Why We Shouldn't Be Mad At Financial Advisers

I'm noticing a lot of replies to the "Pensioners 'kidnap and torture' financial adviser" thread, where people seem to be taking the side of the old men who tortured that guy. While I understand "just deserts," I think most people are mad over some misconceptions about the marketplace, how this happened, and who is responsible.

Let me first start off by saying, if you lost money in the housing market, it's sort of your own fault:

Bottom line, it was a bad investment. The free market IS a form of sanctioned gambling, and that's how "they" want it, because it creates arbitrage.

Arbitrageurs perform a special function, and exist to ensure consistent pricing across different types of instruments relating to a particular asset and its relationships (e.g., cash, futures, forwards, options, etc.) seekingalpha.com...

What they don't tell you is that they "ensure consistent pricing" by buying undervalued securities and selling overvalued securities. The housing bubble would be an example of an overvalued sector, which was arbitraged to the tune of a few hundred billion dollars.

I don't blame the little guys working at investment firms across the country. I know it sounds like I'm apologizing for them, but I'm not -- because they did nothing wrong -- except make bad investments.

That's just how the markets work. I think it's best to just buy an index fund, do your own investing, or go with something low-risk/insured.



The best protection is a working regulatory institution.

While bush was in office, he installed more than 100 top officials who were once lobbyists, attorneys or spokespeople for the industries they oversee, which is a bit like assigning the fox to guard the hen house.

To add fuel to the fire, the SEC was filled with men of such unfathomable incompetence, they did not notice Bernard Madoff's Ponzi scheme after receiving detailed reports for nearly 10 years outlining ever detail of illegal activity.

Describing them thusly:

a group of 3,500 chickens tasked to chase down and catch foxes which are faster, stronger and smarter than they are…As currently staffed, the SEC would have trouble finding first base at Fenway Park if seated in the Red Sox dugout and given an afternoon to find it.

Then, Bush decided to remove the Uptick Rule, which made it possible for speculators and the arbitrageurs (remember them?) to literally send a company into bankruptcy using the open market, or at the very least, scare the hell out of everyone by causing the stock price to drop just a few pennies above zero.

Starting to get the picture of what's going on here?

Wait, there's more:

In 1999, Bill Clinton Signed into law the Gramm-Leach-Bliley Act, allowing mega corporations, wielding ungodly sums of money, to merge together and begin speculating in the derivatives and OTC market. It also made the now famous credit default swaps legally impossible to regulate.

Adding to the volatility of the market, oil prices were soaring to never before imagined heights, due mostly to the speculative activities of institutions fomenting higher prices with their 10s of billions of capital and low margin requirements:

world consumption of oil at 87 million bpd was far exceeded by the "paper market" for oil, which equals about 1.36 billion bpd, or more than 15 times the actual market demand.
www.reuters.com...

A study of the oil market by Masters Capital Management was released which claimed that speculation did significantly impact the market. The study stated that over $60 billion was invested in oil during the first 6 months of 2008, helping drive the price per barrel from $95 to $147 per barrel, and that by the beginning of September, $39 billion had been withdrawn by speculators, causing prices to fall.
www.thetimesonline.com...

And that's not even the half of it, but the rest, as they say, is history.
Here we are, slumped over, bailing out the very institutions that caused this mess



So who's fault is it that all this happened? Is it really some financial adviser in Germany? He was simply doing what everyone else was doing (which is a good sign that it's time to not do it anymore) and it worked for a long long time.

I think blame should probably be assigned to the American public, because they allowed these deregulations to take effect in the first place, voted for the politicians sponsoring these engineered disasters in policy, and said nothing when the lobbyists working for the corporations that profited the most from this mess wrote the laws that congress passed.

In other words, blame yourself. Kidnap yourself and torture yourself. It's basically your fault by sitting passively on your ass as the country was handed up to J.P. Morgan, Citi, Merrill Lynch, Monsanto, Enron, Exxon, Bank of America, etc. in the guise of "free market economics" or Reaganomic deregulation.

If you want to know what went wrong, here's a good place to start. Kidnapping and torturing a financial adviser won't change or fix anything.

Related Thread on Class Warfare

I tend to agree here.
I have thought about stringing bankers up by the necks on a lightpost but the reality is that the people I deal with at the bank who have families to feed and things to pay for are just doing a job.
They don't really know any better then the rest of us.
It would seem right to want to go after them but its actually wrong...its the jerks who decide to create and inflate markets...those decisions are not made by my good aquaintances at the bank.

It comes from waaaay higher up.
Remember there is a banking cartel running the show...not the guys at your local bank.

The system is designed to give bigger rewards for bigger risks.

The only thing that makes me mad is the fact that they get compensated for just showing up. I know if I lost my company or clients MONEY, I would be out of a job pretty quick.

SO MANY people claim, "well, they rely on their once a year bonuses to make ends meet. "

SORRY, but if they cant even budget their 6 figure salaries (BEFORE Bonuses!!!) then they really have no business working in the FINANCIAL sector to begin with.

If you cant stand the heat get out of the kitchen.