Hedge Funder Joins OWS...so you want to privatize SS..????

[TM7]

You might want to think twice about 'media propaganda' to privatize Social Security, etc. This Hedge Fun Analysts explains the Rigged Casino and the 0.1%. And yeah, this guy will be unemployed soon, too................fyi....TM7
 
 
http://www.zerohedge.com/news/hedge-fund-insider-explains-why-retail-investors-should-flee-stock-market
 
 
A Hedge Fund Insider Explains Why Retail Investors Should Flee The Stock Market
 
   Submitted by Tyler Durden on 12/01/2011 22:18 -0500


  Regular readers know that ever since 2009, well before the confidence destroying flash crash of May 2010, Zero Hedge had been advocating that regular retail investors shun the equity market in its entirety as it is anything but "fair and efficient" in which frontrunning for a select few is legal, in which insider trading is permitted for politicians and is masked as "expert networks" for others, in which the government itself leaks information to a hand-picked elite of the wealthiest investors, in which investment banks send out their "huddle" top picks to "whale" accounts before everyone else gets access, in which hedge funds form "clubs" and collude in moving the market, in which millisecond algorithms make instantaneous decisions which regular investors can never hope to beat, in which daily record volatility triggers sell limits virtually assuring daytrading losses, and where the bid/ask spreads for all but the choicest few make the prospect of breaking even, let alone winning, quite daunting. In short: a rigged casino. What is gratifying is to see that this warning is permeating an ever broader cross-section of the retail population with hundreds of billions in equity fund outflows in the past two years. And yet, some pathological gamblers still return day after day, in hope of striking it rich, despite odds which make a slot machine seem like the proverbial pot of gold at the end of the rainbow. In that regard, we are happy to present another perspective: this time from a hedge fund insider who while advocating his support for the OWS movement, explains, in no uncertain terms, and in a somewhat more detailed and lucid fashion, both how and why the market is not only broken, but rigged, and why it is nothing but a wealth extraction mechanism in which the richest slowly but surely steal the money from everyone else who still trades any public stock equity.
 
From Reddit:  I work in Wall Street and work in hedge fund analysis. I'm the only person in my office who supports OWS
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 (censored word) 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 crap 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.

[magooch]

The whole argument about privatization, or not with the SS system is going to be more than moot if this lunacy of continuing the "holiday" on the payroll tax is not stopped.  It will soon, if it hasn't already, change the entire basis of the SS system as being a paid for entitlement to a government welfare handout.  On this one, Obama and the Dumycrats are not on their own; at least some of the Republicans have bought into this reckless raid on the SS system.  And that is not to even mention that it probably puts the death-knell into Medicare.

[blind ear]

I agree that something needs to be done with wall street and the banks but the same congress that is in charge of the law of the land and the destruction of the constitution is in charge of the banking system also so it doesn't matter what we think or know. Until we get a leader, then leaders , elected that can give some correct dirrection we're SOL on any changes that benefit the patriotic historic working citizen of the old United States.
 
We are now set up to be under a system that we have allowed to be legislated into being because we kept believeing the propaganda/brainwashing of the old parties. The politicians and thier masters don't care, they are insulated from us and have the military at thier command. ear

[teamnelson]

... and have the military at thier command.

We're letting go 30K sailors this year, we're less than half strength of where we were under Reagan, with our enemies 3x as powerful on the seas. I sat with the skipper of the TR as we briefed 10 career E-6s that they were being involuntarily separated under ERB due to budget cuts - prior to this, an E-6 was guaranteed 20 years w/retirement if he didn't have disciplinary action. These are family men, with wives and children; they're also all high tier performers, the cream no the fat. We just can't afford them. Next round is O-5 and O-6, who will all just be forced to retire, along with E-7 to E-9. E-5 and below are all undergoing perform to serve; some are being separated prior to the end of their current enlistment/extension. Again, these aren't the dirt bags - under normal budget constraints we'd be happy to keep them.


This was all executed BEFORE the upcoming slash due to the failure of the supercommittee to resolve the debt ceiling bailout.


So when we say "they" have the military at their command, I'm more than a little skeptical ... in fact I'm alot skeptical. I just had a good chat about liberal fascism around the table at the ward room last week. Get back with me in 10 years, after all the independent thinkers have been kicked out, and all that's left are the liberal intellectual elite and the starving poor just glad to have HC and a paycheck, and perhaps the military will be more maleable.

[blind ear]

TeamNelson,
 
No slap at the military.
 
The Oil Coporations got us into the Middle East from the time of the first Bush and before even with Military leaders saying, "the terrorist arn't there, The terrorist don't have a "position" to   attack." We ended up in those conflicts at the dirrection of congress or the president. Many military people said "if they didn't have oil we wouldn't be there".
 
The military didn't just strike out on thier own. Soldiers are always given well thought out reasoning for thier objectives, thier training dictates that a majority of them will accept those justifications/reasons.
 
What is the mind set of the current privates, why did they join the military? What is thier home and school training in the constitution and patriotism?
 
ear

[teamnelson]

ear, didn't take your comments as a slap, but thanks for the follow up. There are many here and elsewhere that are under the delusion that the military is a highly motivated militaristic arm of the socialist-marxist party, and will gladly take your guns and shoot your family. So any opportunity I can to dispel that mythology with truth, I take.


The vast majority of our modern military has come in since 9/11. They did not come in first, and find out why we're fighting later. They voluntarily enlisted or accepted commissions based on the convictions they possessed prior. Most have come to realize that things aren't entirely what they thought; most have come up with their own reasons to stay, among the most common being that our nation is at war, there are bad guys, and our brothers and sisters in uniform are in harms way. There is a fraternity of arms that transcends national will - wise leadership understands that. Case in point, you take 2 Nam vets - one a Dem and one Rep. They will argue ideas until their blue in the face, but if an outsider comes along and denigrates the service of our Nam vets, they will rally together, and lord help the agressor. Our military values honor (albeit a different version than the one I came in under Reagan) which looks mostly like loyalty TO EACH OTHER as opposed to an idea. Dinosaurs like me are village elders.


To your last question; demographics by race and home of record remain consistent to the previous decades. Education levels are higher, but knowledge levels are lower ... public schools do not teach constitution or patriotism, and what they teach of history is sheer liberal propaganda. They do not have any classical training in logic or rhetoric, but they know sports stats older than they are, movie quotes, fads, and more about sex than any generation prior. 3/4 or higher come from broken families, raised by a single parent - never knew their father. <-- single most important contributing factor. They do no know how to value relationships, commitment, or what it means to be a "man" or "woman" apart from meeting expectations of others; they wouldn't understand intrinsic value or the individual apart from psychobabble. They are well indoctrinated in the liberal view of politics, economics and society, having been taught at school by liberals, and raised outside of school by media, because their parents were not engaged in their upbringing.


What is fascinating to me is how many of them cherish their grandparents, who took a hand in raising them while their single mom was off on a bender with a guy she met online. (True story). They want what the "greatest generation" had, but they want it right now, and don't understand work, savings, etc. Their understanding of wealth is rooted in Marx - if comrade ear has 100 TVs and 99 others don't, comrade ear must give his extra to the 99. But they are terribly possessive of material items, which they're in debt to their eyeballs as a result. They don't understand truth as an absolute - everything is relative to your point of view or circumstance. Every answer to every question begins with, "it depends." They're enamored of Occupy - somebody taking action for "good". It appeals to their passions; but they don't like "hippies."


They're a walking contradiction - they have pieces of truth knit together with a web of lies, and something inside them knows it and doesn't like it. They desperately want the truth, but the only voices that are calling to them are not the ones they need to hear from. The ones they need to hear from are viewing them with skepticism, hiding behind their walls, and stockpiling ammo for "the day." Next soldier you see, buy him lunch, give him his own copy of the Constitution, and talk to him of Liberty. I do that on the job. Case in point, we let every Iraqi keep an AK-47 or 74, they have a right to bear arms under the Iraqi constitution. Take that and point to our own, and talk about why that's important, etc.