Friday, April 9, 2010

Muriel Siebert: American "Public Does Not Have Faith in the Marketplace"

Investment legend Muriel Siebert with some common sense views of the stock market.  Apparently, a marketplace dominated by a handful of players who can "tilt" the board create liquidity to create 97-98% winning percentages [Nov 4, 2009: Goldman Sachs Q3 Winning Percentage: 98.4%], .... along with trading now dominated by thousands of automated trades in the time a human can bat an eyelash is not something she is very cool with.  I wonder what she thinks of trading huddles? [Aug 27, 2009: Goldman Sachs Trading Huddles] But really what does she know - she's only been around for 5-6 decades, and can't program an algorithm to cross reference 8200 variables at once, in an eighth of a second.  She probably even reads financial statements - old fashioned!

We much prefer this new paradigm video game stock market.   A place which parallels a gambling hall where CNBC economic report countdowns akin to football pregame shows get our hearts beating, (5....4....3....2....1! Liesman time!)  and betting on one extra comma or change in phrase by the Fed, is part and parcel with the A.D.D. generation brought up on Zelda and Mario.  [Sep 9, 2009: WSJ - Vanguard's John Bogle, Warren Buffet Speak Out Against Short Term Nature of Markets]  Oh, and earnings season... where the value of stocks can fluctuate billions in seconds based on a Reuters headlines as gamblers make Baccarat decisions?  Company "ownership" via stock? Haha... only for 1/4000th of a second. 

In a broader sense let us just keep repeating the mantra "Wall Street = Main Street" as that $700 in the ROTH IRA that half of Americans have in the market, showly clears the 'majority' of Americans own stock and are part of the "equity society". [Mar 9, 2010: Nearly Half of Americans Have Less than $10K for Retirement, a Quarter Less than $1K

Either way, this market does not need small fry anymore.... with net equity outflows (that would be investors drawing OUT money) for the past year it has risen 70%+ so who really needs the individual investor anymore?  Just lend banks money at 0% and let them make risk free return - retail investors are so 1960s 1970s 1980s 1990s.  Can we blame Americans for thinking this has just became a great transfer of wealth machine the past 10 years?

  • Wall Street veteran Muriel Siebert has seen her share of downturns, yet none has been quite like this.  “It has a different feel to it,” she said in an interview with “We want a marketplace where people are going to take their retirement money and build up stocks for their retirement. They’re not doing it to the same degree anymore. I have customers who are sitting on cash in their accounts because they don't have the same confidence. Cash has lost its value in terms of creating income for them.”  (Bernanke: "You're welcome, American savers") [Mar 31, 2010: Bernanke Content to Sacrifice Savers to Recapitalize Banks and Benefit Debtors]
  • What scares me, disappoints me, the public does not have faith in the marketplace,” she said. “You don't see the same public trading that we've seen. We've got to get that back. Public investors are responsible for a lot of the success of this country.”
  • The banks were pigs,” she said. “A bank has an obligation for the public's money. Some of the things they were doing was outright gambling.”  (thankfully they learned their lesson since bad mistakes were punished... err, what's that Oh.)
  • Siebert faults a lack of transparency, particularly in derivatives and dark pools. While derivatives have a place in the markets, she said, they should be registered.  (but if things are not done in dark corners, how could we exploit the system....err, I mean "create liquidity")  “We used to have more transparency as to what was going on in the markets,” she said. “It was actual trading, so you could analyze it a little better. (ahhh, actual trading with some form of analyzing... those were the days - bestill my heart)  If you take a dark pool, you've got to have some transparency with what the trades are. Force them to put it on the tape when it happens; force them to identify short ticks.”
  • ....for public investors to return to equities, she said, global securities regulation is essential. Siebert recommends that the SEC and Federal Reserve hold a global meeting with their foreign counterparts to establish uniform securities and banking rules.
  • But regulation from Washington can only go so far, said Siebert.   “These people are passing laws and they don’t know the system,” she said. “Until you work in the system and you work with people that were specialists, and analysts, and portfolio managers, and people at banks—this is the financial industry— why don’t they have a team of people that are working in the system everyday?”  (we have teams of people - they work at agencies like SEC - but when your teams of people are mostly attorneys... and attorneys who are captured regulators, it really is a moot point.  Carry on.)
  • Born during the Great Depression, Siebert has witnessed economic cycles as a Wall Street trader and a bank regulator. She started her career as a $65/week trainee in research to become the first woman to hold a seat on the New York Stock Exchange in 1967. Today, Siebert heads Muriel Siebert & Co., her discount brokerage firm.

[Sep 16, 2009: Mutual Fund Investors Cling to Safety of Bonds, Missing Stock Rally]

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