I'm normally pretty sympathetic to all those positions you disagree with.
I think that the state regulation, control, bailouts, and corruption are holding us back.
You can have the state pick winners and bail out idiot investors when they lose their shirt. I would rather make individuals and companies responsible for their own good or bad bets.
For me, part of that means letting people place their bets with minimal state intervention and guarantees about the bet.
I think we probably agree more than disagree. Morgan Stanley and Goldman are not banks so they should not have access to Fed money. And sure, they should be allowed to make whatever bets in whatever size they want - as long as they are small enough to fail. If they are too big to fail them I am on the hook for when their bets go bad.
Any business that is too big to fail is too big.
We successfully broke-up Standard Oil and AT&T and we are much better off for it.
It's a philosophical disagreement - I don't want the government picking who can and can't invest their own money into what investments. Many developed countries, such as Switzerland, have no such laws and the world isn't crashing down for them.
I believe that every financial transaction has the potential to be adversarial, there are many ways outside of investing that the poor are disproportionately exploited (lotteries, debt interest). I think the libertarian perspective is that we shouldn't have protections that prevent people from making personal choices that result in harm to themselves, but only from harming others. I think that transparency for the companies seeking investment, or education of the investors themselves are better ways to restrict investment. Net worth/Income is not a fair criteria.
We can't solve hubris, but perhaps we can highlight it to investors.
Funds that too hard to value or are highly leveraged should switch from regulation by the SEC to regulation by state gambling commissions. It would be tricky to find the right cutoff, though, but if an investor would have to travel to a Native American reservation to buy credit default swaps, they might start thinking about whether they really understand what they're investing in.
The regulations are more about regulating the ability to make money off of naive investors, in my view. You should be able to offer the ability to make risky investments to people, but there should be enforcement mechanisms to ensure you're not misleading people.
I think there's an argument to be made that the current rules create obstacles for Ponzi schemes and other conmen, but I'm genuinely in agreement that restricting action based on personal wealth is a great way to keep the poor from moving up. I think day trading is the worst example, especially when you compare its risks to options which have no such restrictions
I'm not for a laissez-faire society, don't get me wrong.
But a blanket restriction on risk taking as you're hinting at here to 'protect the vulnerable' is a red flag because who decides how wide this net is and the terms of the net. Concretely, what are we allowed to say and not say (the Reddit forum question at stake here), how much are we allowed to have and not have as demonstrable assets to qualify for a trade (Accredited Investor and Qualified Purchaser already exist in the private equity world), etc.
If you take a step back and put a magnifying glass on the principle, protect vulnerable people, you have to ask, what about: smoking, drugs, unhealthy foods in an obesity epidemic, extreme sports, combat sports, driving under the age of 18, and many other questions. What about poor people buying lottery tickets? If I go to a local bodega, I'll stand in line behind people buying lottery tickets, and you can see they are not upper income people.
The world is dangerous and we're all vulnerable, and yes, some more than others. Various societies have to decide on the scale of 0 to 100, how much we allow individual to hurt themselves. The answer will be different in China, Sweden, the United States, and so forth, owing to the values of the societies.
How about protecting vulnerable investors by regulating entities like short selling hedge funds?
As someone with libertarian leanings I find puff pieces like this pretty frustrating. I generally sympathize with the idea of opening up private equity markets to more participation, but I also recognize that there are reasons for these restrictions.
The Senator's article doesn't bother acknowledging why those restrictions were put there in the first place. This sort of thinking give free-market policies a bad name and leads to bad results (like the financial crisis).
Let's take this quote as an example:
"Americans are allowed to gamble unlimited amounts at casinos, and can send donations to charities halfway around the world with one tap of a trackpad. Yet, we are legally prevented from making even modest investments in job-creating small businesses."
This is a bad comparison: Casino's and charities aren't marketed as investments, so people shouldn't have the illusion they're going to get their money back.
The article would be much better if instead drawing a false analogy the Senator would have explained just how the legislation plans to vet the crowdsourcing firms to ensure they're not scams.
Personally, I support the general direction of this legislation, but I object to the pseudo-populist slant of the article. It really weakens the case for freeing up capital markets.
The Libertarian in me agrees but then I think of the psychology of how people approach casino gambling vs business investing. For the former, I feel like people know going in that the odds are in favor of the house and they come to terms with that by saying to themselves that its entertainment. In other words, they kind-of expect to get screwed.
In business investing its the opposite. They really do think they stand a chance at making millions even when the odds may actually be worse than gambling in some cases, especially if they fail to do their due diligence.
So maybe instead of regulation we simply need a legal, notarized document signed for every investment that states "I am aware that I stand a very high chance of losing all of my money and relinquish my rights to sue anyone involved unless outright fraud has been established." Probably still wouldn't work, but its worth consideration.
There was a quip about this along the lines of legislators playing the market was like letting referees make bets on their own games, even while they were being played.
In the case of legislators, it's something to tolerate until it gets out of hand, but when their returns are better than professional hedge funds, it undermines the legitimacy of the institution they're employed to operate on our behalf.
yes, let's not argue one controversial topic by introducing another. we all know HN has a deep disagreement over gun regulations.
I do feel that a lot of the restrictions on amateur trader have the effect of barring "normal" people from making some of the best investments. I ought to be allowed to fail like the best of them. the catch here is that I don't bear all the risk if I fail. if I lose everything on a stupid trade, I am entitled to lean on my fellow taxpayers for support. some balance needs to be struck between allowing me to fail and requiring other people to pick me back up if I do.
I've managed my fair share of big-boy risk. I personally believe myself to be qualified.
People should be permitted to buy publicly traded corporate assets. Your gambling analogy doesn't apply here. Robinhood saw fit to approve these people for brokerage accounts (and in many cases options trading). They were allowed to walk into the exchange so to speak, up until the point that they found a favorable position that they wanted to keep trading despite elevated volatility.
It's not the government's job to tell one class of people that they cannot participate in asset markets, while repeatedly bailing out a totally different class of people that blunders its role in the very same markets.
For the most part, the government shouldn't get to tell people what they can or can not do with their money. We don't currently stop people from going to vegas, buying lotto tickets, buying expensive cars, clothes, buying education, etc.
Said another way, 'anyone' can invest 'any' amount in a public stock today and lose it all tomorrow. Heck people were even suckered into mortgages they couldn't afford by our trusty banks.
I think that the state regulation, control, bailouts, and corruption are holding us back.
You can have the state pick winners and bail out idiot investors when they lose their shirt. I would rather make individuals and companies responsible for their own good or bad bets.
For me, part of that means letting people place their bets with minimal state intervention and guarantees about the bet.
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