Nearly Guaranteed Top 12 Predictions For 2023

No one is shedding a tear over the end of 2022.  Sharp inflation. Record food price hikes. Highest ever gasoline prices. Worrisome product shortages. Rising interest rates. Steep stock market losses. A porous border. Runaway federal government spending.  War in the Ukraine.  Good riddance to 2022. 

No even Nostradamus could have predicted the gloom of 2022.

When the calendar flipped to 2023, forecasters with short memories are peddling cheery news about everything from the stock market to inflation.  Optimists claim the new year will make Americans forget 2022.  Not so fast.  My occasionally reliable, highly unpredictable crystal ball is blinking red.

1. The country sinks into a recession, as predicted by a majority of economists and large banks.  The Gross Domestic Product (GDP) will be negative for at least two straight quarters this year.  The Biden Administration will avoid using the "r" word, referring to the crisis as a "temporary retraction." 

2. The economy will shed 1.1 million jobs as more major companies in the technology sector and big firms are forced to layoff employees in the face of less consumer spending.  First time unemployment claims increase each month.  Expect the unemployment rate to climb to 4.5% by year's end.

3.  Adding to the economic woes consumer credit card debt and personal loan delinquencies surge in the new year.  Consumers have been on a spending binge the last two years seemingly immune to inflationary prices.  A consumer retrenchment will negatively impact corporate earnings. 

4.  After the worse market since 2008, equities managers are clinging to history that shows markets tend not to experience two negative years in a row.  Equities bounce around early on before gaining momentum. Stocks finish the year strong with the S&P (+20%) outperforming the NASDQ and Dow. 

5. Home sales will reach their lowest point since the 1980's as interest rates make real estate less affordable, especially for first-time buyers. The good news is that the overheated increases in prices will abate except in a few markets where demand for high-end homes flourishes such as Texas and Florida.

6. The Federal Reserve, as promised by Jerome Powell, will continue to raises rates in the new year as inflation persistently refuses to fall lower than 5.8%. Food and energy prices leap higher than the CPI. Eventually, Fed hikes dampen growth, prompting Powell to forego a rate hike in fourth quarter.

7.  COVID infection rates soar past 70% in China after the Communist nation abandons its COVID Zero policy. New highly infectious variants develop as the virus rages, killing 1 million Chinese.  Chinese travelers spread the virus globally, leading to worldwide outbreaks.  

8. The Supreme Courts ends its temporarily halt of Title 42, which allows the expulsion of illegal immigrants under pandemic-era restrictions. The move unleashes a torrent of border crossings, prompting the forced resignation of Alejandro Mayorkas.

9. More fast food restaurants will join the robot revolution as testing by Chipotle, White Castle and others proves diners are satisfied with food prepared by robots.  The fast food industry will move quicker to adopt robots and AI as wage increases and the difficulty hiring workers persist.   

10.  The collapse of FTX Exchange, once a $32 billion enterprise, prods the Securities and Exchange Commission (SEC) to issue regulations for the cryptocurrency industry.  As more crypto exchanges and lenders file for bankruptcy, the new rules clamp down on the industry, softening currency demand.    

11.  The Chinese will not launch an invasion of Taiwan instead increasing menacing militaristic tactics to cower the island.  When the U.S. fails to intervene, China finds an excuse to encircle the island with a naval armada.  China threatens a blockade unless Taiwan makes concessions.  

12. Trying to speculate on Putin's strategy in Ukraine is a fool's pursuit.  But the most likely scenario is the European Union will push for a settlement as energy supplies dwindle, sapping economic growth. Ukraine is pressured into a diplomatic solution when EU/US commit billions to rebuild the country.   

Print this column and wave in your prognosticator's face at the end of 2023.  However, if you have your own predictions you would like to share, I would like to read them.  After all, the prediction business is full of people who get it wrong every year.  And that has never stopped anyone, including me.  

Top Ten Predictions For 2020

Futuristic predictions are notoriously goofed.  A glance in the rear view mirror of history illuminates the hazard of forecasting.  Consider in 1998 a well known futurist boldly prophesied that human life expectancy would rise to "over 100" by 2019.  He missed by a whopping 27.4 years.

In a 1994 book, a British commentator and editor foresaw the retirement age would inch up to age 70.  He was off by five years.  In the U.S. the average retirement age for men is 65 and 63 for women.  A few European countries have upped the retirement age to 67.

And there are more wrong-headed prognostications.  The International Food Policy Research Institute forecast 33 years ago that the world population would balloon to 8 billion by 2020.  Close but no cigar. The U.N. projects the world's population is 7.7 billion, a mere 300 million below the estimate.

One popular conjecture was the disappearance of paper books as consumers turned to wireless devices to devour their favorite novel.  That must be news to the U.S. book publishing industry which sold 675 million print books in 2018.  True, sales are declining, but readers aren't scrapping books.

Against this backdrop of conceited folly, your journalist once again boldy (some say egotistically) wades into the treacherous, murky waters of the future with predictions for 2020:

1.  The Dow Jones stock index soars to a record 30,000 in the first quarter before giving up ground in the third quarter to finish near 29,000 after business profits begin showing softness and global economies fail to meet market expectations. 

2.  Gross Domestic Product (GDP), a measure of U.S. economic growth, defies forecasts by averaging 2.2 percent quarterly as consumer spending continues to spur the recent boom and recession fears evaporate.  Ninety percent of world economies lag behind U.S.  

3.  China's economy struggles to reach its former robust levels as more banks fail, consumer spending weakens and an increasing number of countries balk at investment because of human rights violations.  These developments compel China to make more concessions on U.S. trade.  

4.  The housing market, after a temporary slumber, awakens as the Fed dampens rate hike jitters triggering a 5 percent uptick in single family home starts, while inventory shrinks and prices for existing homes post single-digit gains, primarily in currently hot markets.  

5.   After much speculation, China launches a digital version of its currency, the Yuan, raising pressure on the United States to enter the digital currency age to maintain the dominance of the dollar as a worldwide currency.  The Treasury Department promises to "explore" the option. 

6.  American wireless firms, after trailing China's aggressive rollout, usher in the next generation wireless technology 5G with rapid deployment in more cities, but applications are a disappointment as handset manufacturers and network connected devices are slow to market.

7.   U.S. Attorney John Durham completes his investigation into FBI abuse regarding spying on Trump campaign and the abuse of FISA warrants, leading to indictments of senior Obama era officials, including John Brennan, James Comey and Andrew McCabe.  

8.  With birth rates falling in the U.S., American colleges and universities rethink higher education and begin reaching out to more than 49 million retirees in an effort to lure them back to campus by building senior housing and other amenities to offset dwindling enrollment.

9.  Early Democratic Party presidential primaries produce no clear frontrunner. Worried about beating President Trump, former President Barack Obama endorses a new entrant into the race, however, delegates to the convention in Milwaukee ultimately decide the nominee.    

10.  Articles of impeachment remain stalled in the House of Representatives as Democrats continue to scour for new charges to levy against President Trump.  Democrats launch new probes and adopt more articles as ammunition to defeat the president in the 2020 election.     

For readers who remain skeptical about your journalist's crystal ball wizardry, five of last year's predictions were absolutely on target, including the prophecy that Speaker Nancy Pelosi would initiate hearings for Articles of Impeachment after the Mueller Report produced no wrongdoing.

Now that you have been offered a glimpse of 2020, here's hoping you have The Best New Year Ever!  

AT&T: A Cautionary Tale For Big Tech

Three American technology titans are locked in a race to become the nation's most valuable firm.  Apple, Microsoft and Amazon are jockeying for the No. 1 spot.  Apple and Amazon have reached $1 trillion in market capitalization before backpedalling as the overall stock market stumbled.

The trio are seemingly bulletproof, outperforming their peers by wide margins and posting eyeopening earnings that are the envy of corporate America.  Financial analysts are betting Apple, Microsoft and Amazon are on a trajectory that will propel the firms into the value stratosphere.

Market cap is one measure of a listed company's size and value.  The number is derived by multiplying the total outstanding shares of a firm by the current market price of a single share.  The result is the market capitalization expressed in dollars. 

Observing the three Goliath's reminds me of AT&T.  At one time, American Telephone and Telegraph was the biggest corporation on planet Earth.  The telecommunications giant ruled over an empire that spanned the globe.  Its corporate brand was the best known in America.

AT&T stock has existed in one form or another for more than 130 years. The first shares were issued in 1877 to seven original owners.  For decades AT&T was a market bellwether, it's performance watched closely as a proxy of the country's economic health.

From the 1920's through the 1950's, AT&T or General Motors swapped places regularly as the No. 1 or No. 2 most valuable company.  In 1932, AT&T represented 13 percent of the total value of the stock market.  By 1983, it was earning more than $15 million every day or $11,000 per minute.

In 1983, the communications powerhouse's assets of $150 billion exceeded those of GM, Ford, GE, IBM, Xerox and Coca-Cola combined.  It had 182 million telephone customers and a wired network of more than one billion miles.  It was the nation's largest employer with 1,009,000 workers.

One man birthed the telephony revolution.  In 1876 Alexander Graham Bell was granted Patent No. 174,465 for his invention, the telephone.  For many years, it was considered the most valuable patent ever issued.  With two financial backers, Bell started the company that would become AT&T.

Over the decades, AT&T churned our inventions such as the transistor, fiber optics and cellular telephony. Its scientists earned seven Nobel Prizes.  It demonstrated the first television service, opened the first radio station and inaugurated transpacific telephone service across the Pacific Ocean.

It was a technological juggernaut that spread its telecommunications tentacles from coast to coast and throughout the world.  Its staggering size and market dominance dwarfed its competitors in the communications industry.  Eventually that proved to be its undoing. 

The Department of Justice filed an anti-trust suit in 1974 against AT&T.  A settlement was eventually reached and in 1984 the Bell System was given a corporate burial.  In its place, Ma Bell became a long distance company and released its seven children: the operating telephone companies.

One of those offspring, Southwestern Bell Telephone, soon began a string of mergers with other Bell siblings.  With the added financial muscle, the firm--then known as SBC--purchased its former parent AT&T in 2005 for $16 billion, completing one of the strangest corporate family episodes. 

The "new" AT&T was no longer one of the country's biggest firms.  In its place, new technologies and e-commerce spawned corporate colossus, such as Apple, Microsoft, Amazon, Facebook and Google (Alphabet).  They would be well advised to learn from AT&T.

The first lesson is that size matters to trustbusters. Each tech firm has near monopolistic share of its market.  Amazon controls 43 percent of all online sales, soaring from 25 percent in 2012.  Goggle has a domineering presence online with a 78.8 percent share of all search traffic.

Microsoft rules the desktop personal computer space.  The firm's signature product Windows is the operating system of choice on 82 percent of desktop PC's.  The next closest competitor is Apple's MAC OSX operating system with just a 12.9 percent share.

The Department of Justice has already shown interest in the hiring, anti-competitive and privacy policies of these high-tech companies, especially Facebook.  How long will it be before the government lawyers begin sticking their noses into the firms' virtual market monopolies?

The leaders of high tech companies should study how a dominant position in a market can evaporate overnight with a single anti-trust suit lodged by the DOJ.  What are the firms' plans if they are forced to shed assets or open up large swaths of their businesses to more competition?  A plan B is a must.

Antitrust is not the only threat to tech Titans.  The tempo of innovation in Silicon Valley, Austin and other technology hotspots can disrupt an entire industry.  Look how Uber and Lyft have upended the taxi business.  Change is occurring at the speed of light and those who resist lose. 

Just as an AT&T innovative device the telephone propelled the company's early growth, Apple has owned the smart phone market since the introduction of its iPhone 12 years ago.  But the market for the once-revolutionary device is saturated and sales are beginning to falter for the first time.

Although the iPhone outsells 96 percent of the companies on the Fortune 500, its market share has slipped to 15.6 percent of all smart phones purchased worldwide.  Industry analysts are beginning to fret that Apple cannot depend on its iPhones to drive its long term growth.

It is eerily similar to AT&T's dilemma.  The telephone was an AT&T invention that spawned an industry, just as the iPhone built robust demand for a rich-featured wireless device that connected seamlessly to the Internet.  Creating a market does not guarantee it will be yours forever.   

AT&T has withstood antitrust suits, erosion of market share, disruptive technology and the rise of competitors for 130 years.  Will today's tech Godzilla's--Apple, Amazon, Microsoft, Facebook, and Google--be around for another century?

Given the simmering pace of inventions and technology and the prying eyes of the Department of Justice, it seems like a stretch today.  Survival in today's corporate world requires visionary leadership, nimble competitive response, constant innovation and less government interference.

Drew's View: Fear Grips Stock Market

Since October, prices of stocks have been on a roller coaster ride.  The market soars to dizzying heights before plunging to nauseous depths. Investors are left with churning stomachs and hand-wringing anxiety.  Even the stock experts are left shaking in their shiny cap toe shoes.

What makes the current market gyrations so incomprehensible is the booming economy.  Market experts subscribe to the theory that stock price increases follow real growth in the Gross Domestic Product (GDP), a barometer of economic health.  However, the correlation doesn't apply today.

From 2006 to 2014, the average growth of the stock market increased at a rate four times higher than the average GDP.  In the second quarter last year, real GDP growth zoomed to 4.2 percent, the highest in more than a decade.  The third quarter was a robust 3.5 percent.  But stocks nosedived.

Stock prices also have plummeted in the face of climbing corporate profits.  American companies posted corporate profits of $3.5 trillion in the third quarter of last year, an increase of $69.3 billion.  It marked an all-time high for corporate profits.  This should translate into higher stock prices.

Some economists blame the sagging world economy for the downturn.  Others cite the trade war with China.  Many theorists also point to the uncertainty over interest rates and unrest in the Middle East.  The worry list stretches into infinity.  Stock brokers act as befuddled as the average investor.

Businesses reporting fourth quarter earnings are fueling apprehension. Apple recently attributed the China trade crisis for its tepid results.  Market gurus accepted the thesis.  The truth is the price of Apple's iPhone is five times more expensive than its Chinese competitor's.  Trade is not the issue.

You can bet in the coming weeks every American firm with weak earnings will lay it off on the China trade squabble. Analysts will nod without challenging the premise.  There is no question China's tariffs are a negative, but China's economy has softened, especially consumer spending.

No pinstriped suit on Wall Street will confess the real reason for the market skid.  It is plain old fashioned fear.  Astute market players aren't supposed to be swayed by emotions.  That's for the great unwashed individual stock pickers.  But it's the most logical explanation for the up-and-down market.

Their worst nightmare is the length of the current Bull market.  In March of 2009, the Dow Jones stood at 8,599.  On January 11, the Dow was teetering at 23,995 after soaring as high 26,186 on February 1 of last year.  That is an astounding gain of 15,396 points or 179% in 118 months.

The previous record Bull market rumbled for 113 months from October, 1990  through March, 2000.  During that stretch, the Dow rose 417 percent.  That still stands as the top gain in history.  Market technicians are certain the Bulls can't run forever.  Duh.  But no one can predict the expiration date.

That accounts for the wild swings in the market.  A day when stocks begin falling at the opening bell turns into a rout as big institutions get nervous that a huge sell-off will lay waste to the market.  If the market trends upward, all the investment whales swim in and swallow up stocks to lift prices.

This see-saw effect is a classic example of fear ruling the market.  Forget the age old investment hypothesis about efficient markets.  No one wants to be caught fully invested in the market when it plunges 20-percent that would signal the return of the hibernating Bears.

The market follows this volatility with a popular measurement known as the VIX or CBOE Volatility Index. Most specialists call it by another name: Wall Street's fear index.  The last time the index performed this way it triggered a crippling sell off.  Fear can make the savviest investor panic sell.

Stock market insiders often pooh-pooh the fear factor.  They point out that most trading in the markets is orchestrated by computers running sophisticated algorithms.  But when market trends spike, computerized trading triggers selling or buying that exacerbates the market oscillation.

A couple of indicators to watch over the coming weeks and months are measurements that make up the VIX gauge.  One is the spread between yields on invest grade bonds and junk bonds.  The other is money leaving the stock market for higher returns in Treasuries and other safe haven investments.

When you listen to the talking heads on television and read the financial pages, discount most of the skittish news about the market.  There will always be speculation about a market meltdown.  Uncertainty exists even in Bull markets.  Instead look for signals indicating increasing fear.

That is all you need to know to understand today's stock market.   So cancel your subscription to the Wall Street Journal and turn off CNBC business.  Be content knowing that all the knowledgeable investment experts have no more insight than you do about the future of the stock market index.

Top Ten Predictions For 2019

As the curtain falls on another year, the spotlight shines on the beginning of the Prediction Season.  Self-proclaimed experts forecast the outlook for the stock market, economy and which Hollywood stars are headed for divorce court.  Most prognosis are bunk.  But this one is the genuine article.

How can you be certain?  Your journalist ditched his ancient crystal ball this year and decided to consult the Chinese Zodiac sign.  This is the year of...wait for it...The Pig.  The animal, according to the horoscope, represents honesty, trust and bravery.  That bodes well for the New Year.

But there also is a dark side to The Pig.  The animal also has characteristics of self-indulgence, naivete, stubbornness and laziness.  Ah, forget all those attributes.  All you need to remember is that the animal ends up as bacon on your plate.  Hmmmm.  Bacon!  Now there's a reason for optimism.

The piggish forecast for 2019 is not as slovenly as the pessimists among you expect:

1.  Despite gloomy forecasts from the likes of Goldman Sachs and other money firms, strong consumer spending spurs an annual gain of 2.9 percent in the Gross Domestic Product (GDP), after posting two quarters of 3+ percent growth early in 2019, outperforming most world economies.

2.  With its stock market sinking and its economic growth underperforming expectations, China signs a trade deal with the United States but before the ink is dry the CIA reveals the Asian country has launched a cyber intrusion on our government that approaches a Category 1 attack.

3. Federal Reserve interest rate hikes in the new year continue to be an anchor on the U.S. stock markets as the Dow enters bear territory, igniting a very public feud between President Trump and Fed chairman Jerome Powell. The tension ends in Powell's resignation, calming markets.

4.  Special counsel Robert Mueller, appointed in March 2017, finally issues his report on Russian interference in the 2016 election after the new Congress is sworn in.  His report is littered with innuendoes about Trump campaign conduct but offers no proof of collusion with Russia.

5. The Democratic Party-controlled House launches a series of investigations aimed at President Trump and his campaign associates, using the Mueller report as its excuse for additional probes.  At the urging of Speaker Pelosi, the House takes up articles of impeachment against the president.

6.  With a March deadline approaching, a disheartened Prime Minister Theresa May calls for a public referendum on the Brexit deal she negotiated with the European Union after failing to get approval from Parliament. Voters reject the exit settlement, leaving the plan to leave the EU in limbo. 

7. Electric car manufacturer Tesla fails to fulfill its commitment to produce 500,000 cars, sending the firm's stock in a nosedive and forcing CEO Elon Musk to give up the company reigns to an executive with auto experience to quiet the financial crisis.

8. Despite most political pundits debunking her chances, Hillary Clinton announces she will run for the presidency igniting a wild scramble among Democrats to come up with a more electable candidate. Former San Antonio Mayor Julian Castro throws his hat in the ring, becoming the favorite.

9. Justice Ruth Bader Ginsburg, who recently underwent cancer surgery, attempts to hang on to her seat on the High Court despite failing health before succumbing to the disease.  President Trump nominates former Notre Dame law professor Amy Barrett as her replacement.

10.  As the cost of health care and insurance continue to climb, industry giants Goggle, Amazon and Apple jump start more research and development on the use of virtual intelligence for applications in drug development, health diagnosis and personal health care, gaining a new revenue wellspring.

I can hear what your are thinking.  These predictions are pig-headed, the figment of a bacon-lover's imagination.  You could be right.  But the good news is that when 2019 ends, you won't remember these forecasts. So go ahead.  Have a wiggly piggly New Year!

Why Stocks Are Riding Market Roller Coaster

Just when the US stock market appeared to be defying gravity, it tumbled back to Earth with a resounding thud. Jittery investors rubbernecking at the Dow and S&P market numbers gulped Alka Seltzer. Panic gripped Wall Street traders who triggered a massive sell off of stocks.

Even before the dust settled, everyone from small individual investors to institutional fund giants were asking the same question: “Is the Bull Market over?”

That question dangled over the market as stocks began a roller coaster ride recently, giving new meaning to the word volatility.  After the end of the bear market in March 2009, stocks have soared into record breaking territory, making this the second longest Bull Market in history.

But the recent gyrations have Wall Street analysts calling the downdraft a correction, a term reserved for a 10 percent drop in market averages. A  20% slide would have signaled the start of a Bear Market.  Last week the market rallied, but the gut-wrenching steep swings may not be over.

Despite the conventional market wisdom, the gyrations are a product of the Federal Reserve’s experimental policy over the last eight years. The Fed propped up the stock market during President Obama’s tenure by lowering interest rates while increasing the supply of money.

Under former Fed Chairman Ben Bernacke, the country embarked on an unprecedented monetary experiment.  The strategy was to repress  the bond market by lowering interest rates, nudging investors into riskier assets such as stocks.  The policy worked as assets prices rose.

Everything from real estate to junk bonds and stocks gained as the Fed drove interest rates to nearly zero while purchasing longer term securities issued by the federal government. At the same time, the Fed flooded financial institutions with capital to promote increased lending.

As a result of the the Fed’s unprecedented maneuvering, stocks leapfrogged to new highs.  However, the market was built on quicksand.  There was no underlying growth to support rising stock prices. Economical fundamentals were soft.  The result was overheated stock prices.

After Bernacke stepped down, new chair Janet Yellen followed Bernacke’s script endorsed by Mr. Obama.  In the twilight of Obama’s reign, when the economy began showing signs of a pulse, Yellen acquiesced and signaled a modest plan for raising interest rates.

Many leading economists were stumped by Yellen’s slow pace.  The experts believed it was time to unwind the Fed’s asset purchases and allow interest rates to move upward at a faster clip.  Despite the lack of economic evidence to continue to weigh down interest rates, Yellen clung to her policy.

The reason for her recalcitrance is the stock market was the one gem in an otherwise dismal economic performance under Mr. Obama. Fed chairs always insist their monetary decisions are unaffected by politics. Don’t believe it.  Everything in Washington is influenced by politics.

That’s why this recent market nosedive should be named the Obama Correction.  The Fed’s policy, which some claim saved the financial industry from collapse, resulted in the slowest recovery from a recession in U.S. history.  Stock traders became rich, but the average American saw far less benefit. 

The good news is the United States economy is shaking off its long malaise.  The Gross Domestic Product (GDP), a measurement of economic growth, hit 3.2 percent in the second quarter and finished the third at 2.6 percent.  GDP numbers for 2017 will be released February 28.

Unemployment has dipped to historic lows. Wages are showing signs of inching upward. Corporate profits are now energized by top line revenue growth.  And more firms are raising their profit estimates for future quarters, an indication there are better days ahead.

Of course, economic growth has a down side for the market.  Analysts are now hand-wringing about interest rates putting a damper on consumer borrowing and spending.  Wall Street is also spooked about fears of inflation as growth inevitably leads to a tight labor market and higher wages.

Even with an improving economy, no Bull Market lasts forever.  The longest Bull Market in history was from October, 1987 to March of 2,000, a period of 4,494 days when the Dow Jones Industrial Average reached 308 all-time highs and spiked 582%.

The current Bull run is approaching 3,000 days.  The average Bull Market lasts about nine years (3,282) days and adds 480%.  Looking at those numbers, the current Bull has room to grow, having added 260% in under eight years.  This Bull may yet become the longest in U.S. market history.

Wall Street's Dumb Obsession With Artificial Intelligence

One of the oldest investment cliches is fast becoming obsolete. For as long as stock trading has been around, brokers and financial advisers have preached long-term investing, urging clients to adopt a 10-year horizon to smooth out the inevitable market volatility that effects returns.

As proof of their theory, investment counselors haul out charts showing that over a decade, despite economic ups and downs, stocks average annual returns of around seven to nine percent. The premise is soothing to investors seeking predictability in the performance of their investments.  

However, in the last ten years the stock market has failed to deliver anything approaching those returns. The Standard & Poor's 500 posted a skimpy annual return of 0.4 percent between August 1, 2000, and August 31 of this year. During this ten-year period, the hallmark of the market has been its unpredictability.

The financial industry can dredge up a laundry list of explanations for the market volatility, most notably the near collapse of the country's biggest banks and financial institutions.  Without overlooking those problems, they don't fully explain the market chaos.  Although its hardly ever mentioned, one of the chief contributors to market turbulence is the introduction of artificial intelligence on Wall Street.

Beginning more than a decade ago, big investment houses, financial institutions and brokerage firms began using computers and algorithmic programs to buy and sell large blocks of stock that traditionally were shopped by traders on the floor of Wall Street exchanges. It was done in the name of speed and cost savings as securities firms were able to slash the number of traders they employed.

Based on this success, every financial company began recruiting mathematicians, engineers and computer science professionals, while dumping millions of dollars into computing, networking and software. As a result, lightning-fast super computers began assuming a larger role in discovering stock opportunities, identifying subtle market trends, figuring when to execute trades and cracking the trading strategies of their competitors.

These moves turned the financial industry on its head.  Major financial firms began relying more heavily on artificial intelligence than human intelligence for every conceivable task.  The trend has become even more pronounced in the last two years with computer-aided trading now accounting for about 70 percent of the total volume on the stock exchanges.

But this reliance has come at a steep cost. Stocks have lost $4 trillion in value since the peak in 2007 as huge market swings have dealt crippling blows.   The largest was logged May 6 of last year when the Dow Jones Industrial Average plummeted 573 points in a mere five minutes.  Most market watchers now believe the so-called "flash crash" was created by powerful, swift computers that spiraled out of control in a series of cascading trades based on algorithmic formulas. In essence, the machines took over the market.

In the aftermath of the crash, dizzying drops in the stock market have become routine and impossible to predict. For instance, this year the S&P 500 has lost more than two percent of its value on 15 days, 14 of those occurring just since July. Stock volatility indices have reached levels last experienced at the trough of the bear market in 2009.

Explaining the dramatic dips is getting harder for financial pros, leading investors to conclude that the stock market is incomprehensible. That has fueled an investor stampede for the exists. In 2010, investors yanked $37 billion out of the market. This year has witnessed further erosion in market confidence as investors have fled stocks for the safety of gold, bonds and other financial instruments.

For a good laugh, listen each day as financial pundits stumble to dissect the market's performance.  They offer up reasons like natural disasters, world debt woes, labor unrest, or insurrections in some obscure country to explain market oscillations.  No doubt these forces and others have impacted the stocks of some companies, but the truth is that computerized investing and trading has fueled much of the dysfunction on the exchanges.

That is because every process from finding the right stock to the timing of selling and buying is done without human involvement.  It is true that humans wrote the software codes and developed the algorithms for the computers, but machines are increasingly driving the stock market unfettered by human intervention.

This is not a comforting thought for the millions of Americans invested in stocks through 401K plans, pensions or mutual funds. Some are calling for the government to get more involved beyond its traditional watchdog role. But the solution lies not in Washington.

It is the responsibility of the financial industry to restore investor confidence by addressing the volatility issue as it relates to computerized trading.  The answer is not to shelve the computers because prudent use of technology allows the market to function efficiently.

However, the industry needs to curb its obsession with technology and ensure that human intelligence has the ability to override computerized trading decisions.  If they fail to do so, then individual investors have every right to Occupy Wall Street.  Unlike the current crop of demonstrators, investors would actually have a legitimate reason for their protest.