By Pam Martens and Russ Martens: July 22, 2015

We truly pity the earnest stockbroker today. Imagine trying to have a sensible conversation with your client about what’s going on in world markets when almost nothing makes sense anymore.

It is an inherent underpinning of “free markets” that they must remain open for trading during regular market hours unless there is a catastrophic event like war or a terrorist attack. Even after the Tuesday, September 11, 2001 event when planes flew into two World Trade Center towers, leaving much of lower Manhattan covered in rubble and a jungle of tangled, destroyed electronic cables, the New York Stock Exchange reopened the following Monday.

But here we are with no war (other than a war of words) and no terrorist attack and yet Greece’s stock market has been closed for more than three weeks. China is officially reporting that it is experiencing 7 percent economic growth but 20 percent of its stocks on its stock exchanges remain halted from trading and commodity prices are collapsing, a further sign of a serious slowdown in the world’s largest raw-commodity consuming country.

And while the U.S. stock markets are indeed trading, far too much of these markets is trading in the dark. Take the shares of Apple, for example. According to the Financial Industry Regulatory Authority (FINRA), which only began reporting dark pool trading to the public on June 2 of last year, during the week of June 22, 2015, there were 17.7 million shares of Apple traded in dark pools. (That’s the most recent full week of dark pool trading reported by FINRA; it releases data on a delayed basis.) The largest dark pool trades in Apple that week were in dark pools owned by mega global banks UBS, Credit Suisse, Merrill Lynch, JPMorgan and Goldman Sachs.

Goldman Sachs is also the firm that has brought to market tens of billions of dollars in debt for Apple so that it could buy back its own stock.

A dark pool (also called an Alternative Trading System or ATS) is a private, unregulated trading venue that functions like a stock exchange by matching buyers with sellers – but it does so in the dark, without showing its bids and offers on stocks to the public. That has the potential for a great deal of price manipulation.

What could possibly go wrong?

As of yesterday’s close, Apple had a market cap (total value of all outstanding shares) of $753.25 billion, or to put it another way, three-quarters of $1 trillion. Apple’s market cap is now larger than the combined value of Procter and Gamble ($221.462 billion at yesterday’s close) and ExxonMobil ($341.429 billion at yesterday’s close) with $190 billion left over.

The way an old-time stockbroker would evaluate the above situation would be to look at the barriers to entry for what Apple makes. It makes – uh – fancy mobile phones and computers and small computers known as iPads with lots of bells and whistles and a watch. Yes, a watch. Here’s what Apple has to say about its Apple Watch: “[it] makes all the ways you’re used to communicating more convenient. And because it sits right on your wrist, it can add a physical dimension to alerts and notifications. For example, you’ll feel a gentle tap with each incoming message. Apple Watch also lets you connect with your favorite people in fun, spontaneous ways — like sending a tap, a sketch, or even your heartbeat.”

An old-time stockbroker would question how many people really want to communicate with people through their watch. He or she might also be highly cynical about the barriers to entry for Apple’s business. In addition, Apple’s stock has a history of getting into trouble really fast. Back in 1996 Apple was warding off bankruptcy. In the second quarter of 2008, its market cap was $153.74 billion but by the end of the year as the broader market lost ground, its market cap lost 45 percent. In 2013, as Apple’s product sales ran into headwinds, Apple’s share price lost 40 percent in a seven-month stretch.

Barriers to entry for what Apple does pale in comparison to the barriers to entry for the businesses of Procter and Gamble and ExxonMobil.  Procter and Gamble has a vast stable of some of the bestselling brands in the world, like Tide detergent and Pampers diapers, with brand loyalty established over decades, or, in some cases like Crest toothpaste, for more than half a century. Brand loyalty is a serious barrier to entry in household products – computer gadgets, not so much.

ExxonMobil dates back to 1870 and is one of the largest petrochemical companies in the world with massive energy and technology divisions. Does it make any sense that Apple could be worth far more than Procter and Gamble and ExxonMobil combined? We don’t think so.

We think it might have far more to do with the really bad market structure in the U.S. As we wrote lost year:

“Goldman Sachs, under current market structure, can underwrite stocks and bonds for its customers; trade stocks in its own private stock exchange it runs behind a dark curtain; put out buy and sell recommendations that move stock prices up or down; co-locate its computer servers next to the computers of the regulated stock exchanges in order to get a speed advantage and an early peek at other traders’ orders; and, to round out the picture, it’s allowed to own and operate an FDIC-insured commercial bank where it can dole out lines of credit.”

And here’s one more thing you’d never convince an old-time market maven about. If the one-year Treasury bill is trading at a yield of one-third of one percent, the U.S. has about as much chance of overheating, and thus needing an interest rate hike from the Fed, as Apple needs more wearable computer gadgets. Notwithstanding this, Fed Chair Janet Yellen keeps telling us that rate hike is just around the corner.