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June 18, 2020 | Investing is Not a Game and ‘Free Trades’ Aren’t Free

Danielle Park

Portfolio Manager and President of Venable Park Investment Counsel (www.venablepark.com) Ms Park is a financial analyst, attorney, finance author and regular guest on North American media. She is also the author of the best-selling myth-busting book "Juggling Dynamite: An insider's wisdom on money management, markets and wealth that lasts," and a popular daily financial blog: www.jugglingdynamite.com

The ‘gamifying’ of stock trading has become all the rage once more thanks to the financial sales marketing machine, a go-for-broke mentality in participants hoping to ‘win’, and misplaced confidence that central banks are able to prevent asset prices from going down.  This is what a shit show looks like and it always ends in shambles.

We are reminded of the tech-wreck top in 2000, the US housing and commodities bubble in the 2006-07 top, crypto-mania in 2017 and pot-stock euphoria in 2018.

Charlatans and the wilfully blind lead oblivious, greed-filled followers into harm’s way, as broker-dealers sell the order flow to ‘market makers’ who front-run to skim profits from dupe customers who think they are trading for free.

This should be banned by existing securities regulation but those on the take are making a fortune and are able to placate those in charge with revolving door appointments as they move in and out of the public sector.  Adults that should know and do better have left their duty of care far behind. This morning brings a particularly tragic story in 20-Year old Robinhood customer commits suicide after seeing a $730,000 negative balance:

Robinhood, E-Trade, TD Ameritrade, Charles Schwab, Interactive Brokers, Fidelity and even Merrill Lynch have all embraced commission-free trading and zero minimum balances [Park note: while making hundreds of millions by selling their clients’ order flow to frontrunners] in an effort to attract younger customers, many of whom have little understanding of the securities and markets they are dabbling in.

“I thought everything was going fine,” says Bill Brewster, Kearns’ cousin-in-law and a research analyst at Chicago-based Sullimar Capital Group. His father said he was loving the markets and really enjoying investing, Brewster told Forbes, “and then on Friday night, we got this call from his mom and he had died.”

…Confetti popping everywhere,” says Brewster referring to the shower of colorful confetti Robinhood routinely deploys after customers make trades. “They try to gamify trading and couch it as investment.”

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June 18th, 2020

Posted In: Juggling Dynamite

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