Assets and markets see no end to smart manipulation

Last week, traders saw sizeable erosions to their portfolios after in the US and European stock markets went through a painful correction. There were some high-flying stocks that shed 50 per cent of their value, and so let’s try and dissect some of the that reasons that could have set this off.

Is this solely related to objective factors concerning the markets? Or were there other factors, such as the concentration of wealth, especially among the new rich who made overnight fortunes by harnessing rapid tech advances in mysterious ways?

Certainly, there are fundamental factors related to the performance of these companies and the volume of speculation that fed market volatility in short bursts of time. However, the focus here will be on the twisted methods resulting from investors’ acquisition of wealth in ways that had nothing to do with market fundamentals. In this regard, let’s have a look at what Elon Musk, founder of Tesla, SpaceX, PayPal, and high-speed transportation Hyperloop, did.

Musk talks up Bitcoin

Earlier this year, Musk said Tesla will invest $1.5 billion in Bitcoin. He also announced that Tesla will sell its cars in Bitcoin in the future, which led to the altcoin shooting past $60,000 from the $20,000 levels at the end of 2020. Musk, however, last week, said he would not sell Tesla in Bitcoin. This led the ghost currency to lose value to $45,000, after Musk probably sold part of his holdings at $60,000 and made imaginary profits!

In the past, Musk had announced that he would produce the first self-driving car, which helped double Tesla's share before it fell by 20 per cent in two days. He then returned to say that his company would not be able to produce a self-driving car this year, which led the share to fall to $560. Once again, he and his companies made imaginary profits and he became the second richest man in the world with a fortune of $150 billion.

Wanton destruction

The latest ‘manipulation’ is related to Bitcoin, which is not governed by law. But strange is the fact that the other ‘manipulation’ was carried out using the Tesla stock, which is listed on the world's largest market, one that’s characterized by transparency and strict laws that prevent manipulation and releasing statements that affect stock prices. In spite of this fact, nothing happened, and no accountability was established, despite the loss it would have meant for many of Tesla’s retail investors.

The question is how was this allowed to happen in the US market by owners of listed companies exploiting news cycles to make profits? Which is puzzling, when manipulators are supposed to be held accountable and referred to due legal process. The US law is strict about abuse of position, but Musk continues to manipulate, as shown by the Bitcoin happenings. And now, he intends to take on board another digital currency Dogecoin to organise flights to space.

Also, many owners of newly created tech and digital companies are adopting the same approach. Jeff Bezos, CEO of Amazon, lost half of his fortune due to separation from his wife and is now trying ways to make up for it.

The risk with this is the destruction of savings helped by mid-income professionals, who are a safety valve for society’s stability. The destruction of this social class will see the concentration of wealth in the hands of a small group. All of which requires foreign investors to avoid falling into the trap. The possibilities inherent in the US financial market can be derived with rational and cautious decision-making.

The writer is a specialist in energy and Gulf economic affairs.