And the world is gradually waking up to the extent of the market manipulation in the United States. Richard Russell last night…

August 5, 2009 — I guess I should come clean and admit it. After reading all about Goldman Sachs and studying Paulson and Geithner and former NY Fed Chairman Friedman, I have become almost hopelessly cynical about the markets. Is anyone ethical? Is anyone honest? I’m starting to wonder. Where money is concerned, is there anything Wall Street or the bankers won’t try?

Rumors of manipulation have been around ever since I started writing Dow Theory Letters in 1958. I always pooh-poohed those rumors, believing that it was the losers who always blamed their losses on manipulation. But now I’m not so sure.

For instance, I watched yesterday’s close on the NYSE minute by minute. The Dow was fluctuating back and forth — up 5 points one minute, down 3 points the next minute. But with one minute to go, the Dow suddenly spurted 33 points higher. I stared at my computer screen in surprise, and I asked myself, “What the hell was that?” It seemed apparent that “somebody” wanted a noticeable higher Dow at the close.

The market can be manipulated on a daily basis or maybe for a week. But in the big picture, as to the primary trend, I don’t believe the stock market or the economy can be manipulated. Although heaven knows that Washington is trying — throwing unprecedented trillions of dollars at the US economy. It’s never been tried before, but won’t trillions of dollars be enough to manipulate the great tide or the primary trend of the market? Maybe for a few weeks or even a few months, but I still don’t believe that the primary trend can be halted or reversed, no matter who tries and no matter with how many Federal Reserve dollars.

The study of the market is part theoretical and part philosophical, and that is what makes it so fascinating. There are certain forces that are so giant, so irresistible that man has not been able to harness them. The tide of the ocean is one. The revolutions of the moon around the earth is another. And I believe the primary trend of the market is a third. The stock market is an invention of man, but although man invented it, like Frankenstein, the tide of the market, the great primary trend of the market, is beyond the power of its inventors to manipulate.

We can’t control the primary trend. Ironically the best we can do is to identify its direction, and even here there are doubts and arguments. Man has invented the X-ray and the Internet, but it’s ironic that man has not invented the fool-proof way to identify the direction of the primary trend of the stock market.

Some of the best minds in the nation have applied themselves to unraveling the mysteries of the stock market. Yet, to my knowledge nobody has come up with the ultimate method of beating the market. I’d say that the stock market is the ultimate mystery to which men have applied their intelligence. How do we know that no one, to date, has solved the mystery of how to beat the market? We know because the day someone discovers how to consistently beat the market, on that day the market will cease to exist. It won’t be a market — rather it will be a sure thing. And one man will be able to accumulate most of the wealth of the world.

I’ve worked for over 50 years with the Dow Theory. A basic tenet of Dow Theory is that it is not infallible. The good and the bad (frustrating) part of Dow Theory is that it requires interpretation. Robert Rhea wrote that “those who demand least from the Dow Theory gain the most from it.” I might add that those who demand most from the Dow Theory are the ones who will be most frustrated by it…..

-END-