8/22/2012

An industry dying



The rot is showing and starting to hurt. The first to be axed will be the remisiers. Following closely will be the backroom staff, then the dealers and the analysts. Eventually the brokerage will simply shrink to a skeleton crew.

How could that be? With investments in the hundreds of millions for out of this world high speed computers, big funds with their high speed sophisticated machines, and product managers with their sophisticated derivatives and wonderful paper products, and with sales volume chalking up double digit gains, why is the industry drying up, and dying?

There were all kinds of gimmicks to increase sales but mostly elementary. Most of the time it is just barking up the wrong tree. What is the real problem in the stock market? Why are the gimmicks of no lunch break, continuous trading, minimal commission, minute bid sizes, cutting more commission to gain market share, sophisticated high speed computers, more derivatives, all proved unworkable? And don’t forget the setting up of many foreign funds to gamble in the stock market, with their expertise and grand machines, it is simply not working.

Does anyone know? Does anyone want to know? Does anyone bothers to know why the stock market is turning turtle? It is time to set up feedback units and ask the people to come up with the answers. Yes, more feedback is the solution.

What is at stake, 10,000 jobs? That is inconsequential. It is the whole finance and banking industry, the financial centre, the companies that needed to raise funds in the stock market that are at stake.

When the financial crisis hit the US, they scrambled for more liquidity, more Quantitative Easing, to provide money to support the industry. What was being done here? Squeeze the liquidity, cut the commission to the barest. Has anyone forgotten that the industry needs the commission to pay for the overheads, to pay for the salaries of all the staff, the fund managers etc? The industry cannot survive without the oil to lubricate the system.

Does anyone know that when commission was 1% we had the best bull run in history? What more tricks are up in the sleeves to save the dying market that no one wants to talk about? How did the industry ended up in this pathetic state? Self inflicted, ignorance or tidak apa, leave it to the experts? Bring in the gods and all will be fine.

22 comments:

Anonymous said...

This is an important industry to be run to the ground. The deaf frogs are not listening. Nothing affects them.

At ground level, the top executives, fund managers, analysts, are mostly high income earners with big mortgages to service. If they lose their jobs, it can be very painful.

Matilah_Singapura said...

Creative destruction is a necessary consequence of growth.

Machines can work faster, cheaper and 24/7. The industry is carrying too much fat, and thankfully that fat is now being trimmed.

Machines can now trade several thousand times per second. If that is the case, how to expect to pay commission of 1%? Impossible. The commissions will end up exceeding the value of the trades!

Commissions need to be rock bottom so Uncle-Aunty Ah Tee Heartlander bin Void Deck s/o GRC can get into the game of trading stocks, and more sophisticated instruments like derivatives.

Heartlander vs Machine Trading. Wah, what a great show!

Got Greed?

Chua Chin Leng aka redbean said...

Matilah, this is an area that you are talking out of your depth. Machines that traded millions of trades in seconds are meant for the casinos, not the stock market. But I must admit that many fools think like you without a clue what is going on in the industry.

Anonymous said...

This is NOT creative destruction.
It's bad management.

It's actually called "The death spiral".
There are various scenarios of the death spiral.
But the essence is the same.

Incorrect cost cutting decisions.
Results in further business deterioration.
Which leads to further cuts.
And further subsequent business deterioration.

Example:
http://www.accountingcoach.com/terms/D/death-spiral.html

Other examples:
https://www.google.com.sg/search?q=business+meaning+of+%22death+spiral%22&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a

Anonymous said...

The destruction started the moment they turned the stock market into a casino for gamblers and gambling machines. And the idiots did not even know what is happening.

Matilah_Singapura said...

anons:

Call it what you want. I like the term "creative destruction" because it annoys the fuck-heads who refuse to accept objective "reality".

redbean: I couldn't care less if people/ machines make the stock markets into casinos. I'm just waiting to get my jollies from unenlightened and jack-ass peoples' devastating fear and greed fueled mistakes.

Gee, I'm a cruel bastard ;-)

Got cheap entertainment?

Matilah_Singapura said...

P.S Anons:

It takes a few attempts and mistakes which affect the lives of people to get a system to a point where it will be "functional".

No one gets it in the first few rounds. To make an omelette , some eggs will be broken. To make a tasty omelette, you not only have t break eggs, but you have to introduce new elements.

Too much emphasis is placed on the "human cost" of change. Too little emphasis is placed on the human BENEFIT of change.

Got flexibility?

Veritas said...

We do not even have a market. The market is fragmented in black pools, that ordinary investors cannot access. Not only trading is rigged, the books and financial reports nowadays are no longer trust worthy. History has shown in 1929 that capitalism fails. The Great Depression brings Hitler. The 1929 saga ended in 1945, a 16 years of transition before a new order began.

Hitler blaming of speculators in destroying Germany are not entirely baseless. Since Hitler, Germany has been reining the power of banksters until very recently. Even then, Deutsche Bank still do not as the same clout as Goldman Sach. In 1929, the hardworking German see themselves wiped out and those parasitic bankers/speculator prosper and pee on everyone.

I believe similar things will happen soon. I hope there will be less bloodshed.

Anonymous said...

The imminent death of the Singapore
Stock Market,a major provider of capital and liquidity in a financial center,is apparent and can only well be attributed to LKY
disastrously successful STOP AT TWO policy.
Sure,the brokerage industry can employ foreign analysts,backroom staff,chartists what have you,but there is pratically a total absence
of locally born participants in the market

Anonymous said...

The industry is in a state if denial. No one want to see the elephant in the room. The impact of a stock market demise will spread across the entire economy.

Anonymous said...

We should celebrate the closing of a casino and very big one, no?

Anonymous said...

Years ago, I traded through my remisier paying 1%. And most of the time I would just ignore my remisier's recommendations which more often than not, turn out to be wrong, or the stock would just spurt up 20 cents and then collapse. So now, why would anybody want to pay 1% when he/she can trade through internet and pay much less?

True Patriot

Chua Chin Leng aka redbean said...

Trading using the internet is an option for those who did not want to pay for the services of remisiers. That is fair. I have clients who are also trading thru the net.

But many investors, including you, are missing the woods in the forest. Please read all my postings on the stock market and hope you can fish out the real problem that I have highlighted. I have made it very clear sort of pointing a finger at the hot button.

The market is being strangled to death not by the cost of comission. It is much much more serious and more sinister.

Anonymous said...

very stupid for companies to cut staff and reduce pay to incrase profit margin .. cos such impact are only short term.. they need to pay staff well so that the purchasing power as a whole can be raised. Only when people start to spend money that these companies have demands for their products. increasing sales and revenues is definitely more viable than cutting cost in the long run. Afterall the government always need to pump money into the economy in bad times. so keeping the purchasing power high is a good way to keep economy growth. not cut costs and have cheap labour.

Anonymous said...

To me, nothing has changed except that my trading cost is much lower now. I m not the trader sort who trades in and out actively. I m the Warren Buffett type who look at the stock fundamentals and invest when it is cheap relative to value and hold.

Computer trading, if it really like what Mr Chua says, is so sinister, then the positive side to it is it has chased out the stock traders a.k.a retail gamblers on margin. Such traders are better off keeping their money safe in the bank, computer or not, they are going to lose their money anyway, to the big boys.

True Patriot

Veritas said...

////
ery stupid for companies to cut staff and reduce pay to incrase profit margin .. cos such impact are only short term.. they need to pay staff well so that the purchasing power as a whole can be raised. Only when people start to spend money that these companies have demands for their products. increasing sales and revenues is definitely more viable than cutting cost in the long run. Afterall the government always need to pump money into the economy in bad times. so keeping the purchasing power high is a good way to keep economy growth. not cut costs and have cheap labour.
////

You are into "Socialism". Capitalism has their own sets of BS. If the rich does not earn more, then $$$ will not trickle down. And if staff get paid too much, the rich cannot invest.

And if you tax the rich, that the aggregate "savings" (aka hoarding) of the rich will go down. Without savings, there will be no investments. And if the rich do not fire workers, there will be no innovation. For example, the old days shit collector got to be fired, as the society has invented latrines. Keeping workers is reactionary.

Who is right? Ultimately the truth is somewhere in between but closer to the socialist idea. Unfortunately, no intellect in university especially economics professor is willing to tell the truth.

On the contrary, all the intellect nowadays invent all sorts of theory to help the rich to exploit people.

Chua Chin Leng aka redbean said...

Hi Veritas, in uniquely Sinkieland, it is the poor that are saving and hoarding in the CPF to let the rich gamble with the money and to feed on it.

Anonymous said...

Capitalism or socialism.
It does not matter.

Just make very sure you understand where your self interest lies.
And vote accordingly.

Sadly.
Most Singaporeans are so trusting, naive or stupid.
They don't even know where their self interests lies.
And subsequently end up voting for the wrong people.

Anonymous said...

Many Sinkies even said can't take back CPF never mind lah.

Anonymous said...

MAS and SGX owe the investors an explanation on how the high speed computers work and if the computers are cheating on the small investors.

Anonymous said...

Let it dies,
Who cares!

Anonymous said...

Diamond, gold and silver have been touted as worthwhile investments.

Reason?

Bcos, the India Indians and the China Chinese are reported by our medias, to be keen on the Above.

Lolx.........