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The subprime mortgage crisis became the economic collapse of the 21st century. And while Wall Street's crimes have been chronicled, there are other sides of the crisis that have received less attention. One of them is the fact that common thievery tends to rise at all levels during economic crises.
Marketwatch's Thomas Kostigen noted: "It seems that tough economic times aren't just putting more workers out on the street, it's pushing those who are employed to embezzle."
What? You mean it's not just the fat cats doing the stealing? In fact it makes sense. As times get harder, folks do things that they normally wouldn't do, such as steal from their boss in order to make ends meet. According to comments from the Association of Certified Fraud Examiners (ACFE) in Austin, Texas: '"The message to Corporate America is simple -- desperate people do desperate things," says ACFE President James Ratley. "Loyal employees have bills to pay and families to feed. In a good economy, they would never think of committing fraud against their employers."'
In fact, ACFE survey data shows that corporate theft goes beyond the conventional now, expanding into "identity theft, con schemes and securities fraud." And it's not just company employees that steal a few widgets in order to sell them at the flea market. According to Kostigen, citing ACFE data "frauds by vendors, financial statement fraud and corruption also increased during the present economic slump."
And it's likely to get worse before any improvement is noticed "as companies institute pay freezes and pay cuts, the temptation to commit fraud may grow. By example, almost 90% of those surveyed for the report said they expect fraud to continue to increase during the next 12 months. The type of fraud most expected to increase is embezzlement. Sixty percent of this group said their companies had experienced layoffs during the past year."
What's worse, is Kostigen's logical extension. He says that while the Bernie Madoffs of the world get the headlines, it's natural for the "little guy" who loses his job to get miffed. Thus, laid off angry workers will take their revenge on their former employee.
So where does it end? Kostigen's logic is harsh, but rings true. "Payback is a bilk. All this just goes to show that the trickle-down theory holds true -- even when it comes to crime. At the tail end of this recession, we should brace for more random crime and street crime. That will be the real bottom indicator. You'll come home. Your house will have been robbed. Celebrate. It's boom time again."
Big Week Could Be Ahead For Stocks
Chart Courtesy of StockCharts.com
Last Friday, in this space, we noted that this could be a good week for stocks. It is the first week of a new month, and there are lots of institutional investors who missed a good portion of the rally. Now, there are lots of dollars swimming around looking for a home. And the stock market looks inviting.
The last hour of trading on Friday was good confirmation of our statement, as stocks rallied out of nowhere, in big volume, delivering a staggering short term knock down to the bears.
Now, hidden in the furor of the GM bankruptcy news, the Semiconductor Industry Association released its monthly chip sales numbers. And the number was better than expected, showing a 25% decrease in chip sales for April, on a year over year basis, but also showing a higher than expected 6% rise in sales from March.
This is the kind of data that can propel a sector in the short term. That's why we have added a long entry point on our Semiconductor's HOLDRS Trust (NYSE: SMH) timing program. The SOX index, which houses the large chip stocks, was starting to show signs of life late last week, as the smart money was building long positions ahead of the report.
Visit our Tech. Timing section for more details.
Conclusion
Hard times lead people to do things that perhaps they normally wouldn't do, such as stealing from their boss. But aside from that, it looks as if this cycle brings in a new wrinkle or two, as third parties, including suppliers, vendors, and perhaps even customers are getting into the act via other vehicles such as identity theft, and even con games.
And it looks as if the whole cycle will continue until the employment picture improves.
The stock market, always beating to its own drum, looks set to make a move toward 1000 on the S & P 500. We expect this to be a good week, which will likely taper off by Wednesday or Thursday, as traders begin to square positions ahead of the employment report, due out on Friday.
We have added several new picks and entry points on all of our sections, but we do caution the reader to consider these as short term recommendations, as summers tend to be volatile.
For more details on ETF trading and how to improve both your own trading and your understanding of what we do and how we do it, check out "Market Timing For Dummies" and/or "Trading Futures For Dummies." See links below for more details.
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