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It's interesting, and troubling, that so many still trust these institutions: * Banks that have been caught repeatedly both intentionally defrauding people and

It's interesting, and troubling, that so many still trust these institutions: * Banks that have been caught repeatedly both intentionally defrauding people and acting with extreme incompetence (and who knows who often they haven't been caught). Yet most customers, from individuals and to large corporations continue to trust the banks with their money and to take the banks' advice. * They trust LIBOR and similar services as accurate and fair, when they've been tampered with repeatedly. * They trust the financial markets as safe, fair places to invest, despite the problems above and others that pervert markets directly, such as high-frequency trading. * They trust the 'Free Market', a good idea in concept but in execution appears to be a rigged marketplace, where the powerful win and if they don't, they get bailed out. Do you still invest your savings in the financial markets? Do you have debts whose rates are tied to LIBOR? If Goldman Sachs offered to advise your company, would you trust them? Most people, knowing all of the above, still say yes. I think in part that's because there aren't many alternatives and in part it's due to lifetimes of of habit. These problems must be hurting trust and I imagine many people eventually will realize the disconnect at some point -- maybe in reaction to some big event -- and pull out. The point of regulation is to make markets safe, which prevents fraud and attracts more investment. It's good for everyone. It seems like many in the financial industry, and the knee-jerk anti-regulation crowd, have lost sight of that.

nodata 12y ago
What alternatives do you personally use?
- DMac87 12y ago
  (Not original poster, but some suggestions) : - Use a local credit union as opposed to big national bank. Yes, there may be minor inconveniences in service, but in this day of online banking, they should be minimal. - Invest with a financial advisor you know and trust, who will pick up the phone when you call and explain things to any level of detail you desire (or who will bring in experts to do so if you won't). Barring that, invest in index funds for broad asset class exposure with low fees. - Don't believe / vote in / listen to anyone (economist, politician or otherwise) who touts "free markets" without further explanation of how that market's regulators & insiders will work.
  - mattgrice 12y ago
    Investing with a financial advisor you know and trust doesn't sound like a good idea to me. That's what Bernie Madoff's clients were doing. You want a financial advisor who is trustworthy, which is a very different thing and much harder to find.
    - DMac87 12y ago
      I disagree - Madoff was extremely secretive about his "strategy" (because there was none) and financial statements. He wouldn't meet with individual investors. So the transparency & access that I recommend simply weren't there with him.
rqebmm 12y ago
How does High Frequency Trading pervert the market? They are acting as middle-men.
- nitid_name 12y ago
  I think the complaint against is generally that they're acting more akin to front runners than middle men.
  - rqebmm 12y ago
    Either way, they're not doing market-making. Don't get me wrong, there's lots of market perverting going on, but HFT isn't party to it.
    - Retric 12y ago
      They if nothing else threy distort the market by adding noise. As in 99.9% of the time no new information is used when they make a trade.
- geekpondering 12y ago
  ...middle-men that aren't providing any service or benefit to anyone except those that profit from those trades. These "middle-men" are injecting themselves between buyer and seller to take their cut simply because they have the money, resources, and -- increasingly these days -- the geographic location to beat someone else to the punch.
  - rqebmm 12y ago
    isn't the typical benefit of a middle-man that they have the money, resources, and geographic location to help facilitate transactions?
    - geekpondering 12y ago
      HFT doesn't "facilitate transactions". What is often happening is Seller A wants to sell something for $10. Buyers B, C and D submit an order to buy it for $10. The computer sees this, knows that it might be worth more than $10, and while Buyers B and C get their orders through, the computer buys it out from under Buyer D because their computers are faster. Buyer D now gets a notice that "oh, sorry, that thing you wanted is now $11." It's the same thing as you overhearing your neighbor saying the Apple Store only has one iPhone left for sale at the Apple Store and, because you have a faster car than your neighbor, you get to the store and buy it and then offer it for resale at a higher price. That's not facilitating a transaction, and it certainly is perverting the market. When the people with the fastest computers and best geographical location get items cheapest, that's not a 'free market'. Middle-men have classically existed to provide a _service_, adding value to a previously less valuable or more difficult transaction -- wholesalers or retailers. Wholesalers existed to pare down which goods are offered, and existed primarily because smaller retailers couldn't afford to purchase in bulk. Most 'middle men' of these classes have gone away due to the digital age and/or conglomeration. Grocery stores or websites that provide value by having multiple items in the same place that you can pay for all in one financial transaction.
tsunamifury 12y ago
Because given the choice between being aligned with: 1) A powerful bad guy 2) A weak and ineffectual good guy Most people will pick the powerful bad guy to protect their funds, advise their company and make decisions for them. We want the power, not the morality. These guys don't let their morality get in the way of winning.
- hackuser 12y ago
  > Most people will pick the powerful bad guy to protect their funds, advise their company and make decisions for them. We want the power, not the morality. Considering only self-interest, how do you trust the bad guy with your money, when they've lost other people's funds? How do you trust their advice when you know they've deceived other clients? How do you know they will act in your interest, when they've acted against clients in the past?

nodata 12y ago

What alternatives do you personally use?

DMac87 12y ago
(Not original poster, but some suggestions) : - Use a local credit union as opposed to big national bank. Yes, there may be minor inconveniences in service, but in this day of online banking, they should be minimal. - Invest with a financial advisor you know and trust, who will pick up the phone when you call and explain things to any level of detail you desire (or who will bring in experts to do so if you won't). Barring that, invest in index funds for broad asset class exposure with low fees. - Don't believe / vote in / listen to anyone (economist, politician or otherwise) who touts "free markets" without further explanation of how that market's regulators & insiders will work.
- mattgrice 12y ago
  Investing with a financial advisor you know and trust doesn't sound like a good idea to me. That's what Bernie Madoff's clients were doing. You want a financial advisor who is trustworthy, which is a very different thing and much harder to find.
  - DMac87 12y ago
    I disagree - Madoff was extremely secretive about his "strategy" (because there was none) and financial statements. He wouldn't meet with individual investors. So the transparency & access that I recommend simply weren't there with him.

rqebmm 12y ago

How does High Frequency Trading pervert the market? They are acting as middle-men.

nitid_name 12y ago
I think the complaint against is generally that they're acting more akin to front runners than middle men.
- rqebmm 12y ago
  Either way, they're not doing market-making. Don't get me wrong, there's lots of market perverting going on, but HFT isn't party to it.
  - Retric 12y ago
    They if nothing else threy distort the market by adding noise. As in 99.9% of the time no new information is used when they make a trade.
geekpondering 12y ago
...middle-men that aren't providing any service or benefit to anyone except those that profit from those trades. These "middle-men" are injecting themselves between buyer and seller to take their cut simply because they have the money, resources, and -- increasingly these days -- the geographic location to beat someone else to the punch.
- rqebmm 12y ago
  isn't the typical benefit of a middle-man that they have the money, resources, and geographic location to help facilitate transactions?
  - geekpondering 12y ago
    HFT doesn't "facilitate transactions". What is often happening is Seller A wants to sell something for $10. Buyers B, C and D submit an order to buy it for $10. The computer sees this, knows that it might be worth more than $10, and while Buyers B and C get their orders through, the computer buys it out from under Buyer D because their computers are faster. Buyer D now gets a notice that "oh, sorry, that thing you wanted is now $11." It's the same thing as you overhearing your neighbor saying the Apple Store only has one iPhone left for sale at the Apple Store and, because you have a faster car than your neighbor, you get to the store and buy it and then offer it for resale at a higher price. That's not facilitating a transaction, and it certainly is perverting the market. When the people with the fastest computers and best geographical location get items cheapest, that's not a 'free market'. Middle-men have classically existed to provide a _service_, adding value to a previously less valuable or more difficult transaction -- wholesalers or retailers. Wholesalers existed to pare down which goods are offered, and existed primarily because smaller retailers couldn't afford to purchase in bulk. Most 'middle men' of these classes have gone away due to the digital age and/or conglomeration. Grocery stores or websites that provide value by having multiple items in the same place that you can pay for all in one financial transaction.

tsunamifury 12y ago

Because given the choice between being aligned with: 1) A powerful bad guy 2) A weak and ineffectual good guy Most people will pick the powerful bad guy to protect their funds, advise their company and make decisions for them. We want the power, not the morality. These guys don't let their morality get in the way of winning.

hackuser 12y ago
> Most people will pick the powerful bad guy to protect their funds, advise their company and make decisions for them. We want the power, not the morality. Considering only self-interest, how do you trust the bad guy with your money, when they've lost other people's funds? How do you trust their advice when you know they've deceived other clients? How do you know they will act in your interest, when they've acted against clients in the past?