8/08/2012

The lesson from Stanchart and Barclay



Two giant banks, with world reputations to maintain, were caught with their pants down for playing dirty. And they were not the only two. Stanchart was reputed to have accepted Iran’s money to the tune of $310b when there was a sanction against it. Barclay and many big banks were rigging the Libor that undermined the integrity of the whole banking industry.

Yes, they cheated for the sake of profitability, like drug smugglers cheating with their lives. The latter faced the death sentence if caught, but they kept coming. Nothing is going to deter them from risking their lives to make money. And nothing is going to keep men in high position from their fraudulent and greedy ways to make money.

There is a saying that nobody will go into business to make losses. People will risk their necks and lives just to make money. The stock exchange is claiming how much it has cut trading cost to boost business and equity trading. Cutting cost seems to be their preoccupation and raison d’tre for a blooming stock market. There were some early gains for the exchange, but for how long? Does the cut in trading cost led to a more vibrant market or is it a corollary to the early demise of the stock market? At the rate it is going, the cut in trading cost is immaterial. The vibrancy and participation in the stock market is zilch or nearly there. The volumes reported were mostly clocked by computers. The traders and retail investors have gone into hibernation or dead.

How would cutting of trading cost help in reviving the stock market? Why was it that the market was so vibrant and the industry doing so well when trading cost was so much higher? Is there a correlation? The economists were the champion of liquidity, pumping more money into the economy to keep it growing. Why remove the liquidity in an industry that needs the commission to lubricate and pay for the jobs it supported by cutting cost, cutting the fuel it needs?



From what is happening, the lower trading cost is putting an end to the industry and it is only a matter of time before the sun set on this once lucrative and active industry. The trading cost is not a real issue in a healthy market. The trading cost is only material to those who need to capitalize on small margins and marginal cost to make money at the expense of small retail traders.

Is low trading cost a gimmick or a deadly concoction that will send the stock market to the graveyard? Many traders and retail investors are already there, dead and buried. Obviously the low trading cost did not do them any good. In fact they could be the direct victims of low trading cost.

What do you think? Still sleeping like Rip Van Winkle?

12 comments:

Anonymous said...

What lesson are You talking about?

Our talented Rulers are teachers to the World, You know?

Are there others better at making money than our Rulers?

patriot

Eagle's 2nd Eye said...

The lesson is that the capitalist world is evil. They will hoodwink you and trick you of your money when you are not careful.

We should trust nobody except oursleves and those who are not rich and not powerful.

Anonymous said...

As I said before,Singapore equities are dead.Just look at the daily volume hovering between 1 to 1.7 billion shares,dollar value invariably less than $1B,with 80 to 90 percent volume concentration
0m penny stock as low as 1 cent a piece.
This is despite of massive IPOs in past years.
The ST Index has been going up but just look at the index composition.
Also,the recent bid for APB by two foreign breweries above$5.1B
with price traded as high as $52,20 and the low volume it registered
suggested the big fish are the owners of these shares and not the retail investors.

Anonymous said...

They are dominated by big fishes. Retail investors with their hard earned money are better off not dabbling with shares. Unless it is a rich retail investor then it is a different story. Gamble or invest what you can afford to lose.

Anonymous said...

There are still good shares/companies listed on the SGX.

But they are the older companies.
Listed before SGX started to operate on a "disclosure based regime".

Anonymous said...

Are there any decent people in SGX, MAS or the govt who would want to clean up the shady ongoings in the stock market and protect the small investors? Or everyone is minding their own businesses as long as they are collecting their millions?

Anonymous said...

The small investors need to be protected at all cost. They must be allowed to only make profits, they must not lose any money playing the stock market.

Anonymous said...

The biggest banks in the world are all con and they cheat the whole world,the earlier one knows the better.Many people refuse to know this fact.

Chua Chin Leng aka redbean said...

Anon 10:01, do you know how the present stock market works? Do you know why the retail traders have all lost their pants and fleeing the market?

I agree with anon 7:23. The western/american financial systems are run by crooks of the highest order and making money through deceit and illegal means, cheating, money laundering, creating dubious worthless products that are toxic, and manipulating the books.

GIC and Temasek better keep their money in the CPF and stop buying foreign banks.

Anonymous said...

redbean, I do not know how the present stock market works, but I do know the retail investors have to be protected at all cost. And the best person to educate them is the stockbroker in which they have a client broker relationship. The broker has a responsibility to tell the client all risks.

Chua Chin Leng aka redbean said...

The retail investors can only be protected by a system that is fair to all parties, a level playing field. Even a jackpot machine is fair as the gambler knows that it is a jackpot machine with unfair odds.

MAS and SGX needs to explain to all investors how the hi speed computer works, how algo works and whether they are fair to all the investors, particularly the retail investors.

To me it is simply cheating when the big boys can plug in their high speed computers to the exchange, monitor the buy and sell and have their computers compute to buy/sell at a price that guarantees profit.

This is like playing poker when the other party knows your card and you didn't know.

The retail investors have the right to know how the high speed computers and algo affect them and whether they are put at a disadvantage.

Anonymous said...

If the broker can't even figure out how the system works, and thinks that the system works against them, then how can retail investors even venture? It is thus in your self interest to find out how exactly this computer trading works, whether it is peculiar only to Singapore, and if and how unfair it is, and thrash it out with your bosses.