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article imageReview: Peter Schiff and the Black Stockbrokers

By Alexander Baron     Sep 17, 2013 in Business
Black stockbrokers have won a massive settlement from Merrill Lynch over so-called discrimination. Financial pundit Peter Schiff has some strong words to say about it.
Last week, Peter Schiff made a video about this case, a good half hour rant. While it is difficult to disagree with anything he says, he fails to recognise the real issue. No, this case is not about discrimination, it is, as he says, nothing but a shakedown, but the real point, and one that as a broker himself he would never concede, is the fact that we - meaning society as a whole - does not need stockbrokers at all: white, black, or anything else.
Here is a short video by someone who knows the sort of things that go on in these big firms.
There is though a far more fundamental reason society doesn't need stockbrokers, that is because all these big investment firms have no idea in what to invest, when to buy, when to sell, or how much. Overall they succeed no more often than chance would dictate. Remember that experiment in which the parrot picked out shares with its beak? You are much better off managing your own portfolio as the lady in the same article. Still not convinced? Okay, between August 2009 and August last year, HMV shares fell from 120.5p to 3.68p. How many of the big firms saw that coming, or as the Queen of England said to the "experts" at the London School of Economics in her usual diplomatic language, if you people are all so smart, why didn't you see the credit crunch coming?
Where were all the "experts" and "professionals" on Black Monday 2008, or Black Monday 1987 or Black Monday in October 1929? Heck, have they worked out yet that these crashes all happened on Mondays, or the reason why?
How many of these so-called experts sold their shares or their clients' shares in HMV at the 120.5p peak, or at half that, or even at 20p?
Here is a short video showing two stockbrokers at work: one in London, another in New York. The black broker in New York travels to work by taxi every morning; obviously "white privilege" is no barrier for him, but listen to what the other guy says about drumming up business, ie trading for the sake of it, and to make money for him and his employer. This is what these men, and a few women, do all day long, day in, day out. This is what they do, and indeed it is all they do.
Neither America nor the UK nor the world needs stockbrokers or fund managers. People and companies should manage their own portfolios. Ah you say, I wouldn't have the time to do this. Fine! That means you will trade less, buy ten or twenty blue chips and hold onto them. Start with a couple of the big supermarket chains, because even if you have to trade in your light aircraft and your Porsche, and cancel that holiday of a lifetime, you still have to eat, and so does the rest of the world.
Our governments should shut down the stockbrokers and the "investment" banks, and let William Hill, Betfair and other dedicated gaming companies do their jobs, because that is what 95% of so-called professional investing is all about: try to buy low and sell high, do it frequently and charge the suckers mightily for it, win or lose.
The other thing to remember, and it is a big one, is that simply trading shares does not create real wealth. If you guess right, buy at 150 and sell at 300, then you will double your money, less commission, spread and any taxes, of course. But someone else will lose, it is a zero-sum game. And if you guess wrong...
Real wealth is generated by real investment: that can mean capital goods - building a hospital perhaps, or a wind turbine; it can mean consumer goods - anything from a can of baked beans to a new suit; or it can mean services - literally anything from a haircut to a piano lesson. Real wealth is created by human beings doing real work, and increasingly by machines. Creating real wealth is not a zero-sum game, so everyone can benefit. It is time our rulers acknowledged this simple fact, even if Peter Schiff never will.
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