomed along with bank profits and executive remunerations. However, with the credit crisis showing the systemic dangers of allowing banks and corporate free rein under the light touch from the SEC along with the FASB caving under congressional pressure, things in the stock market today may be about to change for the better; not for superficial returns on stocks, but for a more sane relationship with the rest of the economy.