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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region Forums"The Stock Market is rigged says Michael Lewis on 60 Minutes."
The Stock Market is rigged says Michael Lewis on 60 Minutes.http://www.cbsnews.com/news/stock-market-rigged-says-michael-lewis-in-new-book/
"SNIP...................
The U.S. stock market is rigged in favor of high-frequency traders, stock exchanges and large Wall Street banks who have found a way to use computer-based speed trading to gain a decisive edge over everyone else, from the smallest retail investors to the biggest hedge funds, says Michael Lewis in a new blockbuster book, "Flash Boys."
The insiders' methods are legal but cost the rest of the market's players tens of billions of dollars a year, according to Lewis, who speaks to Steve Kroft in his first interview about the book. Kroft's report will be broadcast on 60 Minutes, Sunday, March 30 at 7 p.m. ET/PT.
High-frequency traders have found ways to use their speed to gain an advantage that few understand, says Lewis. "They're able to identify your desire to buy shares in Microsoft and buy them in front of you and sell them back to you at a higher price," says Lewis. "The speed advantage that the faster traders have is milliseconds...fractions of milliseconds."
Lewis says a former trader at the Royal Bank of Canada in New York, Brad Katsuyama, figured this out after he consistently failed to have his entire order filled at the price he wanted. Katsuyama, who speaks to Kroft, put together a team of experts to figure out how to defeat the problem and started a new exchange, IEX, that he believes will level the playing field. Katsuyama launched IEX in October and investors, large and small, can route their trades through IEX without fear of predators lurking. IEX has accomplished this by creating a unique speed bump. "They slowed down high-frequency traders' ability to trade on their market," says Lewis.
..................SNIP"
hatrack
(59,584 posts)grahamhgreen
(15,741 posts)AKA STET tax
How Wall Street Can Bail Itself Out Without Destroying The Dollar
by Thom Hartmann
For Grover "Drown Government In The Bathtub" Norquist, this bailout deal will work out very well. At a proposed cost of $4,780 per taxpayer, it'll further the David Stockman strategy of so indebting us that the next president won't have the luxury of even thinking of new social spending (expanding health care, social security, education, infrastructure, etc.); taxes will even have to be raised just to pay for the bailout. It'll debase our currency, driving up commodity prices and interest rates, which will benefit the Investor Class while further impoverishing the pesky Middle Class, rendering them less prone to protest (because they're so busy working trying to pay off their debt). It'll create stagflation for at least the next half decade, which can be blamed on Democrats who currently control Congress and, should Obama be elected, be blamed on him.
But there's another way: Create an agency to fund the bailout, loan that agency the money from the treasury, and then have that agency tax Wall Street to pay us (the treasury) back.
It's been done before, and has several benefits.
In the United Kingdom, for example, whenever you buy or sell a share of stock (or a credit swap or a derivative, or any other activity of that sort) you pay a small tax on the transaction. We did the same thing here in the US from 1914 to 1966 (and, before that, we did it to finance the Spanish American War and the Civil War).
For us, this Securities Turnover Excise Tax (STET) was a revenue source. For example, if we were to instate a .25 percent STET (tax) on every stock, swap, derivitive, or other trade today, it would produce - in its first year - around $150 billion in revenue. Wall Street would be generating the money to fund its own bailout. (For comparison, as best I can determine, the UK's STET is .25 percent, and Taiwan just dropped theirs from .60 to .30 percent.)
But there are other benefits.
As John Maynard Keynes pointed out in his seminal economics tome, The General Theory of Employment, Interest, and Money in 1936, such a securities transaction tax would have the effect of "mitigating the predominance of speculation over enterprise."
In other words, it would tamp down toxic speculation, while encouraging healthy investment. The reason is pretty straightforward: When there's no cost to trading, there's no cost to gambling. The current system is like going to a casino where the house never takes anything; a gambler's paradise. Without costs to the transaction, people of large means are encourage to speculate - to, for example, buy a million shares of a particular stock over a day or two purely with the goal of driving up the stock's price (because everybody else sees all the buying activity and thinks they should jump onto the bandwagon) so three days down the road they can sell all their stock at a profit and get out before it collapses as the result of their sale. (We ironically call the outcome of this "market volatility."
Investment, on the other hand, is what happens when people buy stock because they believe the company has an underlying value. They're expecting the value will increase over time because the company has a good product or service and good management. Investment stabilizes markets, makes stock prices reflect real company values, and helps small investors securely build value over time.
Historically, from the founding of our country until the last century, most people invested rather than speculated. When rules limiting speculation were cut during the first big Republican deregulation binge during the administrations of Warren Harding, Calvin Coolidge, and Herbert Hoover (1921-1933), it created a speculative fever that led directly to the housing bubble of the early 20s (which started in Florida, where property values were going up as much as 70 percent per year, and then spread nationwide, only to burst nationally starting in 1927 as housing values began to collapse), then the falling housing market popped the stock market bubble and produced the great stock market crash of 1929. That speculation aggregated enormous wealth in a very few hands, crashed the housing and stock markets, and produced the Republican Great Depression of 1930-1942.
Franklin D. Roosevelt, as part of the New Deal, put into place a series of rules to discourage speculation and promote investment, including maintaining - and doubling - the Securities Transaction Excise Tax. Other countries followed our lead, and the UK, France, Japan, Germany, Italy, Greece, Australia, France, China, Chile, Malaysia, India, Austria, and Belgium have all had or have STETs.
Perhaps the most important benefit of immediately re-instituting a STET in the USA, however, isn't that it would raise enough money to bail out the banks and billionaires (and after that crisis is covered, could pay for a national health care system), or that it would encourage investment and calm down markets. Those are all strong benefits, and absent the current Republican Administration bailout proposal would stand-alone strongly.
Live and Learn
(12,769 posts)adirondacker
(2,921 posts)mindwalker_i
(4,407 posts)So that financial people can skim a bunch off of us who do ACTUAL WORK. Same with the mortgage markets. Next, I think the banks will try to own all the land.
zeemike
(18,998 posts)It is the new feudal system taking over.
dixiegrrrrl
(60,010 posts)They own farms, they own the commodities grown, they own the shipping of the commodities, the warehouses, etc.
eitehr 100% or a majority interest.
Back in the `1880's, this was seen as monopoly, and broken up. In fact, momoploies have been broken up several times
( remember Ma Bell?) and yet, keep re-occuring.
2banon
(7,321 posts)One of the most repeated anti-Soviet memes during the 50's & 60's, was that the Soviet Union was evil because their "system of government" was a "state monopoly."
Yes, that's exactly how it was promulgated, I kid you not.
No Irony recognized in our media or politicians..
as for the electorate, I can't really say with certainty, but if our discussion board is any measurement, seems to be a mixed bag.
Maybe it's a generational thing.. hmm.
abelenkpe
(9,933 posts)in the past few years, turned around and rented them out.
flamingdem
(39,313 posts)buy and hold too! It can take a lifetime to learn that kind of patience.
bvar22
(39,909 posts)There were millions approaching retirement in 2007 who saw their retirement evaporate in the crash.
They had to keep working because they could no longer afford to retire after their 401K crashed.
It IS a matter of timing.
My wife & I listened to the Cassandras in 2006.
We cashed out everything, paid the penalties,
paid off all debts, and bought dirt in the Rural South.
We live there happily now, drink from a spring,
and grow a great deal of our own food.
Wall Street can live or die without our money or concern.
Our hearts ached for those who Stayed with the Market.
But the market has recovered and those who held on are fine. I wasn't that patient wish i was
bvar22
(39,909 posts)When YOU are 62 years old,
come back and tell me what you think about those 7 years between 62 and 69.
I believe those years will have a different value to you then.
In The GReat American Dream,
most working class people have precious few years of their retirement when they are healthy enough to enjoy it.
Luckily, My Wife & I are able to enjoy our.
Those who had to work another 6 - 7 years waiting for their 401K to recover
weren't as lucky.
It IS a mater of timing.
The Wall Street Recovery depended (and depends) and a massive influx of cash.
If that cash hadn't been sitting there,
there would have been no recovery for Wall Street.
Who is to say that another correction will be followed by another recovery?
Who is to say how long that will take.
Like I said,
we listened to the Cassandras,
cashed OUT,
paid the penalties,
paid off all debts,
bought Bubble Proof inexpensive property outright in the Rural South,
no mortgage, no debts,
planted fruit trees,
learned how to grow food,
learned how to Keep Honey Bees,
learned how to raise chickens,
and loved every minute of it.
Thank GAWD we didn't have to spend those years slaving away for somebody else
waiting to the Market to "recover".
It IS a matter of timing.
flamingdem
(39,313 posts)There were too many unknowns for people close to retirement plus buy and hold is easier for those with a big account
goldent
(1,582 posts)It's great to hear stories like this.
I was a bit younger, so I held everything and kept contributing all the down to the bottom, and then rode it on the way up. This turned out to be a good choice for me.
Zorro
(15,740 posts)It's here for those who missed the broadcast.
http://www.cbsnews.com/news/is-the-us-stock-market-rigged/
Bigmack
(8,020 posts)..and he said the same thing. And that was in the 1950's.
Anybody with an IQ higher than a clam knows the Market is rigged.... as is the whole economy.
mackerel
(4,412 posts)It seems like the Wolves of Wallstreet would have the fix in for it and then they'd end up taking it over.
applegrove
(118,630 posts)Response to applegrove (Original post)
guyton This message was self-deleted by its author.
laundry_queen
(8,646 posts)The whole economic system is rigged. We had some posts just the other day about the 'incestuous' BOD relationships - everyone serves on each other's boards. No one else gets in. Therefore the money just keeps circulating in the same circles. Totally rigged - all of it.
mackerel
(4,412 posts)doesn't know anything. Ever watch his show? He literally says nothing for 25 minutes.
Warpy
(111,253 posts)has been lobbying to get a per transaction tax passed. Not only would it generate enough money to insure nearly all of us, it would make HFT instantly unprofitable.
While it is allowed to continue, it's sucking billions out of Wall Street and handing them over to soft, pink men who own the computers and enough wealth to leverage the trades.
applegrove
(118,630 posts)tomorrow....when in fact they have all the power and are doing the transgressions against the average guy.
Warpy
(111,253 posts)since people with purchasing power that has fallen every year since the 70s wake up a little more every day to what's going on.
loudsue
(14,087 posts)The country needs the money, and the banksters need the lesson.
SamKnause
(13,101 posts)Our politicians and their staff are legally allowed to participate in insider trading.
We can not look to them for change.
New computer programs that shave 10 seconds off here and there leaving others at a disadvantage.
Commodities are up and down on a whim.
They entire system is broken.
truedelphi
(32,324 posts)insider info their way.
Should any small time person like you or me ever question their dealings, we could be told we have violated NSA security provisions, just for asking the questions.
For some politicians, this means the world is now a perfectly run, rigged game!
SamKnause
(13,101 posts)reformist2
(9,841 posts)truedelphi
(32,324 posts)applegrove
(118,630 posts)tied to the 1% when in fact it is not.
kimbutgar
(21,137 posts)Worked for a SF based investment firm which was later brought by a bank. When they did away with glass seagall it was game over for small investors. Nowadays they front run orders driving up the price of the stock before you buy and they sell it to you at the higher price. It is so unethical kind of like the Wolf of wall street but more high tech. I don't miss working in that industry. The greed had become more appalling
laundry_queen
(8,646 posts)really insane shit they did. Watching it made me so disgusted, if only because there are many firms out there that likely do business the same way (minus the added crazy - they probably don't get prosecuted BECAUSE they aren't so ostentatious.) Plus, I'm a business student (last semester) so I 'get' all the ways they are trying to fuck over regular small investors. It's crazy how many different ways there are to do it - and I'm sure they exploit every single loophole to do so. It's fucking sick.
ErikJ
(6,335 posts)He and others have been advocating for a transaction tax on each trade which would raise billions.
This from one of his contributors:
Trading robots, transaction tax--
Trading robots account for 70% of all shares traded on Wall Street. The transactions take nanoseconds. The average investment lasts for two seconds.
The really sad thing is that these computers and associated algorithms are remarkable in their ability. If the resources that went into developing them were instead diverted to tasks that add value to society we would all stand to benefit greatly.
The consequence of these robots is increased volatility in the market and a steady drain of capital away from any trader not using a computer.
The solution to this is a financial transaction tax of 0.03 0.25%. This sort of tax is no deterrent to real investment. A robot that buys something at 34.2333 and sells it at 34.2334 a half second later loses its incentive however. Artificial volume and volatility decreases and game players find more useful venues for their skills.
- See more at: http://www.thomhartmann.com/users/jimsullivan/blog/2011/12/trading-robots-transaction-tax#sthash.imqUxYJN.dpuf
brooklynite
(94,510 posts)My wife and I conservatively invest in a mix of index funds covering major investment categories, and over the past 20 years, we've done nicely. The ONLY instance where we've tried to anticipate the market is the Apple stock I bought...for $4.50 a share.
ErikJ
(6,335 posts)And he also usually buys heavy when the stock market is TANKING! Just the opposite of everybody else.
goldent
(1,582 posts)and the first thing to look at on a stock fund is the management fees. It is really sad how much people are paying in management fees, either on stock funds, or "portfolio management"
aint_no_life_nowhere
(21,925 posts)They sound like complete parasites who should be removed from the social body like a tapeworm.
Spitfire of ATJ
(32,723 posts)loudsue
(14,087 posts)Brilliant! I hope it works!
ChisolmTrailDem
(9,463 posts)tinrobot
(10,895 posts)Trading means going head to head with these guys by trying to make money off of the volatility of the market or by trying to time major moves in the market. Unless you pay close attention and really know your stuff, this is a hard game to win.
Investing means you buy into good companies that are solid and growing. or you invest in broad index funds. You ignore the short term fluctuations and stay in, usually for the long term. In this game, patience is a virtue, so you don't tangle too much with the impatient, quick-rich trader types.
These short term high frequency traders, however, are dangerous because they can introduce a lot of instability into an otherwise stable market.
sendero
(28,552 posts).... these people are ripping you off. You may make something, but a healthy portion of your "profits" is being eaten up by these shenanigans that simply should not even be legal.
If I buy 100 shares of stock X today, these people rip me off to the tune of about .1% of my purchase. I hold the stock for 25 years. I'm not trading, so I don't see how these people are getting anything from me. Then I sell and they rip me off for another .1% hit. I've been ripped off and I don't like it, but they haven't really been eating up a meaningful amount of my profits.
Javaman
(62,521 posts)Water is still wet!
Octafish
(55,745 posts)Slowed down a bit for the humans to figure into the equation.
Like noted upthread, tax every transaction.
brewens
(13,581 posts)sells and what it would have taken to have pulled off a similar scam in the 60's or 70's.
For those high-frequency trades, you'd have had to have someones office or phone bugged to know someone was going to make a large buy you could jump in front of.
For those naked shorts, the way I understand it, you would have had to actually counterfeit paper shares.
Either move would have landed you in prison back then, and not for just a little while!
I sure hope that 60 Minutes piece gets more people fired up about that kind of crap! I knew only a very small percentage of people would have paid any attention to Taibbi in Rolling Stone. Maybe 60 Minutes will have done something worthwhile for the first time in a long time.
BKH70041
(961 posts)And it's very simple.
Since these transactions that are costing investors money are traded on fractions of pennies in fractions of a second, make it where the smallest amount of currency can only be bought and sold would be in nickels.
POW!! You just killed computer-based speed trading.
And yes, this has been discussed at the highest levels of the financial world, though not widely publicized.
woo me with science
(32,139 posts)JEFF9K
(1,935 posts)... especially with Lara Logan gone.
applegrove
(118,630 posts)moondust
(19,975 posts)I'm "guessing" there is a LOT of insider trading.
FreeJoe
(1,039 posts)I don't disagree that HFT is a problem that needs to be solved, but don't throw the baby out with the bathwater. This news shouldn't dissuade people from making long term investments in the stock market.
Think of HFT as a .1% tax on each transaction. If you are buying and sellings stocks frequently, these little .1% hits will add up and really harm your returns. On the other hand, if you buy and hold for long periods, this really don't hurt you all that much.
If you aren't covered by a pension fund and you want to retire with more income that will be provided by social security, it still seems like a good idea to invest some portion of your long term savings in stocks.