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A Hedge Fund Insider Explains Why Retail Investors Should Flee The Stock Market

Tyler Durden's picture




 

Regular readers know that ever since 2009, well before the confidence destroying flash crash of May 2010, Zero Hedge had been advocating that regular retail investors shun the equity market in its entirety as it is anything but "fair and efficient" in which frontrunning for a select few is legal, in which insider trading is permitted for politicians and is masked as "expert networks" for others, in which the government itself leaks information to a hand-picked elite of the wealthiest investors, in which investment banks send out their "huddle" top picks to "whale" accounts before everyone else gets access, in which hedge funds form "clubs" and collude in moving the market, in which millisecond algorithms make instantaneous decisions which regular investors can never hope to beat, in which daily record volatility triggers sell limits virtually assuring daytrading losses, and where the bid/ask spreads for all but the choicest few make the prospect of breaking even, let alone winning, quite daunting. In short: a rigged casino. What is gratifying is to see that this warning is permeating an ever broader cross-section of the retail population with hundreds of billions in equity fund outflows in the past two years. And yet, some pathological gamblers still return day after day, in hope of striking it rich, despite odds which make a slot machine seem like the proverbial pot of gold at the end of the rainbow. In that regard, we are happy to present another perspective: this time from a hedge fund insider who while advocating his support for the OWS movement, explains, in no uncertain terms, and in a somewhat more detailed and lucid fashion, both how and why the market is not only broken, but rigged, and why it is nothing but a wealth extraction mechanism in which the richest slowly but surely steal the money from everyone else who still trades any public stock equity.

 

From RedditI work in Wall Street and work in hedge fund analysis. I'm the only person in my office who supports OWS

This is a self-post, so I'm not trying to karma-whore or anything. I have a message I want to share with anyone who's interested.

I'm writing this in hopes that the OWS movement can have a better understanding of the hedge fund industry and the financial markets. With OWS being the zeitgeist of current politics, I think it's important to know how exactly the hedge funds, along with the financial markets are destroying the 99%.

Hedge funds. These guys are basically the vehicles of choice for ultra-rich people to get into the financial markets, besides family offices and private wealth managers. What are hedge funds? They are funds that have a 1-5 million deposit minimum, cater to the mega-rich, and can invest in anything without regulatory restrictions, use leverage to pump up their exposure by 15x, and pretty much eat up a vast majority of the industry's profits.

These guys invest in EVERYTHING. Instruments you've heard of - stocks, bonds, forwards, futures, currencies, and instruments that you, me, or anyone else have never even heard of, much less know anything about: commodity future swaptions, FRA/OIS swaps, CLOs, exotic future options, p-notes, index/commodity/equity exposures, and a huge array of OTC (over-the-counter) instruments that no regular investor would ever have access to.

Why I bring this up: the financial markets are rigged. 99% of the investing public has access to services such as basic brokerages, 401k/IRA's, mutual funds, pension plans, etc. Some of these services, especially pension funds, will invest into hedge funds, who take an additional 2 and 20 (meaning 2% of assets plus 20% of capital gains).

What this means is that if you go any of the traditional retail routes, you are utterly screwed facing off against the hedge funds.

First, you are paying exorbitant fees. Commissions on every stock trade. Mutual fund managers taking a cut - an annual % cut, as well as a % per profit cut. If these managers (i.e. pension plans) invest in another fund, that fund is also taking another % cut. You're down 2% the minute you invest your money.

Next, if you're doing the investing yourself, you're paying ridiculous spreads. The bid/ask spread of a stock will cause you to be down another 2-3% the minute you buy the stock. For example, if you're buying a share of company at $4.25, you can sell back at only $4.15.

Furthermore, you have absolutely no chance in terms of access to the best services. Hedge funds have a direct line to investment bank's institutional brokerage teams - these are the guys that spend day and night sucking up to hedge funds, trying to get them the best deals at the cheapest rates. This means that while you're buying stocks and bonds, hedge funds are getting special rights, warrants, sweetheart deals, private placement deals, options, bigger discounts on bonds, and much better bulk commission rates and lower spreads on stocks. If you're paying 4.25$ for a 4.15$ stock, they are paying something like 4.16$. And they are eating alive your profits because when the stock goes up to $4.30, they can activate another warrant to purchase 20m shares at $4.25, diluting the value of your shares.

Next, you lack information and exposure. You have no idea what is going on in the market besides what you see on the news - while hedge funds have analysts working around the clock and a bunch of service providers who give minute-by-minute analysis of their portfolio opportunities and weaknesses in all markets with exposures to nearly everything. Meaning, if there is an opportunity in the real estate market (i.e. legislation), it might take you weeks to get in - hedge funds will have gotten in the minute the legislation was passed. Furthermore, when IPOs come out for companies, hedge funds get top billing on the primary market shares - which means investment banks are selling directly to them. Once the secondary market becomes available, hedge funds are up 15-20% on these investments, sometimes within hours.

Finally, you have no capital compared to these hedge funds. The people who invest in these hedge funds are not just the 1%, they are the 0.1%. These are the guys with 500million dollar bank accounts and the ability to do whatever the fuck they want. Hedge funds know this, and they invest without having to care about whether their clients can pay the rent or send their kids to college. All of that is irrelevant. Their sole purpose is to earn money, not to mitigate risk.

What does this all mean? It means the hedge fund industry is making a gigantic proportion of the profits. The top .1% is earning nearly half of the profits in the industry, through not just hedge funds, but other similar vehicles.

The finance industry is a complete scam, designed to funnel money from the 99% investing public into the hands of the top .1%. Sure, some of you will make good money, but stastically, the rest of us will lose, and who is feeding off us? Hedge funds, and the .1%. You have better odds going to a casino and playing slots, the worst-paying game in the house, but still better than the stock market.

Also, the government is in bed with the financial industry. Tax loopholes give hedge funds and other top players the ability to write off losses and not pay taxes on gains for years at a time. For income they derive from the hedge fund (profits), they pay only 15%, rather than the 35% income tax charged to most people earning 80k and above. Meanwhile, you have to pay taxes for not just your own income but also capital gains.

The worst part by far is that the government "encourages" you to put your money into your 401k through 'tax exemptions', which basically puts your money with the lowest tier of the financial industry - pension funds, retail wealth managers, and retail asset managers. These guys have shit strategies like long-only or domestic equity (which means they only invest in American stocks), and have nowhere near the capability and reach of hedge funds. These guys are even more likely to lose your money than you are, and even worse is they will take a 2.35% cut while doing so. And you get penalized when you try to take your money out early. How f***ed up is that.

In other words, if you aren't in the .1%, you have no access to the derivatives markets, you have no access to the special deals that hedge funds and other wealthy investors get, and you have no access to the resources, information, strategic services, tax exemptions, and capital that the top .1% is getting.

If you have any questions about what some of the concepts above mean, ask and I will try my best to answer. I'm a first-year analyst on wall street, and based on what I see day in and day out, I support the OWS movement 100%.

tl;dr: The finance industry funnels money from the masses to the ultra rich, through vehicles like hedge funds which dominate all of the financial markets.

h/t Scott

 

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Thu, 12/01/2011 - 23:22 | 1937189 SilverIsKing
SilverIsKing's picture

Gold, silver, nuff said.

Thu, 12/01/2011 - 23:40 | 1937215 Doña K
Doña K's picture

His message is true and clear. The messenger is not too elloquent. I don't get it. No one can better your odds in a no win situation.

Gold, Silver, Agri-land with good water source, guns and ammo for the next ten years. Real eatate after that.

 

Thu, 12/01/2011 - 23:55 | 1937244 nope-1004
nope-1004's picture

I remember coming to this same conclusion back in the summer of 2009.  The market made no sense.  Financials started taking off, yet FASB was a complete fraud and farce, enabling only those on the "inside" to syphon more public money from the sheeple believing the headlines.

Any retail investor trading this market is an idiot with their head up their ass, believing in a fairytale outcome.

Market is rigged.  Government is criminal.  Joh Corzine and JPM just stole millions of dollars.  WAKE UP people.  The devil is at work here, keep away from this ponzi.

 

 

Fri, 12/02/2011 - 00:25 | 1937336 FEDbuster
FEDbuster's picture

But we have Jim Cramer (just kidding).

When the shit really hits the fan, food is the one item you'll want to have plenty of.  Study a little history, and you will find there is always a shortage of food.  As an American who has never known real hunger (and I never want  to), I have many days where I buy in to the "it can't happen here" mentality.  Now I seem to have more "why can't it happen here" days. 

Fri, 12/02/2011 - 00:57 | 1937350 Oh regional Indian
Oh regional Indian's picture

Hhhhh....the real joke fedbuster is that THAT is where it all started. Of course it's happening all along. Right here (there actually, but sometomes I feel like I'm still THERE).

I remember, once I had understood the whole "Accredited Investor" scam, I knew. Strict upward mobility filter. Rich get richer. It's who you know. Money begets money..... etc.

ORI

the-plan/

Fri, 12/02/2011 - 01:50 | 1937398 flacon
flacon's picture

When I used to work for Merrill Lynch it was an "open secret" that the "derivative group" was CONTRAVERSIAL. I left in summer 2007, 6 months after I knew that... fuck you Stan O'Neal! Yes and I worked for a month for BlackRock when they bought MLIM, fucking bastards! It's all coming down MARK MY WORDS!

 

http://www.youtube.com/watch?v=J0SPio6RE-s

Fri, 12/02/2011 - 03:24 | 1937566 Michael
Michael's picture

Average income individuals who dabble in the stock market are playing Russian roulette with themselves.

I find it quite funny seeing people blow their own brains out(figuratively speaking) playing in the market. I know a few people who lost well in the six figure range and their life savings to the house. I'm sorry, it's just funny as hell to me to see stupid sheeple losing massive amounts of personal wealth to the market manipulators.

Better to not work extra hours making extra money to dump into the stock market, they'll only steal it from you and you'll have pissed away a large chunk of your life for nothing if that's what you do.  

Fri, 12/02/2011 - 04:20 | 1937624 oldman
oldman's picture

if you wanna play

you gotta pay

Fri, 12/02/2011 - 05:02 | 1937665 ucsbcanuck
ucsbcanuck's picture

Here's the problem though - most of my retirement accounts are in cash or CDs. You earn shit returns on those things and government bonds. Maybe the truth is that it's better to be doing things that way than even trying to get involved in the stock market. 

Fri, 12/02/2011 - 05:47 | 1937704 topcallingtroll
topcallingtroll's picture

Long term usa treasurys have the best thirty year return of any asset class. Why didnt you buy bonds?

Richard russell says the real bull markets are so stealthy no one ever rides them all the way.

I guess he is right.

Who around here is in treasurys? Or was long usa bonds these last thirty years?

Fri, 12/02/2011 - 09:07 | 1937875 mrdenis
mrdenis's picture

 go to TIPS ......

Fri, 12/02/2011 - 12:48 | 1938941 ucsbcanuck
ucsbcanuck's picture

And they're overpriced right now, clown.

Fri, 12/02/2011 - 07:31 | 1937754 Confused
Confused's picture

Shit returns on cash and CD's is what helps feed the beast, by forcing us to search for higher returns in equities. 

 

Cash for PMs. My retirement account either won't be worth anything, or I won't make it to retirement. 

Fri, 12/02/2011 - 07:44 | 1937759 Bobbyrib
Bobbyrib's picture

Bernanke is to blame for why so many retail investors are in the stock market. ZIRP is killing the average saver to the point that they look for another vehicle for higher returns. That's when the stock market comes into play. End the Fed. Let interest rates adjust.

Fri, 12/02/2011 - 09:51 | 1938065 pelican
pelican's picture

100% correct Michael.  I am young still, however everything you said was done to me.  Housing Market crash, stock market crash, it is all a lie.  At least I figured this out and have the second half of my life left (I hope)

Never work an extra hour for an employeer.  They will lead you along with a carrort and then eat you for dinner.

Fri, 12/02/2011 - 09:33 | 1937891 Widowmaker
Widowmaker's picture

Accredited investor is pinstripe speak for those with an attorney.

Using a Blue Sky Agreement, one may typically get around the fancy language and min net worth bullshit.

It's all bullshit, but one thing for certain is if you want to lose money there is ALWAYS a way in.

Feel richer yet?

Fri, 12/02/2011 - 00:38 | 1937354 The Big Ching-aso
The Big Ching-aso's picture

 

 

Ya, but in a casino a scantilly-clad babe hands me a drink, wishes me good luck, and winks at me.      

Whenever my wife reads my latest 401k casino statement, she yells at me, calls me an idiot, and gives me the finger.

Fri, 12/02/2011 - 09:58 | 1938104 tooktheredpill
tooktheredpill's picture

like it

 

yeah, maybe buy casino equity as well

Fri, 12/02/2011 - 10:00 | 1938108 midtowng
midtowng's picture

I figure out that the 401k/IRA system was fucked up back in 2003, only after I put in tens of thousands of dollars that are now trapped.

Nevertheless, I figured it out before the bubble, so I don't regret much. I figured out that we were all being lied to, so I bet against whatever the market was pushing. In doing so my assets have multiplied several times over (energy stocks from 2003-2007, and gold from 2002 to present).

The simple fact that I made lots of return on that trapped money by betting AGAINST whatever I was being told just shows how fucked up the market is.

Fri, 12/02/2011 - 00:41 | 1937359 Sophist Economicus
Sophist Economicus's picture

I'm down with the gold and farm land - been acquiring both for years.    That said, this writer is a putz!   I don't believe he works for a hedge fund.   I don't see anything in his incoherent rant that means anything.    For all of the brilliant 'analysts' Goldman has, they go on record being long the Euro and Short the Euro - and on these 'pages' are the butt of jokes.    The we have Paulson with his 'up to the eyeballs' BAC and selling gold to get more, we have a gazillion funds staring at record redemptions, etc.    Two years ago, the entire industry SHOULD HAVE just gone under - some inside information!

 

Is there dirty dealings going on -- sure there is.   But that will be true anywhere people gather - no matter in what profession.   Spare me the hysteria you snivelling idiot - you probably work for an NGO....

Fri, 12/02/2011 - 00:56 | 1937380 JPM Hater001
JPM Hater001's picture

"That said, this writer is a putz!   I don't believe he works for a hedge fund.   I don't see anything in his incoherent rant that means anything."

Your belief is never required. A brick wall will stop you whether you believe it is brick or not.

And so has this kids analysis. Seriously, open at least one eye while posting on ZeroHedge.

Fri, 12/02/2011 - 01:39 | 1937425 beaker
beaker's picture

I agree w/JPM - this guy is a Putz and a newbie putz, at that. Yes, there are some nuggets of truth here.  True enough about the spreads, and lack of access to exotic derivatives, but so what? I mean, WTF is this we hear all the time about hedge funds blowing up?  How does that happen? I've been a commodity trader for 35 years and here's the truth in this story: All these hedge funds are fucking other hedge funds with all the shit they create and trade. If they had all the answers, they'd have all the money. Go ahead and check out this fabulous track record of hedge funds.  It has de-volved into the S&P 500 returns. Here's the loop:  Manager A finds a market inefficiency and makes money.  He markets the system and track record. Money floods to him.  The system works until he cannot trade the logistics of tens of millions of dollars like he could when he was trading a million dollars. Where he was buying 100 cars, now he's buying 10,000 cars.  Try exiting positions like that and he ends up getting spreads like the pink sheets.  Returns flatten out.  Another system slides into obscurity until the next yahoo comes along. The "house" that is really winning are the managers who collect their 2% annual fee and 20% in a couple of the intermittant good years.  Everyone is picking each other's pockets at all the levels of this game.  It is a zero sum because no wealth is being created.  It's a big circle jerk.  This whole thing is like technology turning on its greedy unethical creators so everything is all fucked up like we have it today.

Indeed, buy farmland to create wealth and store it in gold. There's no counter-party risk.

Fri, 12/02/2011 - 01:50 | 1937457 The Big Ching-aso
The Big Ching-aso's picture

 

 

I gave ya some green because obviously you really know your shit.

 

Fri, 12/02/2011 - 02:36 | 1937527 Freddie
Freddie's picture

Go ahead and check out this fabulous track record of hedge funds. It has de-volved into the S&P 500 returns.

+1

Yup - the vast majority are like scammer Raj Rajarian or whatever that fat f**ks name is.  Stevie C who can afford to buy people off. 

This is also why some of us respect guys like Hugh Hendry, Kyle Bass, Ray Dalio/Bridgewater and maybe Chanos.  Also Marc Faber and Jim Rogers who are not exactly hedgies.   These guys really think. 

 

Fri, 12/02/2011 - 03:10 | 1937561 dark pools of soros
dark pools of soros's picture

i agree what you say but you have to take that and apply it to what you said.  Buying farmland was the last 'yahoos' game and the price of good farm land is through the roof and everyone is selling the small farms away...  good luck small guy ANYWHERE even finding choice land under a bridge will be tough for the serfs

 

http://millslegacy.wordpress.com/2011/11/21/land-price-boom-closing-down-the-concept-of-the-family-farm-as-we-knew-it-in-the-past/

 

 and before you think you can go be a hog or chicken farmer, that is even more fucked

http://www.localfutures.org/publications/online-articles/the-farm-crisis

"Many hog and poultry farmers no longer own any animals. The farmers get the chicks and hogs from the multinationals. Even the grain the animals are fed is provided by the company. At the end of the season, the full-grown animals are trucked to the company's processing plants where they're weighed. After rating each farmer's performance in pounds, the company deducts its charges for the chicks or hogs, feed, transportation, and any other services or products it supplied, such as propane to heat the buildings. If there's anything left over, the farmer is compensated. The only thing that the company allows the farmer to own are the heavily-indebted buildings and land where the company raises 'its' animals."

 

 

Fri, 12/02/2011 - 09:39 | 1937989 beaker
beaker's picture

I have never understood the attraction to livestock.  It is a very tough business model, but I do not call that farming.  Yes farmland prices have been bid up but the market is only giving about a 4.5% cap rate at the high end.  The crazy $16,000/ac" stories tat you read about occur at some rural auction where a couple of neighboring farmers are bidding up a small parcel to square a section.  No serious farmland investor is accepting much under 4%.

Fri, 12/02/2011 - 11:53 | 1938646 Alex Kintner
Alex Kintner's picture

Well, since Obama opened the door to Selling Horse Meat For Human Consumption, you have an alternative to hogs now. I guess since the Cat Food commission failed, he felt he had to do something.
http://www.dailykos.com/story/2011/11/30/1041092/-Horse-Slaughter-now-Le...

Fri, 12/02/2011 - 06:04 | 1937712 Scribbles
Scribbles's picture

Great post.

One thing about farmland - there IS counter-party risk when Barry O. confiscates it to create a network of hole-digging communes.

You can, of course, reduce that risk through the purchase of other assets, such as those products available from Smith & Wesson.

Fri, 12/02/2011 - 06:35 | 1937733 Doc
Doc's picture

Author is very naive. Funniest part is about the 0.1% the elusive "super-rich".

I've heard of a lot of Hedge Fund Managers who've made it onto the Forbes lists, I ain't never heard of a client making it on there... even the 0.1%.

The author doesn't address a central fact which is even before the 2000s over 75% of active asset managers don't beat their benchmark.

 

My dislexic aunt who can't even read a fucking income statement or balance sheet has compounded at about 15% a year since the mid 80s buying oil & gas royalty trusts. All she did was reinvest all the income and always check the reserves to make sure the trusts weren't running out of oil in the near future... markets can be outperformed if an investor is dilligent, patient, understands the investment thesis and underlying product, and can bear the volatility. Just don't expect John Paulson type grand-slams (and then grand crashes)...

Look at all the ZH posters who've made money in silver & gold over the past 3, 5, 10 years, taking all the big drops in stride and just building their positions. Again, proof that dilligent and unemotional investors can and do beat the market!

Fri, 12/02/2011 - 08:26 | 1937792 twotraps
twotraps's picture

agree, thanks for saving me the fucking rant I was cooking up.  Sure, there are differences in cost and access, when was it ever fair??  Love the old story about the vote to bring phones to the NYSE floor.....people were agast, 'then anyone can trade' was the cry, people saw progress and volume/business exploded, you can't go back.     So, now we have super-computers and you get quotes on your iphone.  Not likely we go back in time but it must evolve.  Actually, if you've been in it 35, to my 25, you might remember the $75 fees!  

 

Hate to see govt intervention and manipulation but at the end of the day I know I don't have all the information, I know I am behind with access but I still have to decide to trade or not.  Still must make risk decisions, deciding not to trade is a trade.  

Fri, 12/02/2011 - 23:29 | 1940755 count_zero
count_zero's picture

^ +1

Active managers keep most of the alpha for themselves, whether hedge funds or mutual funds. Hedge funds suffer from survivor bias also. After down turns hedge fund managers are stuck with a high water mark to overcome before getting that 20%, so they shutdown.

Don't play the zero sum game. Index! Let others pay for price discovery. If you're concerned about currency risk (as I believe most here are), consider Harry Brown's Permanent Portfolio. (Yes, the same one who ran for president as a Libertarian.)

25% gold (hedges currency risk)

25% t-bills (for interest risk)

25% long-term treasuries (for deflation risk)

25% US stock (eg, VTI, SPY) (for generating wealth)

Four low correlation assets that damp each other, for a slow, steady return. The bond barbell gives higher convexity (lower losses if rates rise) in exchange for a little less yield, vs intermediates.

Fri, 12/02/2011 - 09:50 | 1938057 tooktheredpill
tooktheredpill's picture

what makes u think that PM's are not manipulated also?

If you don't make a living of it like Einhorn and Greenblatt, focus on earning power and stick it somewhere safe with shite interest. Fucking boring but at least 30 years later you haven't blown a large chunk of it.

Thu, 12/01/2011 - 23:49 | 1937239 yabyum
yabyum's picture

Gold silver, can't argue w/that. What abot pslv? phys? miners? as tools to turn fiat into the physs?? Miners have been tough(no shit) time to keep some quality and flip the rest in to metals (or a small acerage w/well)

Thu, 12/01/2011 - 23:53 | 1937245 1000pips
1000pips's picture

Silver is $32.85 an oz.; Gold at $1747...Zero Hedge, and many of you who post here, constantly said many times last year that Gold would be $2500 oz., and Silver well over $100 by the end of 2011.  

Also, you said, the USD was suppose to crash and not be the world's reserve currency by the end of 2011.  

None of this has happened, nor will it.  

The Stock Market will reach new highs in 2012, USD will remain the reserve currency, and Gold and Silver will probably go down in value as 'the end game' never seems to happen and people go on with their daily lives.  

Gold is not a religion, it is a mineral, you buy Gold with Dollars, to wear and show off with, it's 'Bling', not money.

It's time everyone gets back to reality, the world is not going to end, but the Gold bubble is.

Thu, 12/01/2011 - 23:55 | 1937250 RmcAZ
RmcAZ's picture

Don't feed the trolls.

Fri, 12/02/2011 - 00:04 | 1937270 1000pips
1000pips's picture

no troll here, just stating that the predictions of gold being at $2500 by the end of 2011 did not happen, what say you about that?  

Also the USD is still the reserve currency, what say you about that?  

State your logic, oh, you cannot, because now it is a FACT that these predictions of 'the end game' never happened.  What say you about that?  

You are the troll...

Fri, 12/02/2011 - 00:09 | 1937281 nope-1004
nope-1004's picture

Actually, some idiots said gold would be at $500 and silver under $10.

What say you about that?  For a guy that's been a member for 4 weeks, you sure are up on the history of this site.

LOL.

Fri, 12/02/2011 - 09:54 | 1938083 tooktheredpill
tooktheredpill's picture

yes, you get idiots on both sides

but c'mon, equities suck so that must mean buy PM's? fuck me

Fri, 12/02/2011 - 00:16 | 1937307 Backspin
Backspin's picture

You also stated that gold is not money.  That will get you some down arrows around here.

Fri, 12/02/2011 - 01:47 | 1937419 Raphio
Raphio's picture

You also stated that gold is a mineral. Sorry to inform you that gold is actually an element not a mineral.

Fri, 12/02/2011 - 01:54 | 1937464 1000pips
1000pips's picture

No my friend, sorry to inform you that GOLD IS A MINERAL...


  1. Gold - Mineral Fact Sheets - Australian Mines Atlas www.australianminesatlas.gov.au/education/fact_sheets/gold.jsp

    Gold had a significant historical role in Australia, which had its first gold rush in 1851 after the mineral was found near Bathurst in New South Wales. ...

  2. google before  you post disputing me, your lack of education can be hidden the less you say,,,

Fri, 12/02/2011 - 02:42 | 1937531 El Gordo
El Gordo's picture

I thought it was an element listed on the periodic table.

Fri, 12/02/2011 - 02:52 | 1937545 1000pips
1000pips's picture
min·er·al 

 (mnr-l)
n.
1. A naturally occurring, homogeneous inorganic solid substance having a definite chemical composition and characteristic crystalline structure, color, and hardness. 2. Any of various natural substances, as:
a. Such as gold or silver. b. An organic derivative, such as coal or petroleum. c. A substance, such as stone, sand, salt, or coal, that is extracted or obtained from the ground or water and used in economic activities. 3. A substance that is neither animal nor vegetable; inorganic matter. 4. Inorganic, such as calcium, iron, potassium, sodium, or zinc, that is essential to the nutrition of humans, animals, and plants. 5. An ore.

Fri, 12/02/2011 - 03:43 | 1937585 Raphio
Raphio's picture

I stand corrected. I thought I remembered my first year Geology courses correctly  - that minerals are, by definition, composite substances,,ie. compounds. I was not aware that pure elements could also be considered "minerals".

Fri, 12/02/2011 - 05:04 | 1937667 ucsbcanuck
ucsbcanuck's picture

Gold is a metallic element not a mineral.

Fri, 12/02/2011 - 05:26 | 1937687 Eurodollar
Eurodollar's picture

Unfortunately people want someone to lead the way so they don't have to think themselves. It is nothing new. Human beahviour! Simple psychology! It's more comfortable commenting: the world is blowing up bitchez, than to actual spend a whole day analyzing whatever subject should have been analyzed.

 

That said; Tyler is doing a good job by all comparisons. The flow of information here is only good for us "the masses" to digest.

Sat, 12/03/2011 - 20:22 | 1942593 Stoploss
Stoploss's picture

GOLD:

Symbol = AU

Periodic Number = 6

Atomic number = 79

Atomic weight = 196.96654

Element Classification = Transition Metal

Discovered by/Known to the ancients

Discovery Date is unknown

Name Origin = Anglo Saxon: geolo (Yellow); Symbol from Latin aurum (Shining dawn)

Density: (g/cc); 19.3

Melting Point(K) = 3080 degrees Farenheight

Appearance: Soft, Maleable, yellow metal.

Atomic Radius (pm) = 146

Atomic Volume (cc/mol) = 10.2

Covalent Radius (pm) = 134

Ionic Raduis = 85 (+3e) 137 (+1e)

Specific Heat @ 20c j/g mol = 0.129

Fusion Heat kj/mol = 12.68

Evaporation Heat (kj/mol) = ~340

Debye Temperature (K) = 170.00

Pauling Negativity Number = 2.54

First Ionizing Energy (kj/mol) = 889.3

Oxidation States = 3,1

Electronic Configuration =  [Xe] 4f to 14th 5d to 10th 6s to 1st

Lattice Structure = Face-Centered Cubic (FCC)

Lattice Constant (A) = 4.080

Lattice C/A Ratio = N/A

 

Is there anything else you require?? If so, please call:

1-800- i-donthaveafuckingclueaboutpmsorhowtosatisfymywifeinanywayshapeorform.

Thank You from our readership, for your concern, we do not need your help. (We have better computers)

 

Sat, 12/03/2011 - 20:29 | 1942628 Stoploss
Stoploss's picture

Gold is a metallic chemical element.  See above. pips is retarded.

Fri, 12/02/2011 - 00:18 | 1937309 J 457
J 457's picture

I'm old enough to recognize that this time its not business as usual. The USD reserve has never been under as much pressure as it currently is today. The debt @ 15 trillion, the 1.4 trillion annual deficit and 600 billion trade gap. Look back only a short decade ago and see the huge disparity from today.

Yes, the world and the US will continue, but I firmly believe there will be significant change in the next 2-5 years. Our current path is not sustainable and no amount of deficit reduction or tax increases will be enough to satisfy the debt without smothering our service comsumption driven ecomony. We're now in a tight corner.....

Fri, 12/02/2011 - 04:52 | 1937653 The Navigator
The Navigator's picture

Quite correct J 457 - Exponential numbers - Chris Marenson at http://www.chrismartenson.com/crashcourse does a great job explaining how things seem ok untill the last second, when number go exponential and then BANG, its over.

Don't be dissapointed when you think "WTF, it shsould have happened by now" - ZH is way ahead of the curve, 6 months to a year ahead - a better (not perfect) crystal ball once you understand the timing aspect of ZH.

Fri, 12/02/2011 - 00:20 | 1937316 CIABS
CIABS's picture

it didn't happen?  when did 2011 end?  did i miss new year's eve?

Fri, 12/02/2011 - 00:33 | 1937348 1000pips
1000pips's picture

"Men prefer false promise to a flat refusal."   - Quintus Cicero 

Fri, 12/02/2011 - 00:39 | 1937356 SilverIsKing
SilverIsKing's picture

"1000pips is a douchebag."   - SilverIsKing

Fri, 12/02/2011 - 02:11 | 1937485 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

pips is just jealous he doesn't own any gold and silver.

Fri, 12/02/2011 - 02:29 | 1937515 1000pips
1000pips's picture

Of course I own Gold, but not because I am afraid I may have to use it one day to barter for some grain or water.  I own it because I like nice things!

It amazes me that the people on this site are so anti-establishment, yet, when some one presents logical questions regarding facts and timelines made during the last 3 years on this site, all you people can do is use 'personal' attacks against the person asking you to explain your failed position.  

That is exactly what Washington D.C. does to those who question them.  You have become that which you hate.  

 

This is why you have missed the biggest moves up in the Market over the last 3 years-- approx 6,000 points UP!  

So, i suggest you quit 'drinking the doomsday 'cool-aide'; start doing due dillagence and spend less time on blog sites trying to 'talk the market down'.  It is going up, with or with out your commentary, trade accordingly.  

You have just missed the Greatest Move Up in the history of market.  Gold is for 'bling', enjoy it for what is for.

Fri, 12/02/2011 - 04:37 | 1937639 akak
akak's picture

You have just missed the Greatest Move Up in the history of market.

Let's see.

DJIA high in 2001: 11,301
DJIA today: 12,020
% gain over past ten years: 6.4%

Gold high in 2001: $293.10
Gold today: $1745.57
% gain over past ten years: 495.6%

 

Yep, you were in fact correct --- you were merely incorrect about exactly which market has had its greatest move up in history.

Really, your argument is laughable on the face of it.  Are you RobotLemming?

Fri, 12/02/2011 - 09:53 | 1938081 ZeroPower
ZeroPower's picture

Chiming into a gold and silv discussion on ZH is always dangerous, but the fact of the matter remains: many many people lost money buying gold at 1900 and silver at 45 just because everyone (no saints here either) was head over heels on the next targets in the 2000s and 100s, respectively.

Congrats to those who made money buying it before, that is clairvoyance. Unfortunately not many people share that trait while investing.

Fri, 12/02/2011 - 16:12 | 1939649 akak
akak's picture

Congrats to those who made money buying it before, that is clairvoyance.

No, buying gold and/or silver before their recent (and temporary) highs was most definitely NOT clairvoyance, nor was it mere good luck --- it was simply common sense, at least to those with any shreds of independent thought and historical perspective on financial matters when governmental spending and debt run amok. 

Fri, 12/02/2011 - 02:15 | 1937491 calgal
calgal's picture

No its just a disinfo troll disguised as an old fag

What say you old chap?

Fri, 12/02/2011 - 02:56 | 1937551 1000pips
1000pips's picture

For those of you who are 'down arrowing' the above Cicero statement..Kyle Bass used it to begin his report yesterday which Zero Hedge published.  Just thought you would like to know how narrow minded and uninformed you have become...

Fri, 12/02/2011 - 04:56 | 1937656 The Navigator
The Navigator's picture

Didn't down arrow you due to it being a Cicero statement or that Kyle Bass used it - downed all of your posts becuase you're an idiot.

Fri, 12/02/2011 - 00:44 | 1937364 Catflappo
Catflappo's picture

Those predictions might not have played out, but the directions were both right....  Gold up and the USD down, - god, it couldn't even rally against the backfdrop of a totally fucked Euro !

Fri, 12/02/2011 - 00:51 | 1937374 Arkadaba
Arkadaba's picture

Re gold  - Still a few weeks to go till the end of 2011 .... but it has performed according to expectations.

As for USD still being the reserve currency - don't recall anyone saying that it would not be the reserve currency at the end of 2011. Most articles said its days were numbered but were somewhat vague on when the decline would happen (which makes sense given the number of variables)

Fri, 12/02/2011 - 01:30 | 1937420 TruthWave
TruthWave's picture

Yes, Gold isn't at $2500 in 2011, but look at a chart of the massive rise in gold prices over even the last 7 years! Gold has been the game changer in spite of the rigged futures markets.

Fri, 12/02/2011 - 03:19 | 1937577 zebrasquid
zebrasquid's picture

The Fed has pulled every cheap trick out of their bag to forestall the crash of the system. Bag is all but empty. everything just fine, fine in your faked world, is it? Sleep well with that tick, tick sound?

Fri, 12/02/2011 - 00:15 | 1937304 cbaba
cbaba's picture

How much do you get paid for each word ?

Fri, 12/02/2011 - 00:49 | 1937370 Caviar Emptor
Caviar Emptor's picture

The world would not end if all the people in it were suddenly extinct. The sun would still come up in the morning. The point of people's lives, and of having a country, is to optimize the quality of life and to leave the place in better shape for the next generations. NONE of those goals are consistent with the current status quo. It is irrelevant what the stock market does if the underlying economy is a disaster. As things stand the stock market can easily drift in the OPPOSITE direction than that of the economy. That's what happens in a casino rigged by the Fed with infinite money printing that serves to enrich a powerful few who know the right people at the expense of the many. People are very much back to reality right now: they're no longer denying that things are going in a dangerous direction that is bad for their health and that of the country as a whole

Fri, 12/02/2011 - 04:53 | 1937654 oldman
oldman's picture

Thanks, Caveat Emptor

We agree on yours above, but I want to take this further.

I want to ask each of the posters going ping-pong here with words,

What are we going to do about it?

What has each done individually except to point a finger and scream,

"It's just not fair!" ?

How long are you willing to tolerate the government and your money in the form of taxes being used to keep the high-rollers in the game as the noose is pulled tighter around your necks?

Are you not tired of eating shit every day?

Why do you tolerate all of this and then think that any one individual is going to come in and rescue you because of your stupid 'right to vote' under governments that never do a thing except more of the same thing?

You pathetic fucks, you won't even support OWS when it is doing what you should could be doing

OUT IN THE STREETS WITH DIGNITY SAYING "NO MORE"

rather than sitting here behind a 'handle' at a computer yelling yes or no at each other like children in the playground

I'm an oldman, and I'm ashamed to be one of you                                    om

sorry all----just my gut belching out the gas from reading the comments above       ATTACK, ATTACK, ATTACK!

 

Fri, 12/02/2011 - 00:56 | 1937381 Prairie Fire
Prairie Fire's picture

Good for you for showing some originality around here!

I absolutley agree! This website is full of sissies that fall in line instantly when the see the rest of the herd step and grunt in front of them.

Thank you for stopping in!

Fri, 12/02/2011 - 01:38 | 1937433 Messianic
Messianic's picture

Right, it's time to go back to the reality that printing money solves economic problems, cures diseases, and has no side effects to speak of.

 

 

Normalcy bias says what?

Fri, 12/02/2011 - 02:07 | 1937478 calgal
calgal's picture

Ben

I thought I told you to stop posting here!

Not get back in your helicopter and get the fuck out!

Fri, 12/02/2011 - 06:51 | 1937735 swissbene
swissbene's picture

thanks for the hard hitting analysis.  thanks also for your lock on the eur/usd call back here:

http://www.zerohedge.com/news/kyle-bass-un-edited-buying-gold-just-buyin...

are your predictions around USD & gold similarly robust?

Fri, 12/02/2011 - 11:39 | 1938578 JoBob
JoBob's picture

Sure. That's why the CBs are buying tons of the stuff.

Fri, 12/02/2011 - 00:13 | 1937297 JustObserving
JustObserving's picture

Nothing is more manipulated than silver or gold.  Hold physical but trade at your own risk.  Ask Gerald Celente.

Fri, 12/02/2011 - 00:34 | 1937346 gangland
gangland's picture

Opulence....I haz it.

Fri, 12/02/2011 - 06:27 | 1937727 Doc
Doc's picture

Greatest comment ever, you should attach the video!

 

Fri, 12/02/2011 - 07:06 | 1937743 theMAXILOPEZpsycho
theMAXILOPEZpsycho's picture

Well here in the uk that'll be 20 vat on your silver, plus 28% capital gains tax when you sell, plus 40% inheritence tax when you die...thanks!

Fri, 12/02/2011 - 12:24 | 1938793 WhiteNight123129
WhiteNight123129's picture

Guess what, see the performance of many hedge funds. There are many who work in hedge funds here in this blog. THe big boys can not go in illiquid stocks, they just can´t. There are some exporters gems in Portugal and Greece right now, very illiquid, which would get a windfall when their debt is redonominated from Euro to local currency, the big boys can not play that too illiquid. There is a absymal lack of presence in Hong-Kong stocks. The commission the inside information, yeah right. But there are still elephants in the room that the guys don´t see. You want to have a prime brokerage with MS? please. Very very risky. Want to protect your assets? Go to Hong-Kong, the only banking system which would withstand a nuclear derivative strike.

 

Thu, 12/01/2011 - 23:26 | 1937197 chump666
chump666's picture

good stuff

Thu, 12/01/2011 - 23:28 | 1937200 kato
kato's picture

surprised he didn't say the money from the masses was funneled to one Rothschild. and that said Rothschild is fucking a goat-like thing known as the devil. i guess the Rothschilds are kind of off of the favorites to bash list these last few months. maybe next time.

Thu, 12/01/2011 - 23:59 | 1937257 High Plains Drifter
High Plains Drifter's picture

why would you think he would bring up such a subject. first off, i am sure he doesn't have the foggiest idea about that subject.  he works at a hedge fund. that is his world. 

Fri, 12/02/2011 - 00:22 | 1937325 Bansters-in-my-...
Bansters-in-my- feces's picture

The money of the masses was funneled to one Rothschild,FuckHead.

Swallow keynesian cum much...?

Fri, 12/02/2011 - 00:40 | 1937358 Uber Vandal
Uber Vandal's picture

The correct name for the "goat-like thing known as the devil" is Baphomet.

 

 

Thu, 12/01/2011 - 23:29 | 1937204 Seasmoke
Seasmoke's picture

than why do alot of hedge funds have to close their doors

Fri, 12/02/2011 - 00:00 | 1937260 High Plains Drifter
High Plains Drifter's picture

mr know it all ron insana tried to swim with the whales in 2006...........

Thu, 12/01/2011 - 23:31 | 1937206 dick cheneys ghost
dick cheneys ghost's picture

The United States of Corruption

Fri, 12/02/2011 - 05:16 | 1937681 The Navigator
The Navigator's picture

Where laws and taxes are for peons and peasants.

Thu, 12/01/2011 - 23:32 | 1937207 Concentrated po...
Concentrated power has always been the enemy of liberty.'s picture

This guy wasn't hired for his IQ. The best part of the article was written by Tyler in the summation. Concise and factual. The artical isn't as rational as it is emotional.

Thu, 12/01/2011 - 23:56 | 1937251 MarkTwain00
MarkTwain00's picture

Exactly this idiot probably got fired from his job getting the real analysts coffee and cocaine

Tyler should write his own letter and drop it from a helicopter over the protests with a nice Bernanke mask on 

It might actually address the problem and not sound so winy or idiotic

Oh yeah and on the back of the letter draw a map to DC....those crooks are the ones we need to focus on.

Fri, 12/02/2011 - 01:20 | 1937408 hawks5999
hawks5999's picture

It's on Reddit, what do you want?

Fri, 12/02/2011 - 01:41 | 1937441 beaker
beaker's picture

Got that right.  Tyler's summation was spot-on.

Thu, 12/01/2011 - 23:38 | 1937208 Caviar Emptor
Caviar Emptor's picture

When the 99% run out of loose cash to gamble on the stock market, the Fed has to step in regularly and provide "liquidity", bailouts, "quantitative easing", no cost loans, risk free interest all courtesy of the taxpayer. 

 

 

What would you like to do?

Transaction: Wealth Transfer

From: Taxes I pay

To: Wall Street Slush Fund for the betterment of banksters

How much shall I transfer? : $1,000,000,000,000

Are you sure?: Yes

Congratulations! Your money has been transfered!

You did not have the funds to cover your transfer.

You will be charged at 3% annually to cover the money you transfered to Wall Street. 

We are temporarily out of receipts. Have a nice day!

Thu, 12/01/2011 - 23:48 | 1937238 infinity8
infinity8's picture

the 99% isn't gambling in the stock market.

Fri, 12/02/2011 - 01:00 | 1937386 tumblemore
tumblemore's picture

their pension funds are. or rather they're grazing in the stock market field getting sheared from time to time...until the endgame when they'll all be butchered in one single day.

Fri, 12/02/2011 - 01:12 | 1937397 infinity8
infinity8's picture

There's a percentage of the 99% (50? - I don't fucking know but probably less than that) partaking without much say thru 401k's or whatever but they sure as hell aren't gambling their "spare change" voluntarily.

Fri, 12/02/2011 - 01:13 | 1937400 infinity8
infinity8's picture

sorry, "loose cash" - that's even better, in a hilarious way.

Fri, 12/02/2011 - 02:15 | 1937490 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Stocks are a gamble.  Bonds are a gamble.  And having cash in large quantities, unless you have a sick child and no insurance, is just plain stupid.

Anyone that thinks they have wealth when it is tied up in the Fiat Ponzi is getting cheated.

The only real investment is physical precious metal.

Fri, 12/02/2011 - 06:07 | 1937714 Scribbles
Scribbles's picture

Are you kidding? Why do you think they're all upset - because their 401ks are eating it.

 

Thu, 12/01/2011 - 23:35 | 1937210 mmanvil74
mmanvil74's picture

Finally.  An explanation of why the 99% are so pissed off.  Most of the protesters probably don't understand half of this stuff, but "rigged" and "casino" pretty much says it all.  If you are not the house, the odds are you will lose.  

And even when the .1% themselves get burnt by the hedge funds, due to a crisis or market collapse as in '08, the goverment (ie. joe public) comes to the rescue with free money.  What a scam.  

And yet, even now, among the 99%ers, getting a job in the financial industry is considered the epitomy of career choices, while my friends who are teachers, nurses, or tradesmen are practically ridiculed.  This is a disgrace, and we can only hope that the bankers finally screw themselves for good, by blowing up the house they have created, sending us all into chaos.  For it shall be the meek who inherit the earth.

Thu, 12/01/2011 - 23:37 | 1937211 surf0766
surf0766's picture

Does he feel guilty? If it is that bad , quit. Put your ethics first and not your wallet. Run for office to change the laws.

Fri, 12/02/2011 - 08:06 | 1937582 i-dog
i-dog's picture

 

  "Put your ethics first and not your wallet. Run for office to change the laws."

Which office did you run for? Which laws have you changed? Or do you not have ethics?

What a stupid comment!

Even everybody's hero, Ron Paul, has been in "office" now for 35 years and hasn't succeeded in changing even one relevant law.

Thu, 12/01/2011 - 23:39 | 1937214 daveedollar
daveedollar's picture

So should I advise my 82 yr old mom to get her 200k out of dividend paying stocks?  Serious question, no sarcasm.

Fri, 12/02/2011 - 00:04 | 1937268 High Plains Drifter
High Plains Drifter's picture

well good luck. i doubt if she will listen to you. old people are hard to talk to about this stuff. they have faith and do not understand what is really going on.  she likes the dividends. if you tell her to buy metals she won't do it.......they do not understand metals , not one bit.......now, her father did, but not her.........imho....

Fri, 12/02/2011 - 00:16 | 1937305 delacroix
delacroix's picture

pan american silver, pays a dividend

Fri, 12/02/2011 - 01:02 | 1937387 Arkadaba
Arkadaba's picture

My dad does understand metals but he kept saying it is too late and I kept (and keep) saying no it isn't. He got burned on silver years ago - I  think that is part of it.

Fri, 12/02/2011 - 05:35 | 1937694 oldman
oldman's picture

Hey Plains,

We are not hard to talk to 'about this'.

We wiped your noses and your asses, we paid for the infrastructure that you privatized, we worked hard for 35-45 years, paid our taxes, and increased SSI every year.

And now we hear

That we are 'old people', 'boomers, and recipients of YOUR 'entitlements", treated like lepers when we speak, and dis-respected as much as any cockroach accused of not being 'patriots', etc.

We are separated by ourselves

When do we forget these childish differences and begin to come together as the same people? Where is this 'patriotism' of yours when it comes time to act in unison?

If you go back to the top of these comments and read them again, you will see why old folks seem to 'not listen'. They are ridiculous whinings about nothing of importance, of nothing that will change our state of serfdom.

This is not directed at you or anyone else personally, but as a group of slaves so Africanized that we cannot act together in our own defense.

The '99%' is meaningless unless younger people begin to organize with the support of all of us "jews', 'niggers', 'fags', 'wetbacks', 'old people', 'bums', 'filthy street people of OWS', etc.

We old ones care, but we do not have the physical strength or resources to sustain a multi-generational war aginst even the broken machine. We can only support you younger dudes as your mother and your father have done all of your lives and ours before us.

We can only 'do-nothing' as individuals, but to 'do-something' we must learn a new word:

S-O-L-I-D-A-R-I-T-Y

and come together as one body----a giant that with the power and force to clean up his own mess

This is what old people know that their children cannot do and why we do not listen

It is not because we do not hear you or comprehend what you are saying

Help bring it together Plains, and each of you commenters above

Old people are waiting and you can put us out in front---we are unafraid to die                   

Thanks respectfully                             om

Fri, 12/02/2011 - 00:22 | 1937292 BigDuke6
BigDuke6's picture

The serious answer Dave is be very careful with any advice you get here.

If its from someone you think talks sense then check out their other posts and give it consideration, otherwise forget it.

There is a lot of loudmouths who think the rapture is on the way and will tell you its going to be mad max in 10 years, it aint, so slow down and play the long game.

Nobody knows whats around the corner, too many variables, but i dont think accumulating solid dividend paying stocks on the pullbacks is a bad idea - but they've got to be the big pullbacks - seem to come along every 4months just now....

BUT i only read this article because i think the stock market is a big rigged crap shoot and i stay out of it now.

Fri, 12/02/2011 - 00:47 | 1937368 Prairie Fire
Prairie Fire's picture

Thank you for giving the fair answer.

This site is full of chicken little's.

I'm thankful that most people out there don't have the balls to make the contrairian choice.

I'm looking at pot ash companies. Very interesting.

Fri, 12/02/2011 - 02:17 | 1937495 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

So invest in something that is rigged. 

Wise.

Fri, 12/02/2011 - 01:30 | 1937404 Ura Bonehead
Ura Bonehead's picture

Depends on the stocks.  Depends on what your alternative plan is for the money?  Etc.  For example, your mother lives on her dividends, dave.  She can't live on gold.  Be honest, at 82 she's not worried about stuff like France's credit rating or who's printing how much new sovereign debt.  She IS worried about the safety of her principal and her yield.

But then what the crap do I know?  According to this writer I represent the, "Lowest tier of the financial industry" and have "shit strategies."  I've got a great idea, Dave. Maybe you should put your mom's money in one of these hotter-than-Hell hedge funds.  Remind us again, author, exactly which one of these hot steamin' hedge funds has been knocking the cover off the ball?  I've seen a lot of performance numbers and, considering the risk they take to chase what little alpha they generate, that name just isn't coming to me??

Fri, 12/02/2011 - 06:12 | 1937719 Scribbles
Scribbles's picture

Id' go out gradually, but I'd be getting out. She's 82 and she has 200k. Not to be insensitive, but unless she's planning to go to 120, I'd say it's time to cash out and have some fun.

When I'm 78, I'm gonna spend it all. If I'm broke at 85, I'll still be thrilled to be alive at 85 after having the time of my life.

But, of course, it depends on the fixed monthly expenses. If she's just squeekin' by on interest, it's a tough call.

Fri, 12/02/2011 - 11:39 | 1938577 MachoMan
MachoMan's picture

What in the fuck are you going to do at 78?  Blow it all playing bingo?  Bridge?  Nickel slots?  This is the fallacy of retirement...

The problem is of course, that when people stop being perfect stewards of their monies, in search of "the time of their lives," they tend to overestimate their future earning potential and desire to tighten the belt.

The trick is to walk the tightrope...  best of luck.

Thu, 12/01/2011 - 23:40 | 1937216 Coldfire
Coldfire's picture

It's not a market, it's a crime scene.

Thu, 12/01/2011 - 23:41 | 1937220 bobert
bobert's picture

Hs tax analysis isn't correct is it?

Everyone gains from the low 15% capital gains rate not just the "big boys."

Thu, 12/01/2011 - 23:42 | 1937221 Bolweevil
Bolweevil's picture

Scott,
Thanks for the insight. Now that you've experienced life on the inside are you going to continue on your path or are you having second thoughts about a career in finance?

Thu, 12/01/2011 - 23:44 | 1937224 Bob from accounting
Bob from accounting's picture

We all know its a scam, how many of you trust your investments to the retail investment crowd?

 

Thu, 12/01/2011 - 23:46 | 1937225 laosuwan
laosuwan's picture

of course it is rigged. knowing that reduces the odds of getting hurt.

 

just do straddles and wait. take profits off the table. repaet.

Thu, 12/01/2011 - 23:46 | 1937228 silvereye
silvereye's picture

Everyone has access to many of the vehicles you describe.  They can open an account at IB and trade many types of drivatives for better or worse.

By the way, access to these vehicles in no way gives one an advantage.  They are often just a more sophisticated way to lose more money.

Most stocks are not trading with a bid/ask of 4.15/4.25 Im not sure where you are trading?  Pehaps on the pink sheets or after hours.

I do agree that making money is almost impossible these days, and the 99% won't make money due to poor money management and gambling instincts.  Takes one to know one.  I've been there.  Online trading is highly addictive and it is gambling (or soothsaying)..in most cases.  Unless you are using derivatives to really hedge...you are gambling. 

However the 0.1% are by no means immune to these problems either.....see multiple examples of hedge fund and other institutional blow ups....

What is the problem more than anything is that the super connected rich get political favors (well documented in Rolling Stone) which put them at huge advantage.  In addition, trading at a bank where you basically have no margin requirements due to an infinite account size helps also....and of course the ultimate one...make money trading other people's money when you win and take fees...make money losing other people's money...and lose ALL of the other people's money and get a govt bailout to start over!

Lack of practical margin requirements is nice for banks...but hedge funds dont get this....huge ones maybe due to all that extra money sitting there...I seriously doubt that PIMCO has even been taken out of a position due to an margin call it could not meet...ha ha.  They would not dare consider it and lose the business...the 1 Trillion in their accounts helps too...

I agree that there is collusion...some of it probably legal.

Im sure that the index option settlement values are set when its profitable to kill the retail index option traders.  I got hit in this type of scenario once...badly.  They call that bang the open or bang the close right?

Anyway...some of what you say is true...but some of it seems misinformed or exaggerated...(access to derivatives (yes 99% dont access OTC ok) is available and bid ask spreads are not as you describe).

However, I get the point. 

If you are trading stocks to actually make money...forget it.   If you are doing it 'cause you like complex gambling...well then its a blast.

I agree, its gambling.

The biggest gamble of all is FOREX.  With 50:1 leverage no one can possibly survive.  Its 100% guaranteed that you will blow up your account trading this way....I suppose its possible to get right in front of a central bank intervention or something....Ive had this happen to me...but its not enough to offset the losses from normal price fluctuation.  It's even worse if you use the stop losses which are pushed by the industry. As you mention you will be stopped out with a loss every time.

Forex with such leverage really should be illegal to protect the public from the banks and other large traders.  Its gambling pure and simple.  I'd say that is the biggest con of all.  The margins should be similar to other margined products.

Thu, 12/01/2011 - 23:47 | 1937232 MarkTwain00
MarkTwain00's picture

T Money

This is a letter from a 1st year analyst, probably a 21-22 year old kid who, unless you believe the mainstream media, might not even exist.

I understand the sentiment and for most people this rings very true, but you can tell this kid barely knows his ass from a bloomberg terminal.

In case anyone is interested there was a nice rebuttal that came out today.

http://www.businessinsider.com/a-wall-streeter-fires-back-at-the-1st-year-analyst-who-said-the-financial-industry-is-a-scam-2011-12

All in good fun! 

Thu, 12/01/2011 - 23:57 | 1937252 Tyler Durden
Tyler Durden's picture

That whole rebuttal is premised on the traditional Wall Street defense that inequality is fine, and a two tiered market is perfectly ok since everyone "understands" it is rigged. The problem is that it is not ok, and second, that is precisely the defense that was used by the HFT lobby in 2010 before everyone turned against them once the market flipped, leading to virtually everyone now demanding the dismantling of HFTs as a component of market topology (especially on down days). And since the market will ultimately drift far lower, the next natural scapegoat of public anger at the two tier market that eveyrone took for granted but suddenly everyone will say is unfair, will be precisely the same hedge fund "minority" for the very simply reason that while Wall Street in general may be a sizable fraction of the 1%, the HF universe is 0.001%. At the end of the day, it is always about isolating the minority and attacking it, when all else fails. All else will, soon, fail.

Fri, 12/02/2011 - 00:07 | 1937274 High Plains Drifter
High Plains Drifter's picture

or one might ask why gary gensler recuses himself about the mf global investigation..... where is corzine?  etc.......

Fri, 12/02/2011 - 00:29 | 1937341 MarkTwain00
MarkTwain00's picture

You don't think they will find some other way to manipulate the system....we can call for their heads all you want but it wont bring any justice, hedge fund is just a title, the underlying problem will persist

before anything can change we need a political paradigm shift away from the status quo, 

I agree that rebuttal illustrated all that is wrong with how people are complacent with the market 'system', but also how broad and itellectually absent this 'hedge fund insider' is with his message.

Fri, 12/02/2011 - 00:39 | 1937357 Caviar Emptor
Caviar Emptor's picture

Don't think you see yet that the Republic of the USA is at the tipping point of becoming a banana republic. When capital gets too concentrated, pretty soon the politics become inconsistent with democracy. The system of checks and balances fails to correct the drift. Economics and politics always go hand in hand. 

Fri, 12/02/2011 - 06:01 | 1937711 oldman
oldman's picture

Tyler,

I'm on your side.

Those 'poor souls', the .001% are isolated, but, I think, will never be  be attacked because each of us here would gladly change places with them in a heartbeat.

They are scum, Tyler----Come on save your pity for those that have less than you.

Fuck the '.001%"!                                          om

Fri, 12/02/2011 - 12:38 | 1938888 Iwanttoknow
Iwanttoknow's picture

Mr Durden,

Thank you very much for the post.

Fri, 12/02/2011 - 03:03 | 1937361 Temporalist
Temporalist's picture

"The Response" in a nutshell:

 

We're smarter than you!  You don't know what to do with your money and nobody else does but us.  Even when we blow it all up we know what we're doing.  Place your faith in us because you'd just lose your money and we're so much better at doing that than you.  When we get free money it costs us money to use it in exotic ways and because we're cool and deserve it, and most especially you don't, we can inflate IPOs and then dump them hoping to be ahead of the other guy doing the same thing.  When our idols do well they're awesome, but when they don't we're sad faces.  Either way we made money on some poor loser who fell out of favor with some government bigwig and is probably going to now get divorced and go into a drunken bender for a decade...oh and incidentally we knew that one was coming and shorted it because our friends are even closer to the top.  Now detail my Maserati; I have a date with some European women and I have to go buy a mound of coke for them.

Fri, 12/02/2011 - 01:02 | 1937388 Tsunami Wave
Tsunami Wave's picture

I see Johnny Bravo is the first commenter on that page.  He must have finally settled there!

Thu, 12/01/2011 - 23:49 | 1937240 non_anon
non_anon's picture

I fled ages ago

Thu, 12/01/2011 - 23:53 | 1937246 San Diego Gold Bug
San Diego Gold Bug's picture

What do you think of Panama?

Fri, 12/02/2011 - 00:13 | 1937298 High Plains Drifter
High Plains Drifter's picture

hot chicks and excellent blow..........

Thu, 12/01/2011 - 23:51 | 1937242 San Diego Gold Bug
San Diego Gold Bug's picture

Stack em, Pack em, and Rack em,

TEOTWAWKI is right around the corner....stack gold and silver but do not forget the food, water, ammo and friends on the same page as you are.  Warn your friends who will listen and of course your family members.  Most will not listen (as you have probably noticed) because they are to busy watching "The Worlds Biggest Loser" or something worse like "Dancing with the Stars".    WW3 will be very difficult if you are not prepared.  Get ready now!

Fri, 12/02/2011 - 00:09 | 1937280 High Plains Drifter
High Plains Drifter's picture

do you know how many people around me are on the same page?  zip........i wouldn't trust any of them............the best thing to do is if you can, hunker down in place and don't move around much. if trouble is around , let it come to you......

Fri, 12/02/2011 - 00:57 | 1937382 Teamtc321
Teamtc321's picture

Exactly.... 

Fri, 12/02/2011 - 03:06 | 1937560 Temporalist
Temporalist's picture

Family life back because people will be forced to adopt it.  Ironic.  At least we can wipe the dust off of those board games.  Monopoly anyone?

Fri, 12/02/2011 - 00:22 | 1937321 Barbarians_R_Us
Barbarians_R_Us's picture

Watch the History Channels 9 part series entitled "After Armageddon" to get a good look at TEOTWAWKI. Here's part 1: http://www.youtube.com/watch?v=8r97xoSOEjM

Thu, 12/01/2011 - 23:52 | 1937243 Zero_Sum
Zero_Sum's picture

I'm not defending everything he said, but does anyone here not acknowledge at least some of his points? Look at the ZH article below this. The S&P has moved 100% of it's total current value over the last year. Something is clearly broken. We're just quibbling over exactly what. Just sayin'.

Thu, 12/01/2011 - 23:54 | 1937249 San Diego Gold Bug
San Diego Gold Bug's picture

All HFT....Have you or your friends bought any stocks lately??

Fri, 12/02/2011 - 00:55 | 1937378 Zero_Sum
Zero_Sum's picture

Nope. I cashed out in Oct 2010.

Thu, 12/01/2011 - 23:58 | 1937256 Temporalist
Temporalist's picture
BBC Speechless As Trader Tells Truth: "The Collapse Is Coming...And Goldman Rules The World"

http://www.zerohedge.com/news/bbc-speechless-trader-tells-truth-collapse...

Fri, 12/02/2011 - 00:03 | 1937267 San Diego Gold Bug
San Diego Gold Bug's picture

The Collapse is already here..not much timne to get your fiat cash out of the banks!

Fri, 12/02/2011 - 00:14 | 1937302 High Plains Drifter
High Plains Drifter's picture

cramer said today we are defcon 2........

Fri, 12/02/2011 - 00:48 | 1937369 Temporalist
Temporalist's picture

Does he have a special button for that? 

Fri, 12/02/2011 - 00:25 | 1937333 J 457
J 457's picture

This guy is a retail investor with an opinion.  Nothing more.

Fri, 12/02/2011 - 00:01 | 1937262 whoisjohngalt11
whoisjohngalt11's picture

Love hearing babies cry , hey Dude when you buy a Car Retail and sell it back to the Dealer you don't get all your money back either Get better or shut up.. go work hard and stop whining ....Or go look for your Binky...

Fri, 12/02/2011 - 00:20 | 1937311 Imminent Crucible
Imminent Crucible's picture

I love hearing the village idiot jabbering about wholesaling cars and imagining that he's making a point about capital markets. Keep talking.

Fri, 12/02/2011 - 00:02 | 1937263 traderjoe
traderjoe's picture

Not all wealthy are insiders and not all insiders are wealthy. A hedge fund investor is not an insider. Paying 2 and 20 is generally a suckers bet.
We need to identify our enemy's more specifically and correctly.

Fri, 12/02/2011 - 00:33 | 1937345 MarkTwain00
MarkTwain00's picture

+1

Fri, 12/02/2011 - 00:03 | 1937266 Yen Cross
Yen Cross's picture

 When I find the time to " Back down", from Real time, I'll study!  In the MEAN time a little humor is in order! http://www.youtube.com/watch?v=lVttF-4MCkE  

 

   Herman the impenetrable is a Hoot!!   Oh " on alighter note. I'll sell Asia and Europe with tight stops.  I think the numbers are cooked in already.

    PLUS the F.T.  or some ratings agency could drop a CLUSTER BOMB!

Fri, 12/02/2011 - 00:08 | 1937276 whoisjohngalt11
whoisjohngalt11's picture

i am currently watching the eagles vs seahawks , Hawks kicking the crap outta them btw should i cry because i don't play in the NFL,? i am to slow so should the make a special NFL just for slow white guys and who would watch , i wouldn't.. And i am not out there doing 2 a days in the summer either, but i enjoy watching the best and don't cry , but i can fly a untlra light airplane and most of these guys wouldn't have the balls to do that in a plane you bolt together yourself from a kit .. To each his own....

Fri, 12/02/2011 - 01:49 | 1937450 dolph9
dolph9's picture

You talk big, like you're some American ass-kicking cowboy "winner," but you're just a fucking sheep who wastes his time watching oversized nigger freaks try to outrun each other and somehow believes this is entertaining.  You're post also reveals that you can barely string together a sentence, which means you probably can't hold a thought for much longer than a millisecond.

I certainly wouldn't risk my life in any plane you are flying.

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