Does "legal realism" apply to the Wall Street traders and exchange traded funds (ETFs) as we know them today?

Ben Stein for The New York Times says that "financial realism" or "trader realism" is his theory that traders act on the basis of what is the real economic situation for them. He feels traders are doing this all day long, and especially since the subprime mess reared its ugly head. A massive amount of defaults and foreclosures in the market led traders to take advantage of the press and collaborate on the idea that this is a total catastrophe and make money on the short sales.

Stein theorizes that they also trade trade on the way they want the market to go. They don’t figure out which way the market will go, they make it go in the direction of their choice.

Roger Nusbaum for Random Roger doesn’t think there is a need to explain the current state of the market. Maybe on some level an explanation of action by the Federal Reserve or bad data is comforting, whether it may be plausible or incorrect. Fast declines, he says, just end and that the reasons why are less important than the fact that an end always arrives in time.

So, what do you think?

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