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A Modest Proposal On How To Fix A Rigged, Centrally Planned Stock Market

Tyler Durden's picture


A portfolio manager submits the following modest proposal on how to fix a centrally planned, and utterly busted and discredited, stock market.

We are all witnessing what happens when food inflation starts to affect the population in less developed countries: people react with violence. The sudden realization that basic staples have become unaffordable puts enormous pressure on households that rely on daily or weekly cash flows to make ends meet. In emerging markets, prices are surging for basic commodities. Basic commodities are what people consume. In developed countries we experience inflation in manufactured food products, as a result of the surge in basic commodity prices. That is to say, when the cost of cocoa soars, chocolate bar manufacturers will make sure that retailers accept an increase in list prices that is covering the spike in input costs for the manufacturer. All this is well understood. It is however less well understood what actions food manufacturers undertake to protect their profits when commodity prices soar. Historically, food companies have been for the most part very good at “recovering” input cost increases. What they tend to do as a basket of soft commodity prices start to increase, is that they would push through a list price increase to retailers, which tend to more than compensate for the increase in input costs. As an example, a chocolate bar might have direct cocoa cost of 20c per bar. It sells for a dollar. When cocoa prices go up by 50%, and the cocoa in the bar now cost 30c, the manufacturer will try to pass on a list price increase of 20c before negotiating with the retailer. Newspaper headlines generally help to create an emotional environment with expectations for further price increases… At that point, retailers will have several options: decide to accept the list price increase of 20c and pass it on to the consumer, negotiate a 10c increase in line with the spike in cocoa prices or, alternatively, pass on the 20c price increase and ask the supplier to give back the extra 10c in promotions, the good old buy one get one free that consumer love. Now, the latter is the most widely followed route, because retailers know too well that when consumers see promotions, they tend to respond, buy more and consume more, which means higher sales for retailers, higher profits, and bigger volumes for manufacturers, who benefit from this dynamic too. So, with the mere recourse to a marketing gimmick, consumers are led to believe that nothing really has changed, products are not really more expensive, because they are on promotions. So that they do not desert supermarkets, if anything, they do buy more. “Trading down” is a phenomenon that only partially compensate this dynamic. Staples in emerging markets cannot be promoted: street markets are already very competitive. Hence the need to price on immediately the surging price of inputs. Hence the lack of “consumer illusion”, hence the protest.

Now, why all this is relevant to the stock markets? Middle class consumers in mature markets are starting to wake up to inflation. Fuel prices are soaring, food prices are on the up again, rates are increasing, mortgage rates never came down. The massive outflow of mutual funds shows that the middle class is starting to access  retirement money to fund short term capital outlays. As short term cash flow pressure mounts, very little income can be set aside to buy the equity market. Equities have become inaccessible for a large number of households. Households cannot afford to “BUY THE FUKCING DIP”. There are growing concerns in many areas about the stability and solidity of an equity market when popular support falters. Some may say that governments are manipulating stock markets to create the illusion of wealth and manipulate perception on the true
state of the underlying economy. If that was the case, then the very same governments should be the first one to worry about the viability of this so called “ponzi scheme”. I suppose they probably would worry, and I sense that they are worrying already. If we buy the argument that governments are already retailers of financial instruments (debt, currencies and possibly equities, if we assume that they intervene in the market), then I think that they could learn a lesson from observing how retailers and chocolate manufacturers cope with food price inflation, as this could be a good analogy to equity price inflation and the crowding out of middle class investors.

Here is my proposal. Starting from the assumption that the equity market is probably a tad expensive on fundamentals, like the chocolate bar that prices at $1.20 even if really it should only be priced at $1.10, then governments should introduce “sale periods” and stock promotions. Sale periods would attract retail buyers “en masse”, awakening in them their “bargain hunting” animal spirit. Exchanges should be able to organize these sale periods in pre-market trading hours, on a quarterly basis. If shoppers are forming night queues for Iphone 4s, I am sure that they would turn on their laptops at 4am for a heavily discounted stock sale. Shares should be allocated on a first come first serve basis, like ticket concers on ebay, for limited amounts only. Companies that allow their shares to trade in this sale windows, should be granted presidential mention and a medal for helping to build their nation wealth. Stock promotions would instead be managed by company directors on a discretionary basis, and could be associated to disposal of personal holdings in the stock by the very same directors. Stocks sold on promotion would carry the same voting rights than any other stock. There should be a collateral agreement in place that as soon as promotion ends, those market participants that have deep enough pockets to “BUY THE FUKCING DIP” should intervene to readjust market prices. One particular mention should be made for stocks that are integral to the perception of the value of a country as a function of the performance of their equity markets: they should never be promoted, but given for free to selected retail buyers belonging to the lower classes. Amounts should be very limited, but it would be as close as it gets to set up a charitable foundation, with the added benefit of limited potential for tax avoidance.

I strongly believe that this would broaden the base of marginal buyers for equities, democratize once again the markets, increase government popularity amongst middle classes and finally it would help to finally shut up all criticism on excessive corporativism.


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Tue, 01/18/2011 - 11:01 | Link to Comment dan10400
dan10400's picture

Big assumption that retail has money to invest (as opposed to using their 401Ks to put food on the table).

Tue, 01/18/2011 - 11:45 | Link to Comment 66Sexy
66Sexy's picture

This is going to end comedic, because in their effort to attract the average joe investor into the market, the FED ends up screwing main street...

Because, due to public awareness and bearish fundamentals, the only stock market interests of the general public on main street are SHORT...

Tue, 01/18/2011 - 11:03 | Link to Comment Sudden Debt
Sudden Debt's picture

Today I tried to sell a OTC stock (why I bought it I don't know. Just stupid).

My sell price IS 1$ LOWER THEN THE QUOTE!





Tue, 01/18/2011 - 11:42 | Link to Comment Racer
Racer's picture

Yes completely rigged..  I used to trade shares, I tried to sell some BP I had... I couldn't do it online, the broker had pulled the plug, so I had to phone up by which time the price had of course moved a lot

yes that is British Petroleum, in the FTSE 100!

Tue, 01/18/2011 - 11:47 | Link to Comment 66Sexy
66Sexy's picture

what is your online dealer, so i know to avoid them!

Tue, 01/18/2011 - 12:04 | Link to Comment Racer
Racer's picture

It doesn't matter... if a dealer doesn't want to quote, they won't... e.g. during flash crashes of shares that happen on a regular basis

Tue, 01/18/2011 - 13:11 | Link to Comment nonclaim
nonclaim's picture

SD, you have to check where is your order. It's probably sitting in a dusty corner of the market as happen often in less active stocks... To sell it, open level2 quotes and see where the activity is. Cancel your standing order and route a new one to the most active exchange (ask you online broker how). Or wait until someone does this and trade your order... This is an inefficiency of the market structure, not really a malfeasance as you imply.

Tue, 01/18/2011 - 11:03 | Link to Comment themosmitsos
themosmitsos's picture

Fucking dripping with sarcasm! LOOOL!

Tue, 01/18/2011 - 11:49 | Link to Comment 66Sexy
66Sexy's picture

My 401K is cashed out with huge losses, and my home has already been foreclosed.

I'm freeeee!

Tue, 01/18/2011 - 11:03 | Link to Comment Bearster
Bearster's picture

Ironic that the article claim that it is "well understood" that producers can force consumers to pay higher prices. But in reality it does not work as this author claims. Karl Menger showed that the offer is set by the marginal consumer. The notion of "cost push" doesn't work. The market turns out not to care what your costs were. If your costs are higher than what you can sell your product for, you go out of business...

Tue, 01/18/2011 - 11:10 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Well you should go out of business.  Perhaps that has been the problem all along, our government is not so good at picking the winners and the losers.

Tue, 01/18/2011 - 12:07 | Link to Comment 66Sexy
66Sexy's picture

just another reason to short grocers and long wall mart.

independent food producers, like TSN or PPC, who raise and kill their own product, might rate a long look as well. Because of their independent price controls they can raise prices based on perceived cost increases, that could in fact be phantom..

Tue, 01/18/2011 - 11:07 | Link to Comment chumbawamba
chumbawamba's picture

Here's my modest proposal:

Nuke Wall St. and K Street.

I am Chumbawamba.

Tue, 01/18/2011 - 11:11 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Best proposal out there.  REAL VALUE is the key.  Any sector of the economy that does not add real value is cancer and should be cut out immediately.

Tue, 01/18/2011 - 11:21 | Link to Comment Robert Neville
Robert Neville's picture



Tue, 01/18/2011 - 11:27 | Link to Comment Misean
Misean's picture

From's the only way to be sure...

Tue, 01/18/2011 - 11:33 | Link to Comment Alcoholic Nativ...
Alcoholic Native American's picture

Right on, level that shit like the twin towers.

Tue, 01/18/2011 - 11:07 | Link to Comment Dexter Morgan
Dexter Morgan's picture

Pardon me if I missed it, but I didn't see any reference to margin.  Shouldn't this plan include a hefty dose of margin to make it really work?  haha  Who needs savings anymore?

Tue, 01/18/2011 - 11:31 | Link to Comment umop episdn
umop episdn's picture

You mean that 'they' should loan me money so I can buy into a corrupt system? Too bad corruption is not cheap at any price.

Tue, 01/18/2011 - 11:10 | Link to Comment Tic tock
Tic tock's picture

Man, that's one utopian vision of the future.

Tue, 01/18/2011 - 11:10 | Link to Comment The Nagus
The Nagus's picture

You just described the silver market.

Tue, 01/18/2011 - 11:11 | Link to Comment the not so migh...
the not so mighty maximiza's picture

Is a tad as big as in airplane 2, 100,000 million miles?

Tue, 01/18/2011 - 11:42 | Link to Comment Mercury
Mercury's picture

This is ridiculous of course but if this guy isn't serious you know some D.C. genius already has this plan written up and is just waiting for the green light. 

If input (commodity) costs go up, someone in the chain of manufacturer--->consumer has to eat it.  If the consumer ends up paying more and/or getting less, he's eating it, "promotion" or not. 

Sorta-kinda like how the American taxpayer is now paying more and/or getting less government service even though there's this big, red-star, Now With Hope & Change! promotion going on.

Tue, 01/18/2011 - 11:11 | Link to Comment Oh regional Indian
Oh regional Indian's picture

It would be funny, but funnier yet is that if implemented, it might work as the author posits.

The suk mentality. It's our reality. Why shouldn't retail stocks sell like retail anything else?

i hear Citi is on sale today, last years model, no demand.


Tue, 01/18/2011 - 11:11 | Link to Comment GoinFawr
GoinFawr's picture

yah...but no.

Tue, 01/18/2011 - 11:15 | Link to Comment RobotTrader
RobotTrader's picture

New highs in the FTSE, CAC, NYSE Composite...

Tue, 01/18/2011 - 11:19 | Link to Comment SheepDog-One
SheepDog-One's picture

Wow this is one of your most worthless posts ever Robo, hard to believe you actually wrote that.

Tue, 01/18/2011 - 11:22 | Link to Comment JW n FL
JW n FL's picture
Company Last Sale* Change Net / % Share Volume SBIBW Sterling Bancshares, Inc. $ 3.15 1.20  61.54% 60,252 HEV Ener1 Inc $ 5.56 1.88  51.09% 5,942,759 DTLK Datalink Corporation $ 6.22 1.68  37.00% 625,578 PNBC Princeton National Bancorp, Inc. $ 7 1.63  30.35% 7,010 ARIA ARIAD Pharmaceuticals, Inc. $ 6.66 1.41  26.86% 3,617,906
Tue, 01/18/2011 - 11:24 | Link to Comment JW n FL
JW n FL's picture

21% of the Nasdaq is down but we can and will close up you fucks... "YES WE CAN!"

Tue, 01/18/2011 - 11:31 | Link to Comment Paper CRUSHer
Paper CRUSHer's picture


Tue, 01/18/2011 - 11:37 | Link to Comment Sudden Debt
Sudden Debt's picture


Tue, 01/18/2011 - 11:50 | Link to Comment Paper CRUSHer
Paper CRUSHer's picture

Reboot Robo?.......Nah.

Tue, 01/18/2011 - 11:56 | Link to Comment Sudden Debt
Sudden Debt's picture

Bluescreen :(

Tue, 01/18/2011 - 11:16 | Link to Comment LawsofPhysics
LawsofPhysics's picture

So the answer to a corrupt market that has been fleecing the retail consumer is to encourage the retail consumer to put MORE into said market?


What a fucking retarded idea.

Tue, 01/18/2011 - 11:34 | Link to Comment SheepDog-One
SheepDog-One's picture

They created a massive market bubble to dump to retail, and no one showed up. Yea, theyre pissed. Now they'll just INSIST the retail public should buy their garbage stocks, after all theyre ON SALE! LOL what a joke.

Tue, 01/18/2011 - 12:40 | Link to Comment whatz that smell
whatz that smell's picture

the bernank swaps treasuries for equities..... voila! retail suckers left holding the bag. praise be the bernank! may he ease a thousand years!

Tue, 01/18/2011 - 11:16 | Link to Comment redpill
redpill's picture

When's the part where we feed liquified bankers intravenously to broke, Medicare-dependent boomers during their final hospice stay?

Tue, 01/18/2011 - 12:16 | Link to Comment serotonindumptruck
serotonindumptruck's picture

Hmm...liquified calamari? Better than Soylent Green?

Alas, I would question the EROEI on such a proposal. A more cost effective solution might be a massive IV dose of potassium chloride. Inexpensive, but theorized to involve excruciating pain from sudden cardiac arrest, so there is an unfortunate downside.

Tue, 01/18/2011 - 11:17 | Link to Comment SheepDog-One
SheepDog-One's picture

We'll regain confidence in the totaly rigged criminal mafia stock casino by offering free spins of the roulette wheel, 1 per hour, and even if you win it goes to the house anyway. Great plan, should work real well!

Tue, 01/18/2011 - 11:19 | Link to Comment Cdad
Cdad's picture

A portfolio manager submits the following modest proposal

Are you f'n kidding me?  You must have meant, " A desperate as Hell criminal portfolio manager submits the following modest proposal... "

Listen, creative thinking aside, sweep the criminal syndicate known as Wall Street clean of criminal bankers, including Ben Bernanke.  Let the market find a real value.  Investors will come.

Capital cannot form in banks as corrupt as those on Wall Street and throughout this nation.  There is no way to avoid the discomfort of identifying, prosecuting, and punishing those who have perverted our financial system.  There is no creative idea to circumvent this fact.  The market must be free.  The market must not have participants that are above its rules and regulations.  It really is this simple. 

Same goes for hundreds of representative there, who will raise the debt ceiling and continue spending, need to be removed from power in order that the nation be allowed to heal from their failure, as well.

To the creative fellow who wrote this...there is no replacing truth, justice, freedom, and free markets.  Get out of the way already.



Tue, 01/18/2011 - 11:26 | Link to Comment SheepDog-One
SheepDog-One's picture

I believe theyve tipped over into complete delusion at this point, a common end result of believing your own hype for so long. Now as the equity markets are an obvious farce even to the avg Joe layperson, they think they can create 'stock mania' again by marking stocks 'on sale' even if those stocks are 100 P/E jokes at the top of an extreme bubble? And we're not supposed to know any better or care?
It seems these desperate stock salesmen are going 'Black Friday' mentality for the retail moron to camp out overnite for the next days announced 'stock liquidation sale'...this has just become retarded Cdad Im goin fishin.

Tue, 01/18/2011 - 11:41 | Link to Comment Cdad
Cdad's picture


This is the dumbest thing I have ever read on ZH.  I am speechless, really.  Is this a Tyler joke?

This seems about as good in terms of being a catalyst to close the long side of the book as anything else...including shares of the world's largest zombie maker experiencing price target upgrades as Steve Jobs faces his mortality.  Unreal.


Tue, 01/18/2011 - 11:22 | Link to Comment Byte Me
Byte Me's picture

Brilliant idea!!

Once every so often you have this deep discount trade and the HFT closest to the exchange server arbs the lot for a Faaaaat profit.

It's just doing Bog's work after all..


Tue, 01/18/2011 - 11:22 | Link to Comment slaughterer
slaughterer's picture

S&P 500 shooting up like a robo boner at 10:20 am.  Making new 52 Week Highs and POMO is not even finished.  What a travesty.

Tue, 01/18/2011 - 11:28 | Link to Comment shargash
shargash's picture

OMFG! What a golden opportunity for the Squid to front-run the retail suckers. Just pump up stocks right before they go on "sale", then sell into the buying frenzy. Rinse. Repeat.

Retail stores have been doing that forever. Does the author think Goldman is stupider the K-Mart?

Tue, 01/18/2011 - 11:28 | Link to Comment Bluntly Put
Bluntly Put's picture

Attention, all equitity consumers there is a blue light fascist sale on aisle 9.

Please remit all green coupons on government subsidized solar energy at the customer service counter located near the fire exit.

Tue, 01/18/2011 - 11:30 | Link to Comment SheepDog-One
SheepDog-One's picture

'Fix the markets'? Why? Never seen such optimistic rose colored glasses outlook ever...whats the problem? They created a market bubble and no one showed up? Aw thats a shame...leave them as the ultimate bagholders.

Tue, 01/18/2011 - 11:32 | Link to Comment Freddie
Freddie's picture

Hope and Change bitchez.  As long as the idiots get their daily brainwashing in HD on their plasma propaganda box then all is well.

Tue, 01/18/2011 - 11:33 | Link to Comment Stoploss
Stoploss's picture

If i am already a holder of said fire sale stock, am i supposed to BTFD too?? Also, if these sales were pre announced, wouldn't that cause a sell off in the days ahead of the sale? Can you see the smile on my face when i discover i am holding a stock that's been put on "sale" to allow the "liquidity challenged", an entery at my expense?? Because, i can't. And why is there no mention of a "selling" opportunity for me to sell my shares at a guaranteed profit of exactly the opposite of the special buy in percentage? Where i trade, BTFD is followed by STFR..

Tue, 01/18/2011 - 11:38 | Link to Comment SheepDog-One
SheepDog-One's picture

Indeed! Apparently the perceived problem is the hoi-paloi simply cant quite afford $340 Apple they'll put them on sale for $10 less then the 'liquidity challenged' will rush in and buy that suddenly 'cheap stock' at $330!
I cant believe the fuking world I live in, seriously someone stop this ride I want off immediately.

Tue, 01/18/2011 - 11:35 | Link to Comment The Axe
The Axe's picture

Robo is right, the market is strong beyond all rational thought, it just won't die brothers. I will not play in a world of crazy stocks...nuts.. good luck Robo..And keep post the hot vids.

Tue, 01/18/2011 - 11:38 | Link to Comment Alcoholic Nativ...
Alcoholic Native American's picture

Fixing it?  Looks like they are doing the exact opposite ATM, pumping it up, making it too big to fail.  Too big and corrupted to fail is the old status quo, but now it has been UNCHAINED!  TOO THE MOON BABY DOW 12000!!!

Tue, 01/18/2011 - 11:39 | Link to Comment MiddleMeThis
MiddleMeThis's picture

C'mon all we really need is a Jersey Shore meets Wall St. reality show to get the working class involved in commodies buying.

Tue, 01/18/2011 - 11:43 | Link to Comment Alcoholic Nativ...
Alcoholic Native American's picture

Don't give them any ideas, I don't want to have to go visit my parents one day (to their underwater house) and see them watching....


They can't seem to get enough "reality TV"


Tue, 01/18/2011 - 17:00 | Link to Comment StychoKiller
StychoKiller's picture

Reality TV is an even BIGGER oxymoron than Govt Assistance!

Tue, 01/18/2011 - 11:39 | Link to Comment Misean
Misean's picture

Well, yes, I agree this is quite a good start. However, it could be improved if the poor and "middle classes" (as if there's a difference anymore) were allowed to further their purchases by trading their children for said purchases. Clearly, given the demographic shift numbers, encouraging couples to breed for the purpose of purchasing quality assets would be a double sided boon to the economy. And certainly, as wealth in asia increases, the demand for man servants and maids, as well as organ donors, is likely to surge; such children would be quite valuable to the houses that facilitate the exchanges of them for stocks. (And let us not forget driving the BDI up as well as finding uses for all of the new large cargo ships).

Yes, a good start, but as you can see, one that needs a bit of expansion to truly get it out of the blocks.

Tue, 01/18/2011 - 11:40 | Link to Comment DonnieD
DonnieD's picture

Sounds like someone is a little desparate to move product to anyone other than Ben.

Tue, 01/18/2011 - 11:43 | Link to Comment Cdad
Cdad's picture

Don't you mean it, "Sounds like Ben is desperate to move product?"

Tue, 01/18/2011 - 11:48 | Link to Comment DonnieD
DonnieD's picture

2 desperate men cling together.

Tue, 01/18/2011 - 11:42 | Link to Comment israhole
israhole's picture

Nahh, I'd rather starve the beast and let them enjoy this side of the fence for awhile.  Pull out any money that you have left, stuff your pantry, and put the rest into ammo so you can defend it. Having food and free time will soon be the "American Dream".

Tue, 01/18/2011 - 11:44 | Link to Comment Alcoholic Nativ...
Alcoholic Native American's picture

I'm unemployed and get food stamps, it's hardly a dream.

Tue, 01/18/2011 - 12:57 | Link to Comment Dexter Morgan
Dexter Morgan's picture

I wish I got food stamps!  That and unemployment, or else work for the federal government. 


Tue, 01/18/2011 - 11:45 | Link to Comment UnRealized Reality
UnRealized Reality's picture

These articles are killing me. Fix the market,HAHA. These markets have been like this since inception. And the greedy aren't going to become un-greedy. Just because people are aware of it now, means shit. And I thought ZH was ahead of the curve.

Tue, 01/18/2011 - 11:45 | Link to Comment whatz that smell
whatz that smell's picture

every market opening will look like a black friday walmart stampede!-

"body bag aisle 17"

Tue, 01/18/2011 - 11:47 | Link to Comment Misean
Misean's picture

Seems to me a lot of posters are ignorant of the implied sarcasm in the title...A Modest Proposal.

Tue, 01/18/2011 - 11:48 | Link to Comment plocequ1
plocequ1's picture

The Dow is up. I take it that its not because of Regis Philbins retirement.

Tue, 01/18/2011 - 11:48 | Link to Comment onlymyopinion
onlymyopinion's picture

IMO if not for AAPL the Dow would be about ready to hump 12K.  Market strength continues.  No reason for any pullbacks at least not until Q4 earnings are over and the Dow is above 12K.  Still like 1340 on the Snp's before a small pullback. 

Tue, 01/18/2011 - 11:49 | Link to Comment plocequ1
plocequ1's picture


Tue, 01/18/2011 - 11:49 | Link to Comment bunkermeatheadp...
bunkermeatheadprogeny's picture

CNBC, for the nth ad nauseum time, just ran a short news piece, "is the retail investor back?"

Of course not, the foolish viewers that had money have lost it already.

The foolish viewers with no money, buy the imitation gold plated coins that are regularly advertised on CNBC, which speaks volumes as to CNBC's demographics.

Tue, 01/18/2011 - 14:54 | Link to Comment Freddie
Freddie's picture

CNBC = GE which is a corrupt shit company with worthless debt.  They all pimp for the Kenyan and his elite bankster pals.

Tue, 01/18/2011 - 11:49 | Link to Comment Forgiven
Forgiven's picture

They do that already Genius.  It's called High Frequency Trading.  Unregulated bait and switch Bitchez!

Tue, 01/18/2011 - 11:50 | Link to Comment whatz that smell
whatz that smell's picture


Tue, 01/18/2011 - 11:50 | Link to Comment prophet
prophet's picture

Groupon for securities!



Tue, 01/18/2011 - 11:51 | Link to Comment thepigman
thepigman's picture

An article like this, even tongue in

cheek, just serves to point out how broken

this whole mess is. Our institutions

and leaders have proven to be pathetic

at anything other than smoke and mirrors.


Tue, 01/18/2011 - 11:56 | Link to Comment Alcoholic Nativ...
Alcoholic Native American's picture

The market is going to go full steam ahead going right up to the 2012 elections.  Bank on it. Also Obama is going to win in 2012, cause the republicans like this puppet fucken punching bag coward, and they don't have anybody on the teatard side that can run up against them that doesn't have retarded fascist character flaws.  Obama is the best liar we got, 4 more years of the great placator!


Tue, 01/18/2011 - 11:57 | Link to Comment Stuck on Zero
Stuck on Zero's picture

The thing I see that's most heavily managed is the government CPI figure. 

Tue, 01/18/2011 - 12:00 | Link to Comment savagegoose
savagegoose's picture

buy the sales bitchez

Tue, 01/18/2011 - 12:05 | Link to Comment Arm
Arm's picture

Are you smoking hash?  This is the silliest idea I have heard by far.  Should we even take the time to excoriate it?  Or should we excoriate Tyler for thinking it was worth printing?

a)      Stocks are a secondary market.  Any increase in share count to provide for “discounted share offerings” goes against existing shareholders.  Thus the price WILL be affected

b)       “Deep-pocketed” market participants cannot set the price of a highly liquid asset.  It costs them money to do so, so why would they do this?  Your “collateral agreements” (misuse of the term by the way) sound awfully close to stating that market makers can “set” the price of the assets

c)       Your scheme is not a balanced portfolio but rather the opportunity to sell individual stocks.  What will happen to the specific risk of individuals that invest a large part of their savings in the 2 or 3 stocks that are auctioned?  You are selling hard licquor to the natives and then inviting them into your casino… how charitable of you…

d)      You forget.  Poor individuals do not have the spare cash to enter the stock market (they could open an Ameritrade account just as easily, but they don’t).  They have no savings capacity, no laptop, limited internet access and more importantly no knowledge on stock investing.  Thus there are not many that could access your discounted stock window so it is not a very fair subsidy (about as fair as a Russian privatization).

e)      Like most of these schemes.  It could be easily abused.  Individuals without the available resources would start “selling” their quota on the black market.

f)       In essence your scheme is nothing more than an expropriation of existing shareholders in an overly elaborate wealth transfer scheme.  You might as easily just establish a total wealth asset tax and redistribute.

How about REAL solutions say:

·         DELEVERING

·         Limitations on credit creation to non-productive sectors of the economy.  This implies eliminating margin accounts, reducing collateralized lending, and reducing consumption lending (mortgages, car financing, credit cards)

·         Increase bank reserve ratios over a period of 15 years until you reach a 25% Tier 1 capital level

·         Expand definition of CPI to include asset prices and eliminate the hedonic adjustment fraud

·         Introduce balanced budget constitutional amendments and prohibit off balance sheet liabilities

·         Central Bank purchasing of residential mortgages and then condoning debt (with the prohibition on reselling the property for a certain period of time)

·         Central Bank purchasing of muni bonds from municipalities that have established clear plans to balance their budget (think IMF meets the United States heartland)

·         Strengthening development banks that lend EXCLUSIVELY against non-speculative trade receivables

·         Investing heavily in productive infrastructure (damns, port, railroads, nuclear power plants) vs. just investing in repaving streets

·         Reform healthcare , Medicaid, public pensions, tort litigation, and weaken unions


Tue, 01/18/2011 - 12:21 | Link to Comment aerojet
aerojet's picture

Oh, man, you just don't get it, do you?  You do anything grownup or even logical in this market and you detonate the whole thing.


"  Increase bank reserve ratios over a period of 15 years until you reach a 25% Tier 1 capital level"

We're running at what? 0% right now?

Tue, 01/18/2011 - 13:13 | Link to Comment dracos_ghost
dracos_ghost's picture

How about a 10% surcharge on notional value of all off balance sheet transactions/derivatives. Would hinder the junkie mentality of GS et al and provide real insurance against the shenanigans.

There is no need for the "retail" investor. Just tell them to increase their 401(k) contributions and then borrow against it. Then let the fiduciary play games with his hedge fund buddies and destroy his 401(k),403(b) whatever. It's all good since they can window dress at the end of every month and lie about their positions.

Before Glass-Steagal was repealed, there was a need for the investment banker to "do business" with the average Joe to get him to put his savings at work. That's why you used to be able to get a decent CD rate from your bank. Force the Wall Street scumsters to pony up a little to play for access to the bank deposits.

Post Glass-Steagal repeal, these scum just say FU and print their own money to play with. Let everyone eat cake. And a rate on a CD that is less than inflation.

It's the retail investor's fault they are getting fleeced. Apathy is biting them in the ass. Everyone was a tough guy during the boom/bust, the 2008 "Whatever happened" bust and whatever we call this boom and eventual bust. All preceded with rhetoric that we need 'to allow global banks to be flexible so they can compete in a global market'. Jeebuz, at least some cuddling before penetration would be appreciated.

That being said, hell, let's legalize online poker in the US. Give the retail investor a little fun as they are wiped out. In fact, I bet there are better odds at making money than on Wall Street. All the money would leave Wall Street and it would die by default.




Tue, 01/18/2011 - 14:03 | Link to Comment AnarchoCapitalist
AnarchoCapitalist's picture

Thank you. Best response on this article yet. You have now saved me ten minutes worth of time since I was about to rip this idea apart as well.


Why did Tyler post this?

Tue, 01/18/2011 - 12:32 | Link to Comment dhengineer
dhengineer's picture

This is nothing but an idea for a pump-and-dump scheme hidden in plain sight, especially if, as the author proposes, that the scheme is a way for insiders to sell their own shares.  Essentially they would be selling into a rally, and the retail sucker would be stuck trying to resell the "bargains" as the stock price slides below the entry point when the rest of the morons rush to sell their own "bargains." 

Also, wouldn't this backfire when everyone realizes that some stocks are really only worth ten or fifteen percent less than where they price at right now, leading to lower prices across the board as the retail "investors" hold out for more bargains in the future? 

Once big-ticket items price at significant discounts, it is very difficult to then sell the same item at full retail.  The true analogy in the article should have been big-screen televisions, not chocolate bars.

Tue, 01/18/2011 - 12:45 | Link to Comment hbjork1
hbjork1's picture

Question.  What is 1 times -15?

My answer: -15

ZH:  Sorry 3 characters now allowed.

Tue, 01/18/2011 - 13:11 | Link to Comment MachoMan
MachoMan's picture

I have discretionary income and a penchant for investment, but I will never contribute a dime to the stock market (or traditional investment vehicles for that matter, depending on level of counterparty risk of course) until I am completely convinced everything is legitimate and valuations reflect some semblance of reality.  In short, I will never contribute and I will further urge all persons I know to do the same.

If the author is simply talking his book, then I propose you find an alternative career path, as I am not alone and more join my ranks daily.

Tue, 01/18/2011 - 13:56 | Link to Comment MrBoompi
MrBoompi's picture

My modest proposals?  Temporarily doing away with the 10% penalty on early 401k withdrawals and permanently doing away with HFT.  In other words, my modest proposals will go nowhere, just like the ones mentioned above.



Tue, 01/18/2011 - 16:00 | Link to Comment savagegoose
savagegoose's picture

heres an idea, only people with an interest im commodities like say miners or farmers or producers, or manufacturaers  can trade on the market. non of this damn speculating  on prices. shit its ok to sell short if you aint harvested the crop or what ever. but dammit game the system till its broke isnt what the place was set up for


Tue, 01/18/2011 - 16:12 | Link to Comment the grateful un...
the grateful unemployed's picture

First of all you have to give pension funds and municipal government portfolio managers first rights at these discount stocks. Assuming the Fed would first buy the paper, (to prop up the market, it could be done in huge block trades, the institutions could unload stock ABC to the FED, the FED would assign the paper to fund XYZ, which cannot meet their future obligations.)

Once XYZ has brought their cost basis down they can sell some more ABC, the shares they own at a higher price than todays, in the open market (to the institutions, who in turn sell it to the FED). Rinse and Repeat.

The bankers get out of their overvalued stock ABC (or AAPL if you prefer) positions, the pension funds boost their balance sheets. Since the pension funds are the strong hands, the paper is never going to get marked to market. The Fed opens an equity line window. Taxpayers take the hit. The risk is further shifted from Wall Street to Main Street.

Sun, 01/23/2011 - 01:27 | Link to Comment Guy Fawkes Mulder
Guy Fawkes Mulder's picture

I'm pretty sure Tyler submitted this in jest, as a sarcastic example of how deluded and ridiculous the portfolio manager who wrote it up was.

Fuck you, portfolio manager. Fuck your life. Fuck your parasitic career. Fuck yourself. Fuck your stupid plan to get more fools to give you their money so you can richer off of other people's money like you have done your whole life.

You are part of a disease. Change yourself.

Dow Zero.


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