Follow-up to “A Time For Regulators”
  • July 10, 2017 09:04 am
  • by Bill Cara

For years, many of us questioned how the physicals market in precious metals was so different than prices in the securities market, so we referred to it as a manipulated market. Our critics laughed, calling us conspiracy theorists. Then the regulators stepped in after whistle-blowers acknowledged our complaints, telling us we had it right. Prosecution followed after HB&B admitted to illegally setting prices in precious metals as they had in many other markets.

Recently there has been the Saudi Oil Minister and firms like Sprott Asset Management and Raymond James among many who have complained about market manipulation by Humongous Bank & Broker algos, HFT and ETFs. In substance, algorithms, HFT and ETFs are like nuclear energy, useful technologies; but in practice they are used by HB&B as Weapons of Mass Destruction, and must be controlled.

My complaint has been that HB&B, in controlling the creation and destruction of the world’s money, is outside public control as they have become more powerful than governments and its lawmakers. While our securities and futures markets regulators are focused on details, they are overlooking the big picture, probably because they have no ability to alter it. Consequently, HB&B has grown to dominate market trading, virtually unchecked, and the public, directly and through managers, has been quitting, preferring alternative investing in private equity, real estate, cryptocurrency etc. So, I have directly asked our public market regulators to own up to the truth.

Twenty years ago this year, the Executive Director of the Ontario Securities Commission on behalf of the Canadian Securities Administrators asked me to represent the public in a final full-day hearing of all market participants in what was then a full review of the new electronic trading. In the 20 minutes provided to me, I stated simply that the public wanted the financial services industry, which controls debt and credit markets, to not also control our asset and capital markets. As long as HB&B could legally trade in securities as principal, agent, advisor, investment banker, etc, there needed to be checks and balances. Instead, I saw a massive deficiency and much effort on behalf of HB&B to maintain that status quo. After criticizing one company for controlling the upstairs market [ http://financial-dictionary.thefreedictionary.com/Upstairs+market ] between broker-dealers, which manages trades at prices the public could not participate in, calling for them to be regulated like any exchange and opened to public trading, I was rebuked soon afterward. When I finished my presentation, several of their senior executives followed me out of the room literally screaming obscenities and insults at me.

Yet, I was right. I had told the truth. That company was a private exchange. I had even made the point to the presiding nine securities commissioners representing Canada when I pointed out that the day before the hearing one stock on the NYSE had collapsed after the market close because of internal fraud. The next day, close to noon, that stock opened on the NYSE, setting a record for trading, having lost half its market cap. Yet, all night and early morning long that stock was being traded by HB&B (friends, family and best clients) while none of these commissioners personally or me or any person in the room not connected to HB&B was allowed to trade that stock. I even made my point by asking each commissioner as I went down the line of this group of nine sitting on the high bench like Supreme Court justices if I had not stated a fact.

So while one of my readers says he no longer understands me, my point is he has not been listening because I have never changed. At the end of the day, all I can do is state facts and appeal for social equity.

I can give an encyclopedia of fact-based argument to no avail if people are not willing to openly debate me. Others can give me day trading discussion that I won’t listen to unless someone can refute the facts. The facts as I addressed them yesterday are that companies are valuing their assets on an investment basis, not on the basis that HB&B presents as their exchange-traded prices. Because it takes up valuable time, the people I will debate on this matter are regulators. These are the only people in the room who are important.

A case in point for those who were around this blog some ten years ago: I stated that the real estate market would crash because economic principles required sustainable investment returns of much greater than 1% and 2%, which was all what prices then commanded. The only investors buying at the top during the 2006-2007 period were ignorant people being duped by financial media like CNBC and money-laundering drug dealers and (largely illegal) offshore principals. As long as HB&B had use of bad loan syndications and futures backed by phony insurance (AIG, Fannie Mae and Freddie Mac), they were making money and could not have cared less about the outcome that they had to know was soon to occur.

So, when HB&B cranks up equity prices in instruments like the “Big Five” tech stocks and then tells us things like “You are Richer than you Think” and Value Investing is dead, they insult my intelligence.

I refuse to be one of Pavlov’s Dogs.

Enough said.


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