Is Efficient Market Hypothesis Valid?

Do markets actually self-correct themselves? Agreed that when the prices don't reflect the best available public and private information , those having the best available information take advantage(basically transacts or trades) of it until that advantage is gone (which is when the same information is available to everyone - efficient market). Should we invest in an efficient market at all? Or better try to get hold of that golden asymmetry? Which is why we depend on financial intermediaries , those brokers , bankers and fund managers, because they have better 'insights'. Don't the technical and fundamental analysis give that extra edge of information?

So, doesn't the information asymmetry drive the financial markets? One argument can be that it is the individual's expectation which drive the financial market - X expects the prices to rise and hence a buy while Y expects the prices to fall and hence sell to X. But don't these contrasting expectations get built by the same asymmetry of information?

Those brokers , bankers and fund managers do have better insights and we are in a way right to delegate our investment decisions to these experts. But this delegation somehow creates a sort of agency problem. They become our agents and obviously have better information than us finally leading the moral dilemma. So the bottom line is - it is the information asymmetry which drives the financial markets and time to time put these same markets into trouble?

Don't the point made by efficient market hypothesis (EMH) that price of any traded asset reflects all known information about the asset , puts us in an illusion that "all is well"? And that regulators are indeed wrong to close their eyes and not interfere in the markets? EMH is in a way contributing to the development of a financial crisis by holding the regulators from raising the red flag.

The Wall Street Casino

Are the banks in U.S still not "too big to fail"? Ask anyone on the Wall Street and none will accept the bubble in making. They keep on showing there is enough of money chasing investment opportunities particularly those risky ones but no money for job creation in this land of opportunities . Groupon's first mover advantage wont last long but still valued in excess of $25 Billion. Very soon their stock certificates out of the impending IPO will be used as wallpaper in the purchaser's drawing room. Its now a decade since S&P has been delivering zero returns. US is bankrupt but rejoicing at the gay legalization.

From manufacturing to finance to speculation - Welcome to the new world order where few make money like bandits and every market crash is followed by latest rounds of head-scratching and pleas for reforms to start it all over again. Finding new ways to legally and directly or indirectly steal money from the public - is that what they are supposed to do in their cushy suits? A silicon valley techie thinks out of the box and transcend the old ways of doing the same things while a Wall Street wizard also thinks out of the box understanding that playing within the old rules of uncertain profits and slowly accruing returns will no more quench their ever carving thirst. And came the move from the stocks , valuations and investments to the psyche , fear of losing out,  herd mentality, salesmanship, flaws within the old rules and greed disrupting ethical standards and exploiting the loopholes. 

A hacker finds flaws in people's security systems to get privileged control while these guys at Wall Street find flaws in public nerve to mint their excesses. In both the cases, the revelations can be embarrassing to those exploited and hence almost gets unreported and untraced even though sharing the exploit would be helpful for various others to avoid the same in the future.

From the great depression to the great recession and still going strong. The casino is on , sanctioned by the government and funded by the poor taxpayers. More like a legalized mafia , very much like Las Vegas.  When will it stop?

The Financial Crisis : Greed Accumulation

Its not a news that Investment Banks created those complex financial products/securities backed by the mortgage based products.They became underwriters and placement agents for these products and gained not only from the success of these securities but also from their failure (making profit from the same products which caused loss for their clients - they reversed their transactions and started selling the same products to their clients which they bought once they saw decline of the mortgage market coming up). What caused this  increasing level of risk appetite and conflict of interest (greed?) in the Wall Street?

Before 1994, U.S banking industry was more of a fragmented , localized and decentralized cluster which prevented an undue collation of financial power and provided adequate risk spread in the financial system. With authorization of inter-state banking in 1994, it became more easier to open bank branches throughout the nation. The repeal of Glass-Steagal Act in 1999 enabling the normal banks , securities firms, investment banks and insurance companies to operate as a single merged entity. And hence the rise of too-big-to-fail financial institutes. 

They started producing new instruments with no prior performance history making it difficult to analyze and predict the associated risk. In 2002, the US treasury reduced the capital reserve requirements for securitized mortgages depending on the credit ratings of the securities which created incentive for the credit rating agencies to portray an optimistic risk assessment of the mortgage pools and hence the created opportunities for banks to reduce their capital asset ratio. Thus , mortgaged backed securities started gaining in demand which promoted more and more lending promoting lenders to issue mortgage to high risk subprime borrowers as well. The higher the loan amount was , the higher was the commission for the mortgage broker, the higher was its initial profit and price in the secondary market for the lender and the higher was the source of revenue stream for the wall street firms.

Since the lenders were able to securitize almost all of their loans, credit ratings took a back seat and the volume and speed of lending plus securitization became the key. As the risk of non-payment was finally being passed to third party, the lenders lost the interest in loan eligibility and determining whether the sold load would ever be repaid. These volume of loans got defaulted and paved the way for tough times.