Thursday, April 16th, 2009...9:46 pm
Seven Ways to Beat the Market - Guaranteed
Become….
1. BROKERS
Charge ample commissions.
Charge for margin usage.
Get kickbacks from the exchanges (aka order flow)
Get % interest on cash deposits.
2. FUND MANAGERS
Charge management fees (like 12-b-1 fees) while consistently underperforming or just lie to investors (Madoff et al).
3. MARKET MAKERS/SPECIALISTS
Keep the spread (diff. between bid and ask).
4. EXCHANGES
Charge participation and transaction fees on everything concievable.
5. CONSUMERS: EXCEPTION TO THE LIST, THESE NEVER BEAT THE MARKET
In general, think of the market as a carnival booth. Like throwing dull and crooked darts at small balloons, or tossing dimes into dishes or knocking milk bottles off a stool with a softball or having a go at the shooting gallery. If you haven’t figured it out yet, the game is rigged and ridiculously expensive. One more example: the claw attached to the crane game. You think you can get the fluffy pink bear in the middle, but you only get stuffed.
6. REGULATORS
Charge regulatory and licensing fees to all of the above and do it with abandon.
7. GOVERNMENTS
Tax entities 1-5.
8. “EDUCATORS”
Lie about your returns. There’s a sucker born every minute and if you gather a substantial following, you might get bought by a Broker (see entity 1 above).
Stay tuned for next week’s article: The birth of a stock: a story of magnificent mark-ups. Is this series a little too honest? Perfect. That’s the idea. Call me Peter Pumpkinhead.
