IT CAN’T HAPPEN TO ME. GUESS WHAT? IT WILL!!
Chapter 12
The Flow of Money
Money goes where it is treated best. This really means money goes where the owner of money is treated best.
States that have low taxes have the lowest unemployment rate because there is less money for bureaucracy and more for investments. Investment means jobs for the individual.
Now doing business with an honest profit motive versus wiping out the spread between profit and loss sounds good, but in reality can be the cause of the opposite result.
Case in point is the Stock commissions. When the authorities moved to the decimal system versus fractions the middleman was wiped out. Investments now became gambles. Many firms sprung up over night advertising first 100 trades free. So the unwary would buy 10,000 shares of a penny stock.
Volume exploded on the upside. So did volatility because the “pros” did not have the funds available, made possible by market spreads, to support stocks.
To supplement lost income the “street” invented ways to fleece the unwary and line their pockets. Instead of working with clients and protecting them; it became an all out war.
First it was the Options market. In the beginning over 80% of all trades were losers; I do not know if it has improved much over the years. Number one rule is: There is no such thing as a free lunch!
Then came the big bombs. So called “bunker busters” under the guise of derivatives and collateralize mortgage obligations or CMO’s.
One can collateralize anything providing they have a willing buyer. The “spread” is humongous versus the honest stock exchange commissions of yesteryear. This is why some firms have billion dollar earnings QUARTERLY.
This fiasco has become such a financial nightmare there is no easy way out except to ban all future trades and let the existing ones wind down under their own steam.
The markets have become giant casinos for daily trading. Increasing the cost of investments will cause one to invest versus trade for penny profits.
By raising margin rates across the whole spectrum of investments will stall SPECULATION.
This experiment in negotiated rates to benefit the little guy has backfired. The little guy is dead and buried. The survivors are petrified.
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