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Old December 1st, 2011, 11:52 PM
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Jack_Black Jack_Black is offline
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Default Hedge Fund Analyst exposes Stock market scam. It IS a SUCKER'S game.

http://www.reddit.com/r/occupywallst...t_and_work_in/

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 **** 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 **** 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.

Last edited by Jack_Black; December 2nd, 2011 at 12:14 AM.
  #2  
Old December 2nd, 2011, 07:50 AM
blackriver blackriver is offline
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This is pretty sick. I have most of my money in cash. The main reason I want to invest is not for profit, but to be diversified.. I think that's all you can do....avoid losing to inflation, etc
  #3  
Old December 2nd, 2011, 08:05 AM
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creeping panther creeping panther is offline
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Default Black

Quote:
Originally Posted by blackriver View Post
This is pretty sick. I have most of my money in cash. The main reason I want to invest is not for profit, but to be diversified.. I think that's all you can do....avoid losing to inflation, etc
The U.S. is a scam, it is so evident to anyone who really cares to look.

Fight the power!

CP
  #4  
Old December 2nd, 2011, 09:22 AM
Machinist Machinist is offline
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Quote:
Originally Posted by blackriver View Post
This is pretty sick. I have most of my money in cash. The main reason I want to invest is not for profit, but to be diversified.. I think that's all you can do....avoid losing to inflation, etc
X2 blackriver,,,,,also,,,,,,gold, silver, land, guns,comicbooks (or so I hear), cows, old split bamboo flyrods, old fish reels, antique lures, older tractors, vintage mx bikes, collectable cars, the list is long.

Machinist
  #5  
Old December 2nd, 2011, 10:43 AM
shadroch shadroch is offline
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First Superman just sold for $2.16 million plus a buyers premium. Same book sold for $800,000 last time it changed hands. I, and a few other predicted it would break 3 million, but there were not enough buyers to get it into a bidding frenzy.
With that said, I still keep more than 30% of my assests in the stock market and believe it is the best way to make long term wealth.
I'm out of gold and only have about $10,000 in silver coins these days.
  #6  
Old December 2nd, 2011, 11:51 AM
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Friendo Friendo is offline
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Quote:
Originally Posted by Jack_Black
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.
Old, old joke:
A long time ago, a visitor toured Manhattan. At Battery Park, the guide showed him some nice yachts at anchor.

"Are those the yachts of big stock market investors?" asked the visitor.

No, replied the guide: "Those are the yachts of the stockbrokers."

You really must look for the lowest-load, nearly-passive, computerized funds out there (e.g., Vanguard).

Beware the corporate 401K. The matching may make it worthwhile, but it's likely that many of those funds are high load, and that the fund management company is kicking back some of the profits to your company's managers.
  #7  
Old December 2nd, 2011, 12:14 PM
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zengrifter zengrifter is offline
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Quote:
Originally Posted by blackriver View Post
This is pretty sick. I have most of my money in cash. The main reason I want to invest is not for profit, but to be diversified.. I think that's all you can do....avoid losing to inflation, etc
How much of your 'money' (%) is in precious metal?

The collapse of MF Global and the failure of the CME to protect investors from outright
theft heralds a new development where no one is safe (ie, FDIC, SPIC, etc.) zg

See - Global Financial System is Collapsing, says Gerald Celente -VIDEO
  #8  
Old December 2nd, 2011, 12:16 PM
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zengrifter zengrifter is offline
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Quote:
Originally Posted by Machinist View Post
X2 blackriver,,,,,also,,,,,,gold, silver, land, guns,comicbooks (or so I hear), cows, old split bamboo flyrods, old fish reels, antique lures, older tractors, vintage mx bikes, collectable cars, the list is long.
Your list is a little too long on collectables. Ammo is good. zg
  #9  
Old December 2nd, 2011, 12:39 PM
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zengrifter zengrifter is offline
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See also - Stock Market is a Suckers Game
  #10  
Old December 2nd, 2011, 01:00 PM
Machinist Machinist is offline
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Quote:
Originally Posted by zengrifter View Post
Your list is a little too long on collectables. Ammo is good. zg
ZG a mans gotta amuse him self somehow.......I can look at gold and silver, but you can only stack it so may times. But most of the other stuff is usable......
I guess maybe its the "hunt" for the "stuff" at a cheap price that keeps it fun also.
Hey just hought of something........CANOES are great collectables too......especially if won in a bet!!!!!!!!

Machinist
 

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