Someone has a money making idea, someone copies it, then tons of people are doing it, then before you know it, it’s done, it needs to be reinvented or it needs a gimmick.

The amount of consumers buying it becomes so diluted among the amount people selling it that it becomes less and less profitable while costs have gone up.

Costs related to marketing against all your new competitors, costs in regards to researching new ideas to produce your product cheaper or faster.

Before you know it, you are injecting your products with steroids and preservatives, or things to make it addictive, or creating new solutions to new problems that you created, or creating fake or floating interest rates that look good on the surface and all kinds of other gimmicks.

Banks, fast food chains, drug companies, printing companies, investment companies, retail companies, software companies they all do it in some way shape or form.

This is when a product or an idea’s risk level skyrockets, once that company has to rely on gimmicks to push the product. Then you know the niche is gone and when the niche is gone the competition is encroaching.

Then bam, the economy hits a rough patch, the weaker competition falls away and the strong are left. Financial Darwinism. The companies that remain are the ones that should remain.

When you start bailing companies out, you start inter-fearing with the natural order of things, you start propping up the companies that were relying on the gimmicks.

1) The patent office does not have the capacity for the deluge of patents finance firms would attempt to get. (nor do I believe they have the right people to evaluate these instruments)

2) There would ahve to be someone to enforce and regulate these patents. This would seem to fall under the SEC, wich remains incompetant and understaffed.

Bottom line is that money will always find its highest and best use, so we will likely never have the right minds in place to regulate such a complicated industry. The government can never pay enough to get the best employees with regards to the financial sector. Just my two cents.

Michael Lear
Portfolio Manager

Markets are supposed to be fair. Fair for everyone including the investor who is putting $50.00 a month in his/her IRA mutual fund account.

Our markets are becoming too complex and diverse. Long time investmenting has always been sound advice….or is it? The in and out investing of online brokers is a bad idea–these institutions are market makers for gamblers. The SEC continues to fail in creating a “fair and equitable” market place with REASONABLE violality.

I understand a blog post can’t be comprehensive, but I think the impact of moral hazard needs be given a certain level of attention.

Lehman Brothers aside, the government is propping up hundreds of financial institutions undeservedly. Bankers correctly predicted that this would happen, since it has always happened in the past. The equity in many (but not all) of the TARP firms should be wiped out.

The short term pain for long-term gain would be well worth it.

The stock market is sort of a love/hate topic right now for me.
I have spent years trying to figure out some way to make money at it. Looking at the Commitment of Traders Reports and other tools. I wanted to have the odds stacked in my favor when trading. I will not go into all the systems that I have tried and bore you. A couple worked, most Did Not.

I assume from reading this blog you have innovated a new system you want to market to make money. I am not surprised you have a great mind for that sort of thing. I remember reading a previous blog about how you used statistical analysis in regards to the fouling in the NBA and how it was unfair. I also enjoyed your stats on the NBA all star numbers where you gave impact% and clutch% and other factors to rate players. So if anyone can figure out a successful system for the markets. It would be you.

In some cases people give all their money to Bernard Madoff and Sir Allen Stanford because their funds have been so successful for years. So your quote is so important. “Call it Madoff’s Law. Where there are consistent returns, it doesn’t mean that the risk is reduced, it means you can’t see the risk.” This quote is great and should be put in gold writing.

I do not necessarily believe these people are idiot’s, but they are naive. They believe in these fund managers and the SEC to protect their capital in blind faith. They believed a Ponzi Scheme could never happen in today’s world. However it did happen before and it will happen again. It’s still Mind boggling to believe how much was lost.

I have found a few technical things that have worked if I had of followed the rules and stuck to the system. But I got to emotionally attached to a stock or got cocky.
I needed to preserve my capital with closer stops and not use margin money. I needed to have more humility because that comes before honor. I admit sometimes I have imitated or copied systems or tried to adapt them for better results.

I do not feel it is necessarily a bad thing I enjoy reading new concepts and ideas in the market. I like to learn from successful people. There are so many ideas out there. It is fun to look at other people’s attempts and see if they are worthy in real time. For example I looked at Woody’s CCI. No comment.

I am not sure this plan would be feasible. I am just a private investor. So now I will have to pay for this new product or service? How much will this cost me? How much will it cost the institution? How much more Government will be needed to follow all these systems and licenses? How much more safer will the investor be?

I thought we could not trust the system or anyone?
If I use this product. I am going to have to pay to use their system and if I do not the institution’s will have even more of an advantage over me. Due to the fact that their product is being monitored by the government. This monitoring in the past has not worked look at the SEC. Government can not run or fix Wall Street.

“The one’s with the greatest upside would want protection.”
I thought we already established the fact that no system out there is foolproof and by believing this would be foolish. You already stated that CONSISTENCY DOESN”T REDUCE RISK, IT INCREASES RISK. So now I am depending on the institutions and government again but just paying an extra tax to do so. A Ponzi Scheme could still result imho. By investing in these products I will still be a copycat or imitator and i will still be an idiot to believe in them with all my capital. The Market is never stable or consistent.

The more people that buy these products the less the products will work and that is a fact. You have to have a buyer and seller in the market. Too many buyers and then a collapse could occur when the product’s success hits a peak. Maybe after the 5 yrs of being artificially held up by these 2 entities or when there is no more buyers. These are just the flaws I see that could happen.

I do agree with you that Obama can not limit brokers salaries or the brokers will probably be able to get their money some other way. This is scary..

I really do not think anyone can fix Wall Street it has been around for a 100 years. There will be Scams and Ponzi scheme’s and people losing there money on stocks like GM Ford and Nortel. This is inevitable people will just have to be more smarter with how they trade and invest and not put blind faith in someone else. There is always a winner and a loser and over 90% are losers. As Kenny Rodgers would say, “Know when to fold em.

On a personal note I will put my regrets and resentments behind me and start over again. It is to much of an anchor on my soul.
Enjoy your blog and MMA.

Mark Farwell

Aka WW