Is The Stock Market Rigged?

Happy Saturday…

I have been sitting in a chair the last three days working so after posting this newsletter this morning I am getting off my ass for a run and a ride.

Onward…

The number one question I get on Stocktwits 'Is the market rigged'? Often it is not in the form of a question but in the form of a comment or complaint about a stock or market or event.

The answer I always give is YES! If I am responding to a comment or complaint about a stock or event or a talking head I respond with ‘assume the market is rigged’.

Someone always knows more than you.

The good news is the markets, at least the US stock market on the whole measured by the S&P 500 ($SPY) and The Nasdaq 100 ($QQQ) is rigged in a good way as well if you have money, time and patience. They are rigged to weight companies that make the most profit and free cash flow over long periods of time. Because of tax laws you can futher rig owning the markets in your favor via direct indexing (like our portfolio company FREC.com)

Have a look at the last 30 years which include one crappy decade…

I think we can all agree from this chart that the profits and free cash flow have been flowing and growing best in the technology sector.

There is no guarantee that this will continue to work because the government could screw things up. To be honest, I assume they just will and I don’t know how we would unfuck ourselves if they change the rules that make the markets on the whole work like they have done (I am an optimist and a cynic which is why I am never 100 percent invested).

Until the government screws up the profit motivator, the dips will get bought.

The rest of investing is about managing your own fear and greed. The faster you are honest about your risk profile and risk tolerance, the better.

Have a great day.