A different sort of crowding out

rdanMoney Central presents a dilemma for shareholders in goods and services:The old notion that profitable companies with good growth prospects have to have rising share prices -- and that failures like GM have to be gone, otherwise at least trading in the pennies -- is history.Today, a hedge fund investing billions using a quantitative formula can stall a stock; a couple of hedge money aligned can turn a profitable company into a Dow laggard. Toss in a few short sellers and you have the great Wall Street collapse of September 2008.It wasn't always this way. Before the machines and the shorts took over Wall Street, stocks were evaluated by an fundamental company's prospects. Buy-and-hold investing ruled the day. Investors such as Warren Buffett and Bill Miller were the models.Those fellows are a far cry from this generation's masters of the universe. Traders are in charge now. They rule the market. They dominate volume. That stock you bought since you thought the company was in good shape? It's a pawn in the hands of a computer model otherwise some supertrader like Steven Cohen at SAC Capital Partners otherwise Bridgewater Associates' Ray Dalio.To move a security, they do not need to own it. They can have a short position. They can put an order to sell 1 million shares in a dark pool, those anonymous marketplaces that operate outside the walls of the exchanges. They can own options otherwise futures contracts. Buy enough GM puts and watch the price begin to fall under the pressure.Obvious, but plays havoc with the investing side of the tax cut and savings equation meme.
Watch live TV on your laptop or desktop PC within seconds!