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License to Steal?
A senior pension fund manager sent me a link to a Washington Examiner blog entry, Europe starts confiscating private pension funds:
The U.S. isn't the only place that's facing a major pension fund crisis. The Christian Science Monitor has this alarming report:
People’s
retirement savings are a convenient source of revenue for governments
that don’t want to reduce spending or make privatizations.
As most
pension schemes in Europe are organised by the state, European
ministers of finance have a facilitated access to the savings
accumulated there, and it is only logical that they try to get a hold of
this money for their own ends. In recent weeks I have noted five such
attempts: Three situations concern private personal savings; two
others refer to national funds.
The most striking example is Hungary, where last month the government made the citizens an offer they could not refuse.
They could either remit their individual retirement savings to the
state, or lose the right to the basic state pension (but still have an
obligation to pay contributions for it). In this extortionate way, the
government wants to gain control over $14bn of individual retirement
savings.The article goes on to detail other
pension grabs in Bulgaria, Poland, France and Ireland. Obviously, this
is a cautionary tale for America. If fiscal austerity becomes a real
issue in the U.S. the way that it's been reaching critical mass in
Europe -- don't think that U.S. lawmakers regard your either your
personal wealth or money they might owe you as sacrosanct. Government
has a habit of looking out for itself.
While some governments are "Hungary for pensions",
I wouldn't worry too much about a big US pension grab -- at least not
yet. I am more worried about legalized theft taking place in the markets
every single day. Yahoo Finance posted a CNBC article, Investing Dying as Computer Trading, ETFs & Dark Pools Proliferate:
There's
an old Wall Street adage meant to inspire investors that goes "it's
not a stock market, but a market of stocks." Consider that dead.
Computer
trading, dark pools and exchange-traded funds are dominating market
action on a daily basis, statistics show, killing the buy and hold
philosophy still attempted by many professional and retail investors
alike. Everything moves up or down together at a speed faster than which
a normal person can react, traders said.
High
frequency trading accounts for 70 percent of market volume on a daily
basis, according to several traders' estimates. The average holding
period for U.S. stocks is now just 2.8 months, according to the
Crosscurrents newsletter. In the 1980s, it was two years.
"The
theory that buy-and-hold was the superior way to ensure gains over the
long term, has been ditched completely in favor of technology," said
Alan Newman, author of the monthly newsletter. "HFT promises gains are
best provided by holding periods measuring as few as microseconds,
possibly a few minutes, or at worst, a few hours."
The
problem is only made worst by the proliferation of exchange-traded
funds, traders said. The vehicles, which make trading a group of stocks
as easy as buying and selling an individual security, passed the $1
trillion in assets mark at the end of last year, according to
BlackRock. This is probably why all ten sectors of the S&P 500
finished in the black for two consecutive years, something that's only
happened one other time since 1960, according to Bespoke Investment
Group.
"The capital raising stock market of the past hundred
years has morphed in just the last 10 years into a casino," said Sal
Arnuk of Themis Trading and a market infrastructure expert who advised
the SEC after last year's so-called Flash Crash. "Who is doing the
fundamental work analyzing stocks? In the end, we've greatly increased
systemic risk."
Another factor jumped
into the fray in December: dark pools. Off-exchange trading accounted
for more than a third of the trading volume in December, says Raymond
James. While these trades are eventually reported to the public
markets, they further damage price discovery, an essential element for a
fair securities market, investors said.
"This was a record high
market share for off-exchange trading and we believe the SEC will
ultimately be forced to react to support the price discovery process by
limiting off-exchange trading for all traces except for large block
trades," wrote Raymond James analyst Patrick O'Shaughnessy in a note to
clients yesterday.
"This destroys
capital markets," said Jon Najarian, co-founder of TradeMonster and a
'Fast Money' trader. "Hidden trading venues, where some participants
get to peek at the orders as they are entered so long as they agree to
'interact' with a minimum percentage, is not an exchange, it's a
license to steal."
While many see these
forces aligning to cause a sort of self-correcting powerful drop in
the market down the road, others feel like it's creating an opportunity
for the stock pickers to mount a comeback.
At the end of last
year, something strange happened. After tracking the S&P 500 for
most of 2010, the Russell 2000 Index, made up of many small companies
with very different characteristics and merits, broke away in the final
three months to double the gains of large cap benchmark for the year.
"Small
cap outperformance in the last quarter is a very good sign this trend
is ending," said Joshua Brown, money manager and author of The Reformed
Broker blog. "Winners and losers are starting to separate themselves
after a year of the whole risk-on (buy anything), risk off (sell
everything) of the last year."
Of course, you could have just bought the iShares Russell 200 Index ETF (NYSEArca:IWM - News) in September.
I
also feel that all these dark pools, ETF flows, and high frequency
trading platforms are wreaking havoc on the market, but they do present
opportunities for stock pickers. This is because if things get really
out of whack, long-term investors (like pension funds) will move in, and
in extreme cases, they may even take a company private.
Nonetheless,
the reality is that investors are struggling to make sense of wild
market gyrations caused by high frequency trading and dark pools. Over
at Zero Hedge, they have been writing on this subject
for a long time, but only now is mainstream media waking up to the fact
that markets are routinely being manipulated by a few large and
powerful players in this space. Some will dismiss this as "part of the
liquidity game", but I think large pension funds should also be asking
some tough questions on how these new "sophisticated" trading methods
impact their holdings.
For me, this is all a license to steal.
Sure, it's legal, but it's still theft using multimillion dollar
computers that are able to trade faster than the speed of light. And
I'm not so sure that the CNBC article got it right. I think Michael Hudson got it right,
the average stock is held for 22 seconds and foreign currency
investment for 30 seconds. As sad as this sounds, this is the reality of
our "new and improved" markets. Computers have taken over, and while
there are limits to these trading platforms, they are increasingly
dominating the way markets react to fundamental news.
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The fact remains that if you hold a stock for less than a year you pay ordinary income and not capital gains so the thought that the 20% penalty between 15% and 35% can so easily be made up by abandoning buy and hold is questionable. More likely day trading is now an activity to protect the long term by seeking to break even in short term trades by using protection in futures contracts.
"For me, this is all a license to steal. Sure, it's legal, but it's still theft..."
Just like subsidizing solars.
Did you send Leo a box of chocolates for Christmas , this year?
Technically, I guess you could call it chocolate...but it smells funny ;-)
If the pension funds had hedged with PM from say, Sprott management etc, they would not be in such a bind ,trying to make up for the total pump down and organized theft they suffered from, in 2008. Of course nobody ever told them about PM, because the pension fund managers and all of these adviser types can't make much money when you go long in PM and stay there for the duration of the bull which will probably end this side of never.
...another group of vultures looking to devour someone else's meal.
In the "civilized" world as in nature, no safety exists.
Perhaps the solar technology is not yet "ready" to be subsidised (very inefficient). However, history demonstrates that many of the innovations (such as electrification (rural electrification), interstate roadways, air travel, trains, subways, intercoastal waterways (east coast, Mississippi, Great Lakes, St Lawrence Seaway),etc, etc.. became "main stream" via public subsidies. Think of Robert Moses.... was the creation of the interstate roadways "wasted taxpayer" dollars? Or the hydro dams on the St Lawrence River, Niagara Falls, etc, etc?
...all wasted in the sense that all those systems now are so throughly degraded, their maintenance having been ignored for decades, that many no longer function and worse, have become critical dangers. No money to fix 'em. US economy grew and depended on that infrastructure; now that we have little manufacturing and infrastructure has become dangerous, solar technology seems like something individuals should do for themselves. We're all on our own, we just don't know it yet.
Yes...history has shown a willingness for people to take taxpayer money to enrich themselves.
Strange you don't cite the primary education system as one of those achievements.
I heard someone on CN bullshit a couple of weeks ago or so, I remember talking about all the jobs that solar is creating in the United States. When asked how many, the analyst said 400. 400 freaking jobs. whoopie!!!!!u
How the heck did I do this?
HPD,
I have been around around so long that I remember when telephones were a funny looking wooden and Bakelite appliance hanging on the wall. In our small town, people could pick up a receiver and ask the operator to connect to the person you wanted to talk to. Really small towns only had one community phone. There was radio but TV was a laboratory curiosity did not exist in the public domain.
At work in the 1960's carrying my code change sheets over to the gals that did the card punching for making another run on the corporate IBM 340, Model 70, trying to get my finite element models to close, I could have NEVER have dreamed that there would be a computer sitting on ever desk. Today, I go to lunch with the guys and they are comparing their TV news picture reception on their, TV, telephone, computer portable appliance.
Bought REE yet? Why the heck is it going up so much?
Why are the Chinese so interested in "transition elements?
How do plants capture those little photons coming from the Sun? There really isn't enough energy to kick an electron out of its orbit. There has to be special electron arrangements to capture that photon.
China doesn't want to export their rare earths. Why the notice? Wierd names like Lanthanum, Ytteriumq, Scandium, Gadolinium, what does this kind of dirt have to make any rational person interested?
Could it be that it has to do with their electron cloud?
I won't be around to see it but IMO the next 5 decades will produce just as much technical change as the last 5 have produced. Collection of solar energy by various means (including plants) will be commonplace.
The question is only; "Who is going to to get the brass ring". But if development parallels the transistor development, the first will not necessairly stay first. IBM is the only major player from the 40's transistor discovery era that is still surviving as a corporate major.
IMO, historically, technology investment, in the long run, has been waisted only when political social movements overide organized society.
First we need to root out the acceptance of fraud as a standard practice in our organized societal structures.
...Just like forcing me to pay into a Social Security and Medicare system that is never going to provide me with any benefits. What's the difference?
Don't worry, you'll get your Social Security. It just won't have any purchasing power.
As Greenspan said years ago about future gov expenditures, "We guarantee we can always meet our obligations, what we cannot guarantee is their value." (or something like that)
It's true. Both Dems and Reps caused the problem. Time for real change.
Fight organized (government) crime: don't vote.
There is no difference...it's theft.
Leo has taken the standard socialist position that he will just roll grenades down the aisle and run away from his posts.,,see here;
http://www.zerohedge.com/article/outlook-2011-climbing-wall-worry#comment-842138
That's fine...if he wants to close his mind and not have a debate on the merits (or lack thereof) it's his choice...but around here we call it cowardice.
Cowards don't belong in Fight Club...it lowers the genetic standard...and if anything a socialist eugenicist should understand the ramifications of that.
If you don't like Leo's posts, then stay the fuck off the board. Coward.
Well, hello weinie...you wanna have a go at it?...or are you gonna run off too?
weiner: It seems you have overreacted. All he did was comment on Leo's posts and methodology. He is on the board to do precisely that which he did--comment on a post. And how does anything he said make him a "coward"?
What happens to what is ostensibly a CAPITAL MARKET when a huge and growing amount of money is bet (via those damn ETFs), piggy-backed on a shrinking pool of real investment funds invested in a few companies producing real goods?
Answer: RISK and VOLATILITY.
It's not only "computers have taken over" - it's more like a casino mentality has taken over in a desperate search for yield...but even so, the biggest factor is those goddam POMOs!!!! Some people have to play with real money while select others get monopoly money.
there's about $3 trillion in 401(k)s in the u.s.
that's mighty tempting to the criminal bankstas.
think it can't happen?
gov made deal with prudential to hijack veterans life insurance benefits
http://www.bloomberg.com/news/2010-09-14/veterans-agency-arranged-secret...
And how do you turn $3 trillion in 401(k)s into $1.5 Trillion? In-Fucking-Flation Or QE3, 4, 5.
The license to steal is rooted in the Fed's ability to print 'to the moon Alice, to the moon'
By the time 'They' raid the 401k lockboxes, all they'll find is Weimar paper.
There's only 1 true money, if you care to investigate the definition of money - and that is Ag, Ag, in your hands, your safe, or laying in the bottom layer of your cat box; protected by your Pb.
Semper Paratus.
Printing Money. It is the governments most powerful hidden tax. You can not explain this to most people.
I think it is $10 to 12 trillion when you factor in IRA,s 403Bs, some annuities and other retirement savings plus 401Ks.
The govt already floated the idea of taking 401k's already. They will do it on a future major market decline, they will offer to restore some of your losses if you exchange your private retirement for a "guaranteed" government stipend. hmmm, kinda like pay in SS your whole life for future SS nothing.
I'd like to borrow a million from anyone and I'll offer to pay you a billion back, sometime in the next 50 years.
Okay, but we'll need $900k in collateral.
I'll give you 1800k in collateral. How bout Enron stock? some Detroit MBS? They are really valuable, according to my books.
Exactly.
If the Gov'ment will steal from the taxpayer to bail out banks and insurance companies; why would they not steal money in 401K's and IRA's to bail themselves out?
The dialog will be "It's a crisis" and "We must do it for the children" etcetera.
We heard and saw it in 2008, and we will hear and see the equivocation again.
Does anyone think the government will try to take or control individual privately held IRA accounts ???
Yup. They already do from a taxation standpoint. Doesn't take much of leap to think that they can also direct where such funds can and cannot be placed. Forcing all retirement accounts into treasuries is one possibility of course.
The treasuries point scares the hell out of me. You are not the first to say this. Somebody must be thinking about it.
It's no surprise that people will only hold a stock or forex position for seconds. When the market is rigged behind the scenes, you'd best make your money and get out. Keep a trade open and you risk being the only one without a chair when the music stops.