Lisa, it's against my better judgement, but I'll jump into the discussion.
Alas, the pieces of eight of yesterday have been translated to eights of a point on Wall Street. The difficulties of navigating the waterways of today's financial markets are no less perilous than that faced by travelers of the past.
Thoughout history there has always been a small group of individuals that have managed to amass a significant amount of wealth. There is also been consistently recorded a small group that is bent though cunning or force to take that wealth away from those that accumulated it.
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What happens to the investor when the pirates control the regulatory bodies? Not good!
In the summer of 1996, one of the principal regulatory bodies, the National Association of Securities Dealers (NASD) was censured by the SEC for a variety of "abusive practices" in the operations of the NASDAQ stock exchange. Additionally, the NASD signed a consent decree with the Justice Department acknowledging, among other issues, that collusion existed among the major Market Makers to widen the spread between the bid and the ask. According to Arthur Levitt, the chairman of the SEC, the regulatory body, composed of the Market Makers "simply looked the other way."
According to Money (October, 1996), this practice cost investors $2,000,000,000 annually. The Market Makers agreed, as part of the settlement, that they would spend $100,000,000 over the next five years on increased surveillance of the problem. Not a bad return on investment.
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The Market Makers of the financial services industry and your local supermarket have much in common -- only their approach is different. Both carry inventory and both make money only if you acquire their inventory. Both accept "placement" fees from the product sponsors to encourage you to buy the product. Both will run "specials" and "advertise" to encourage you to buy the product. It is part of what is frequently called the Market "noise."
When major financial institutions, despite massive legal and compliance departments, agree to Billion dollar settlements with their clients, the prudent inquirer may reasonably question whose interests are being served. ...
Clearly, there are rogues and pirates who will have no social remorse separating you from your money. Additionally, these same rogues and pirates are a part of the regulatory process and establish the rules of the game. This is the fact and has probably always been the fact. However, you are not absolved of responsibility. ...
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Lisa, it is clear to me that manipulation has, does, and will always be a part of the game. However, the sheep line up to get fleeced on a constant basis, and some will just not believe.
Enjoy,
Berney |
