DionysusToast
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I don’t see many people on these sites discussing the fact that Wall Street/The Financial Industry is basically a casino. In a casino, the more you play, the more likely you are to become a victim of the ‘house edge’. Similarly, in trading, the more you trade, the more likely you are to become a victim of the ‘Wall St house edge’.
Preposterous! I hear you say.
Wall Street, or rather the ‘financial industry’ employs masses of people: Traders, Brokers, Math Whizzes, Bankers, Fund Managers, Secretaries, CEO’s, Accountants, Receptionists, Marketing people, IT staff etc. etc. They have costs too – office rental, equipment, travel, advertising etc. etc.
The costs associated with the financial industry are huge, yet it’s still a very rewarding industry to be in. In fact, in certain areas, even if they fail, the government will come by with a big slice of taxpayer money to bail them out.
So, you have a huge industry with high costs and only 1 source of revenue. That is the investing public. It doesn’t take advanced math to figure out that the investing public AND the financial industry cannot both make money out of this game.
Consider an IPO. Your typical IPO is for a company that will no longer be in existence in 8 years time. The IPO itself is a straight transfer of cash to a company with a nice slice going into the hands of the underwriters. After that, for most trades made, there is a broker getting a fee and a market maker/specialist getting a spread and the exchange getting a fee. Obviously, when the company dies (as the majority do), it is the last people holding those shares that hold the bag, although it has to be said that they don’t take all of the losses as the price normally would have dropped gradually spreading the loss across many shareholders. In the meantime – how did the financial industry fare? Quite nicely! A fee and a spread on almost every trade.
Look at the Mutual Fund industry. They don’t like to talk in such crass terms as profit/loss, rather in terms of ‘exceeds benchmark’. Of course, the benchmark is some index maintained by another company in the financial industry that the mutual fund pays a license fee to use. Do mutual funds companies really care if their customers make money? I don’t think so, in fact they know that on the whole, because this is a minus sum game, it is IMPOSSIBLE for all of their clients to make money.
Take a close look at your broker. All of those ‘free’ training courses and seminars they offer are there for one thing only – to get you to trade more often so that they can take their fee. They don’t care if you make money or not, they just want to keep you trading.
Take a look at sites such as this. The people running such sites do so to part you with your money. They already realized that trading is an ‘almost impossible’ way to make money and that the money is made on the other side of the fence.
Take a look at all the system vendors – it’s the same story. These are 99.999% people that realized that they couldn’t make money trading, so they decided to sell systems to gullible people. Look at the sales spiel most of them use – selling you the dream of an independent life, total hogwash.
Look at the books printed – all that stuff about following squiggly oscillating lines to make money. Again money to Wiley, money to the guy writing the book (who also can’t make money trading), more trades going through the broker all at the expense of the investors.
Look at the TV shows spouting crap about the reason for the latest 1 tick move on the DOW and the latest upgrade/downgrade - it's just a big ra-ra show to keep you trading and to leech more of the money investors put in.
The whole industry is a crapshoot. It is absolutely geared around giving false hope to the investing public and leeching their money from them and it does an EXTREMELY good job of it.
Preposterous! I hear you say.
Wall Street, or rather the ‘financial industry’ employs masses of people: Traders, Brokers, Math Whizzes, Bankers, Fund Managers, Secretaries, CEO’s, Accountants, Receptionists, Marketing people, IT staff etc. etc. They have costs too – office rental, equipment, travel, advertising etc. etc.
The costs associated with the financial industry are huge, yet it’s still a very rewarding industry to be in. In fact, in certain areas, even if they fail, the government will come by with a big slice of taxpayer money to bail them out.
So, you have a huge industry with high costs and only 1 source of revenue. That is the investing public. It doesn’t take advanced math to figure out that the investing public AND the financial industry cannot both make money out of this game.
Consider an IPO. Your typical IPO is for a company that will no longer be in existence in 8 years time. The IPO itself is a straight transfer of cash to a company with a nice slice going into the hands of the underwriters. After that, for most trades made, there is a broker getting a fee and a market maker/specialist getting a spread and the exchange getting a fee. Obviously, when the company dies (as the majority do), it is the last people holding those shares that hold the bag, although it has to be said that they don’t take all of the losses as the price normally would have dropped gradually spreading the loss across many shareholders. In the meantime – how did the financial industry fare? Quite nicely! A fee and a spread on almost every trade.
Look at the Mutual Fund industry. They don’t like to talk in such crass terms as profit/loss, rather in terms of ‘exceeds benchmark’. Of course, the benchmark is some index maintained by another company in the financial industry that the mutual fund pays a license fee to use. Do mutual funds companies really care if their customers make money? I don’t think so, in fact they know that on the whole, because this is a minus sum game, it is IMPOSSIBLE for all of their clients to make money.
Take a close look at your broker. All of those ‘free’ training courses and seminars they offer are there for one thing only – to get you to trade more often so that they can take their fee. They don’t care if you make money or not, they just want to keep you trading.
Take a look at sites such as this. The people running such sites do so to part you with your money. They already realized that trading is an ‘almost impossible’ way to make money and that the money is made on the other side of the fence.
Take a look at all the system vendors – it’s the same story. These are 99.999% people that realized that they couldn’t make money trading, so they decided to sell systems to gullible people. Look at the sales spiel most of them use – selling you the dream of an independent life, total hogwash.
Look at the books printed – all that stuff about following squiggly oscillating lines to make money. Again money to Wiley, money to the guy writing the book (who also can’t make money trading), more trades going through the broker all at the expense of the investors.
Look at the TV shows spouting crap about the reason for the latest 1 tick move on the DOW and the latest upgrade/downgrade - it's just a big ra-ra show to keep you trading and to leech more of the money investors put in.
The whole industry is a crapshoot. It is absolutely geared around giving false hope to the investing public and leeching their money from them and it does an EXTREMELY good job of it.
