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September 01, 2005
Suckers!
"It's morally wrong to allow a sucker to keep his money!" ~ W.C Fields
Christine Hurt is an Assistant Professor of Corporate Law at Marquette University. She makes an interesting post on Conglomerate in response to Larry Ribstein's post on David Swensen's book which I posted on here.
At any rate … Christine is writing a paper "comparing online trading to online gambling and why, given the theory that active traders and problem gamblers suffer from the same behavioral biases and on average both suffer losses, the SEC embraces active traders (online and not) and shun online gambling."
She says she started out with the assumption that "the federal government should restrict online/active/day trading in the same way that it claims that online gambling is illegal." In the end, she decided the opposite, that online gambling should be legal just as online trading is.
The central theme in all of these posts is one not unfamiliar to long time readers - stock picking and market timing are a fool's game. You will lose at both. And yet, the industry is based on these very ideas. It is allowed to continue because without the retail investor to play the sucker, the financial markets would be too efficient for anyone to make any money.
The basis of retail investing is one of two models: the greater man model or the greater fool model.
In the greater man model, somewhere out there is a great man who can pick stocks for you. If the guy you are paying now isn't it you leave him in search of the next greater man.
In the greater fool model you buy an asset that you really don't want to own over the long term in hopes of being able to sell it to a greater fool for a greater price.
Do either of these sound like a good way to build a retirement nestegg? Now that we are responsible for replacing our income in retirement with little or no assistance from pension or Social Security, how much sense does this make?
None.
The person who is saving for retirement cannot afford to continue playing a fools' game. The stakes are just too high. The fact that we continue to allow/encourage/teach people to gamble with their retirement savings is morally reprehensible!
Did they appoint W.C Fields SEC Chairman when I wasn't looking?
An interesting read - especially the comments. I'll post the paper if Christine would be nice enough to alert us when it becomes available. Post your thoughts below.
Kim Snider, Kim Snider Financial Communications, Chronim Investments and/or Snider Advisors make no representation that the information and opinions expressed are accurate, complete or current. The opinions expressed should not be construed as financial, legal, tax, or other advice and are provided for informational purposes only. Call 866-952-0100 to request the Snider Investment Method™ Owner's Manual, which includes a description of the Snider Investment Method, investment objectives, risks, suitability and other information. Please read and consider carefully before investing. All investments are subject to risk including possible loss of principal.
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Kim Snider is an author, speaker and host of Financial Success Coaching, Saturdays at noon, on KRLD Newsradio 1080, Dallas - Fort Worth. This blog is primarily devoted to empowering individual investors with information to help them be good stewards of their money. Above all, it is about achieving true financial success. Kim's book, How To Be the Family CFO: Four Simple Steps to Put Your Financial House in Order is in bookstores now. Order yours from Amazon or other fine booksellers today.
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