SoT Market Update: Wall Street Wants To Trap Your Money
-- Published: Thursday, 17 September 2015 | Print | Disqus
By Dave Kranzler
SEC Chairman, Mary Jo White, is not on your side. If she had any sort of backbone and wanted to protect the public from Wall Street’s den of thieves, there would be people going to jail right. She does not have your best interests at heart. BlackRock? They just want all your money. – Rory Hall, Shadow of Truth
Consider yourself warned. In fact, the first warning from the elitists was fired in January 2010, when the SEC voted almost unanimously to allow Money Market Funds to suspend investor redemptions during periods of “extraordinary circumstances.” Of course, it’s during those periods of time – when the financial system is melting down – that investors would want to get their money out of money market funds.
As of September 10, a total of $2.66 trillion was held in money market funds. I would surmise that 98% of the investors in these funds have no idea that their money will be “frozen” the next time financial panic hits this country. Undoubtedly their “trusty” financial adviser never disclosed the existence of “redemption gates” on money market funds. Returns are so skinny on these funds there’s really no reason to leave your money in them. The eventual cost of the convenience these funds offer will be the amount of your investment.
It was only a matter of time before the trend in redemption gating the fund industry moved to mutual funds. While the latest proposal being considered by the SEC is not a hardcore redemption gate, the agency is looking into allowing mutual funds to impose a surcharge on investors who want to get their money of these cesspools during times when the market is dropping quickly.
The current proposal would allow mutual funds to charge extra fees to investors who leave the fund when the market is taking a dump. The rationalization being that there’s extra “trading costs” involved in selling securities when the market is “volatile.” This is highly misleading because “trading costs” are accounted as operating costs, which are costs incurred ratably by all investors in the fund.
It’s interesting that these “extra costs” didn’t seem to occur in 1987 when the stock market dropped in 22% in one day. Or in March 2000, when the Nasdaq fell 93% over the next 29 months. Or in October 2007, when the S&P 500 fell over 50% over the next 17 months. These were all periods of “high volatility” and fund investors were fleeing en masse.
And, of course, there didn’t seem to be any “extra trading costs” involved when the market volatility was heavily skewed toward the upside starting in April 2009 and the masses were rushing back into these funds.
Make no mistake about it, this is the next step closer toward enabling the mutual fund industry to impose redemption gates on all mutual funds. After all, what better way to help the Fed prop up a collapsing stock market – which will be collapsing for valid fundamental reasons – than to prevent investors from taking their money out.
Wall Street, with the Government’s full backing, has two goals in mind: 1) seduce the retail public into putting all their money in mutual funds, especially funds loaded with hidden risks and derivatives; 2) figuring out how to force them to keep it there. Be clear about one thing, the entire Governmental system is moving toward totalitarianism. One of the cornerstones of a totalitarian system is capital controls.
Rory and I discuss the latest scheme by Wall Street to trap your money in this Shadow of Truth Market Update:
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