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What Happens When I Fall Off?
By Tom Burnett
I just had a lateral leap in a discipline I hate: economics. I now understand formalized public trading.
Individual investors cannot make money in the 'market' because public markets don't create wealth - they spread risk from corporations to individuals. That's the only reason equity markets exist. 'Specialty' markets - commodities, metals, hedges...all do the same thing at the level of the individual investor. Individual investors are not going to take delivery of 40,000 pounds of pork bellies. The market in them was made to provide meat packers with risk management by putting the risk on the public. ALL markets exist to manage risk for companies and lay it on individual investors. The dividends companies pay for is insurance money to keep people buying - and they leverage their own stock against the investor. There is no one else to leverage it against. Everyone know this so far...
The game is rigged. It's not supposed to be, but it can't work any other way. How is it rigged? Basically through the use of OTC derivatives - which are not reported and not regulated. Would you like to know what kind of money we are talking about in OTC derivatives? Easily 200 TRILLION dollars at any given moment and it could be a lot more - because they aren't reported. That number is not a typo.
And THAT is why Goldman Sachs is TBTF but millions of American homeowners aren't. That twelve TRILLION dollars everyone is worried about just covered a few crappy credit defaults - it didn't save the economy. It didn't create jobs. It paid BP (which didn't lose a penny destroying the Gulf of Mexico)...it saved the wealthy people who own the government...and, in fact, it saved the government itself for a couple of years. But that won't last. The government will fall with the economy.
The 'market' lets individuals gamble with their earned income. Since wealth cannot be created but merely traded by consumers, the best anyone can ever do is take another individual's money or lose theirs to someone else. "But wait! You say! I have made a lot of money in the stock market!" No, you haven't. Stock prices go up because more and more investors compete for the opportunity to suck up corporate risk. But you can't win because the dealer has 200 TRILLION dollars in play hedging your 50 thousand or 50 million. What looks like profit to you is nothing. It's only there to tempt you to keep playing. And the great Monopoly wheels keep rolling.
So you have a hundred ounces of gold bullion, do you? OK. You paid $300 an ounce and it's worth $1,600. You made $130,000. Or did you? If the economy tanks, you didn't. If inflation goes wild, you didn't. If gasoline is $10 a gallon, you didn't. If there is no one to sell it to, you didn't. But let's say you made that 130k. What's the tax? What's the brokerage fee in and out? What's left....$80k? 
What are you going to do with it? You can buy the $80k house you could have bought for $30k back in 2002 - the last time gold was $300 an ounce. Well, not quite. But if you had, and had rented it, you would still own it - AND the gold. Because you would have grabbed someone else's earning stream. 
No matter what you do with that dough - unless you launder it - you won't have made anything - and that's the plan - no one can beat the actuarial tables.
Get out of formal markets. Wall street doesn't need your money - your ohana does if they are going to survive. Invest in simple solutions which cannot fail. Do it now - there is a learning curve and I am already obligated to my tribe.
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