What is an investment fund? “A way of investing money alongside other investors in order to benefit from the inherent advantages of working as part of a group such as reducing the risks of the investment by a significant percentage” (Wikipedia). The supposed to be advantages are (once again Wikipedia):
- To hire professional investment managers, which may potentially be able to offer better returns and more adequate risk management.
- To benefit from economies of scale, i.e., lower transaction costs.
- To increase the asset diversification to reduce some unsystematic risk.
None of this is really true. People use Investment Funds because they
- Pay less taxes (none, in many cases).
- Have no time to think much about investment opportunities.
- Have no way to buy shares without a broker (there is a monopoly about there).
- Lack information.
- Are supposed to be officially silly, and therefore all kinds of Governments must protect them.
All this has blown up in modern days. Anybody has in his mobile phone almost the same information as any professional broker, it is free (no transaction costs or very low costs), it is immediate (very short delays), does have time and is pleased to think about his own investments, and regrets to be doomed as the class fool. In fact, those apes who have been condemned by the markets as consistently ignorants are the LSE and Wall Street and the Wherever-in-the-world-Street market gurus, who have been ashamed by their poor results. In fact, not so poor, because they are still rich. Those who are poor are, once again, their clients.
So the only reason why nowadays people invest through Investment Funds is taxation. In Spain, and in many other countries, those who have lent their money to the Bank’ss broker (which is the Bank itself) live in a Tax Heaven that is not in Barbados but right here, in Madrid. It is called Banking Establishment. When they sell and earn money, they do not pay taxes. They will only pay when they take their money out of the Banking system. This is the Governments alliance with the big boys of the money.
The problem is: almost no “Investment” Funds are earning money nowadays, not even those invested in various kinds of Government Bonds. So taxation is not so important. Investment Fund’s managers are not ashamed, though. The just think that people should not be free to invest their own money.
Among the sharks, the most dangerous species is the Short-Selling Shark. Not individuals but flocks of greedy tycoons, grouped in legal but immoral business who want their share of the disgrace when impoverishment is the rule and starving the daily bread for so many. They make their money accelerating the fall of those markets and shares with lesser perspectives −in their view, a slanted opinion which they promote in their own profit− who compound an every-day bigger flock of bearish funds. A dangerous tribe, indeed. And of course, a part of the establishment as they are, without any taxes to pay until they get their money out of the system. Which is never, because this year they still have enough for the yacht’s renting.
The question is: a new kind of investment funds is born. It’s called Reddit. Or Twitter. Or Whatever-The-Social-Media-You-Want if the army is big enough. This free people use their mobile as their sword, their free-of-any-commission trader as a shield, their instinct as information, some money, not high amounts, as their bet, and have only one thing in common: they do not care of taxes. They do pay them, but they do not need to be yoked to the burden of letting a “professional” decide where their own money should go.
Freedom is contagious. And those herds of free investors do have now the tools to be themselves. There is only one trick: they are millions. People in bearish funds, just as bears, are few but big and rich, who put lots of the money they do not deserve available for more harm and therefore more profits (for them). They are millionaires.
The New Investor is not rich but there are millions of them. In fact, it is also a question of numbers. They have more money because they are many more. And quite well organised. Funds tell you with a boring Newsletter you never read how much you have lost. Reddit informs you of which are many other’s perspective and your mobile phone takes you immediately to the battlefield.
Social Media are the new Investment Funds. And this will last. Mainly because the time has come for investors in Funds to pay their share of socialism, just as others do, when they take profit. But also because politicians know −or should know− that they must break their covenant with the rich and bearish and make a New Deal with the Many-And-Bullish. Should they not, we will soon have −this is a Democracy− not just new Funds in Reddit, but also New Politicians.
If you have come to the end of this post, I thank you. Now, if you also share it, perhaps this Blog will have more likes and I yearn to post in the next one why Short Selling is not a game and should be stopped. BANNED.
Thank you.