Thursday, October 27, 2011

On-Line Betting and Bass-O-Matic

On-line investment companies are very aggressively hawking their wares to average television watchers, a bit like Dan Akroyd’s Saturday Night Live, ‘BassOmatic” TV ads.  The online investment ads try to convince ill-informed people to gamble with their savings.  What they are doing is ethically very questionable.  If a gambling establishment did the same thing, they would have the US Justice Department on them immediately, since internet gambling, that accepts bets from customers in the United States violates Sections 1084, 1952, and 1955 of Title 18 of the United States Code, each of which is a Class E felony. The bets made at on-line investment companies are called investments, but they still amount to bets.

Today most Americans have little money to begin with, as evidenced by limited retirement savings, which amounts to around $22K for 35-44 year olds, and $6300 for people under 35, a mere pittance in terms of their life time needs.  Average Americans know very little about stocks, bonds, futures, mutual funds, ETFs, FOREX, gold, and all kinds of exotic “financial instruments” these firms offer.  Financial Instrument has a technical sound to it, a bit like a proctoscope. 

Companies like Scott Trade, E-Trade and TD-Ameritrade are peddling their junk on television all hours of the day and night to people, many of whom badly need money. These companies are like drug dealers standing on the corner offering poor kids their first hit of Coke for next to nothing, knowing that once they’re hooked, they’ve got ‘em. When people are desperate for money, they will do all kinds of irrational things they later regret, that they believed at the time might make them an easy buck, like buying lotto tickets or signing up for electronic online trading.   

One of the online trading companies begins their ads, “You can open your account and begin trading (i.e. gambling) within 10 minutes.” That’s right. Any yokel like you or me can sign up and begin frittering away what little money we have by signing on the dotted line and providing a few other details, like that they are 18 years old or older.  These companies try to sink the hook in by making you think you’re special and actually a very shrewd investor.  The strategy reminds me of devious computer or home sound system sales person trying to convince the newbie that the beautifully streamlined device s/he is ogling and fondling, the shiny one with the glowing blue-green LED panel, “is only for the power user.”  The newcomer is dying to think they are a power user, even though he just learned where the on off switch was last week.  TD Ameritrade offers “tools for serious traders.”  And as a “serious trader,” of course you will be delighted to learn that “SPX is within its Bollinger Bands,” which is announced breathlessly near the top of their home page.  Whew! You can’t believe how relieved I was to learn that, which only us “serious traders” would understand.

They urge you to “implement your unique trading strategy”(i.e. just like you do when you’re playing poker), and emphasize how essential it is to get streaming real-time data, so you can invest and trade anytime, anywhere on your BlackBerry smartphone, iPhone, iPad, or Android,using cutting edge investment tools,” like when you’re out standing in line waiting for a job application or at the welfare office. They want you to be constantly thinking about, fretting over and pondering your puny investments, absolutely relentlessly.  Every time you change your bet they make money.

And of course there is the E-Trade baby making trades via his tablet computer in his crib, where’s he says he’s  “In Time Out’ for riding his dog like a horse, suggesting, just suggesting, you understand, that it’s reeealy easy to become an E-Trader and make money hand over fist.  They didn’t exactly SAY that even baby could do it, did they, not exactly in those words?

The software company Stock Market Studio sells graphic projection software used by investment professionals, but which they sell to the general public as well.  On their website they sum it up nicely.  “Here you can test your favorite trading techniques and strategies, evaluate and compare effectiveness of various trading systems. Think about our site as of a training polygon, a research laboratory, or, better, an art studio.  Well, after all, trading is an art!”   Got that, trading is an art, and since it’s an art, anyone can do it given they have crayons and a coloring book.   

Surely, you don’t doubt for a minute that your average high school grad or college French  or Anthropology major, who gets entirely flummoxed by seeing the isotherm lines on television weather broadcasts, would thrive on messing with those projection charts, with their whisker box error bars and aperiodic squiggles and dashed lines going off this way and that.  I especially like the ones that include the full moon, really, no kidding, the full moon!  It has been widely demonstrated, that even college students in the sciences often have difficulty interpreting graphs correctly.  What does that say about the likelihood a typical high school graduate or a non-scientist/non-math or statistics major will be able to so on their own with these investment projection graphs?

According to Common Dreams.Org,,  “despite the growth in stock ownership in the US, more than half of American households still do not possess a single share. And those that do generally don't have the kind of portfolio that would replace the level of security found in government programs. It is entirely possible for an American family to have both a growing stock portfolio and falling in economic security at the same time….  Since 1989, non-elderly middle income families actually experienced the largest losses in wealth,” stock investments or not.

And of course those companies that bombard viewers with their misleading electronic investment ads offering a quick easy way to get rich, are required by the Feds to provide a bunch of warnings and disclaimers at the end of their television ads. They amount to saying you fully understand that you are doing all of this investing (i.e. betting) at your own risk, and that they are not responsible, and that you may well lose all of your life savings (not exactly, but that’s more or less what it means).  The words flash that on the screen for several seconds, all in about 8-point font that you couldn’t possibly read if you wanted to. Example: The E-Trade disclaimer totals 7200 words (which I actually counted), which at the average reading speed of 180 words per minute adults in the US would require about 40 minutes to read… two-thirds of an hour just to read their lousy warning and disclaimer, which they give you 10 seconds to read.  Sleazy? What do you think?

When my father was a kid on a in Northern Minnesota around 1920 he told me about the snake oil salesman standing on a wooden box out front of the drug store in the small town six miles from their farm, hawking their linament and nostrums, “Guaranteed to cure all your aches and pains, gout and bowel problems.”  Sometimes things never change in America.


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