Fear of High Frequency Trading

                       

Those who defend high frequency trading say such trading improves market liquidity, It assures a buyer or seller availability whenever one wants to trade

                       

High frequency trading benefits mutual fund investors and traders in that it reduces costs. It lets investors with fast computers take advantage of small price discrepancies and brings market liquidity.

.

In the past, the stock market was efficiently operated by middle men or “market-makers.” They normally completed sales by buying and selling in their own accounts, if they could not immediately match buyers and sellers. Market makers profited on the difference between the bid prices buyers were willing to pay and the ask prices sellers accepted.

                       

The SEC is tightening its controls of high frequency trading which it’s currently suspicious of, and further studies the matter.(See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

Does Making Big Banks Secure Always Boost Business?

As I have noted in my previous comments, Dodd-Frank is attempting to make sure that too-big-to-fail banks will not bring on another economic disaster. In doing so, they are strangling the economy with regulations.

                       

Monetary policy has been set up merely to accommodate this “too-big-to-fail” doctrine at the expense of business who cannot or will not access loans. Banks who have received government treatment get low interest rates and safe government bond investments to bolster earnings. Why would banks not play this spread rather than make risky loans to business? Especially with government agencies looking over their shoulder, suggesting that risky business loans are taboo?

                       

Only government bureaucrats can think up such absurdities with bank regs, while supposedly attempting to get business out of a recession.(See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

Banks Too Big to Fail are Simply Too Big

One of the reasons for the Dodd-Frank Act of 2010 was fear of financial institutions failing.That fear produced monumental bailouts, resulting in extraordinary budget deficits. Which, in turn, has created legislation such as Dodd-Frank, that’s now dooming our economic prospects for decades to come.

Big banks are being fostered to become still bigger.  

                     

Dodd-Frank is ever-ready to impose layers upon additional layers of stifling regulation. Unfortunately, with no possibility Big Banks will have eliminated systemic risk.

                       

There is a simple, free market solution that has worked in the past, but left-leaning politicians have no clue nor inclinations about its implementation.

                       

They did separate commercial banking operations from proprietary trading, Banks, though, will not be smaller, less risky and less apt to fail now, than did the risk-taking and more leveraged investment entities of the past.(See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

Government Efforts to Create Jobs

Economic stagnation persists when business cannot risk hiring permanent workers.

                       

I have often commented about jobs.. They don’t come from government hires in questionable projects. The worthwhile, stable variety generate within industry, not in a make-work program with no true productivity aim.

                       

Always keep in mind what has made the U.S. different from socialist governments with all their perfect job-planning schemes. Fancy words and plans never succeed. They may fool and appease the public, at least for awhile. But never for long. (See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

Securities Trading By Supply/Demand Logic

 Never buy securities on the basis of a public recommendation. Many, perhaps thousands, or hundreds of thousands, are receiving the message at the same time or may have gotten it earlier than you.

                       

Remember the effect of everyone acting at once. And the law of supply and demand. That law will be working against you when everyone acts on the same news at the same time.

Simple advice. How many “smart” investors take it? (See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

How Guilty Are Inside Traders?

Insider-trading prosecution trials have been confusing the investing public more than they should; convictions have unfortunately clouded rather than clarified the picture. The media have been of relatively little help in remedying this public confusion.

The problem is actually twofold: One has to do with legality. The other has to do with what investors seek as a “level playing field.” They have nothing to do with each other. The former is about a forbidden activity. The other may be about a perfectly legal pursuit, but the public opposes it for a good pocketbook reason.

In the first instance, what is illegal is the sale or divulging of information that an employee or principal is contractually not permitted to divulge. It may be part of their employment contract or obligation to their company.

As an investor, you may not be hurt by such illegality, despite what the government prosecutors are able to get judges and juries to believe. However, judges and juries, unfortunately, are not always conversant with the way the investment industry truly works. Innocents as well as the guilty may therefore get caught up in such zeal in the future.

Investors do expect federal and state regulatory agencies will help thwart any Ponzi-like chicanery. Unfortunately, many of these deceptions are never caught in time by the authorities.

What the Securities and Exchange Commission, for example, seems to be excellent at, is the ability to impose nit-picking regulations that require the costly issuance of theatrical data which most investors cannot possibly comprehend or use in a practical sense. That fuzzy data generally comes in the mail and winds up, unread, in the garbage.

Let’s now turn our attention to what investors really want, apart from justice when any criminality exists; they want a level playing field when they put their funds at risk.

There is a practical way for all investors to get that sought-for level playing field. It’s simple enough.

They can get this when they avoid the adverse impact of those I often refer to as the financial industry’s “inside players” who, incidentally, usually operate legally,

These players include stock brokers who push over-zealous traders trying to  outfox each other; advisers with “tiny” management fees that translate into as much as 20% or more of their earnings each year; hedge funds that think nothing of taking an additional 20% of any annual earnings profits on top of fees; and analysts who suggest securities of corporations they diligently evaluate, though they could not run their own profitable pushcart.

All these costs that uneven the playing field are charged without any commensurate service.

When research shows that low-cost index mutual funds and ETFs are invariably the alternative bargains to the wares of the inside-players. (See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

Financial Ads in the Media

There always is a conflict of interest when an ad or public relations announcement gives financial advice.Especially with the repetition of ads and announcements.

                       

Because all you get is one side of the story. You get one financial idea or strategy’s positive slant. But there is always a negative factor in every financial idea or strategy; maybe more than one. Obviously, they’re never mentioned.

                       

And media financial advertising provides so much inaccurate and only “education’ for the average investor. (See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)