What's All The Hooplah About Fair?
This week Mit Romney released his 2010 tax returns showing that he paid taxes at only a 13.9% tax rate. Newt Gingrich and the Democrats seized on this, calling this completely unfair, especially when it became clear that Romney was making $57,000 per day. The real question investors should ask is...when have the Markets ever been fair? Has any full service every said to an investor...we are going to be fair?
In 2008, major brokerages created collateralized debt obligations, CDO's, encouraging unsuspecting traders to invest over $1.3 trillion in instruments they knew nothing about. These brokerages created a series of complicated and extremely risky financial securities comprised of subprime mortgages. They sold them once, then repackaged them to sell them again and again. Was this fair?
A full service investment advisor excessively buys and sells in a retiree's account, churning and churning so they can make commission. Is this fair?
A brokerage front runs his customer's accounts by executing orders for his own account before executing orders for the clients because he has advance knowledge of his customers' pending orders. Is this fair?
The US Congress seems to have no rules prohibiting them from trading stocks based on nonpublic information they learned on the job. A 2004 study showed that US Senators' portfolios performed 12.3% better than the market average. Hey, you voted for them. Is this fair?
High Frequency Trading Robots (HFT's) now make up 70-80% of all trades executed in all the exchanges. These robotic trades come from computers that are physically inside the exchange. Their executions happen before the individual trader can even blink an eye. Is this fair?
The owners of MF Global took money out of individual trading accounts to the tune of over $1 billion and lost it buying soverign debt. Is this fair?
Whoever told you that life was fair? When you were a kid in school and wanted were beat up by a bully, was that fair? When all the pretty girs got dates in high school and you didn't, was that fair? When you had to study and study to get a "B" while others aced every test without even opening a book, was that fair? Whoever told you that life was going to be fair?
Sure it was unfair for Romney to report his taxes without mentioning his accounts in the Cayman Islands and Switzerland. He'd probably been doing that for years. And now because he is running for president and got caught with his pants down he has to amend those returns. Sure its unfair. But whoever said life was going to be fair?
If you want to be fair to yourself, forget the Mit Romney's of the world, forget the brokerages, to be fair to yourself, get yourself educated. Before you put $1 on the line in any brokerage account, find out what that brokerage is all about.Before you decide to trade for a living, find out the rules of the game. Don't make the assumption that trading is going to be fair, or that some brokerage is going to be fair. Do your due diligence -- get educated.
Go out and buy a training course on trading the Markets. And if you don't get the answers you're looking for, buy another course, and another, until you have learned just how unfair the game of trading can be.