Counterparties: The broken brokerage industry … Where the hell should you put your money these days? If you're like most Americans, you probably haven't saved enough for retirement. That the stock market is flirting with an all-time high isn't actually helpful — it'll make it that much harder for savers to catch up. People used to listen to brokers for this kind of thing, but the brokerage industry isn't what it used to be. "Commissions are drying up," Zeke Faux wrote in October. The industry's fees are down 31% since 2009, and average daily volume is down 36%. "It's an impossibly tough business," the CEO of ThinkEquity said. – Reuters
Dominant Social Theme: Look, we're going through a rough patch. Just put your money in the stock market and ride it out …
Free-Market Analysis: So the brokerage industry is reaping what is has sown. But really, the brokerage industry, in the US especially, is made up of individuals young and old who are just trying to make a living and are subject to vast and powerful forces beyond their control. It is no wonder the brokerage model is failing, given the way the larger money business works in the US and elsewhere.
But even though markets are subject to many unacknowledged influences, the Invisible Hand of competition does yet operate. Companies of note that are innovative and technologically adept do provide investors with legitimate outcomes and profitability.
Probably the way to reap benefits from such companies is not to use standard services that have evolved in the 20th and now the 21st century. The article excerpted above does give us a good, brief overview of these services and their struggles but it is reluctant to draw the conclusion that must be made, given the current situation. Here's more:
… LPL Financial [has] quickly become the largest nation's fourth-largest broker, just behind traditional Wall Street powers like Merrill Lynch and Morgan Stanley. LPL's lower-cost model uses brokers that are "essentially contractors", and they've targeted rural America. They've also been hit with more than their share of penalties "for selling complex investments to unsophisticated investors, for speculative trading in customer accounts, and, in a few cases, for outright stealing from clients."
Unlike its competitors, the company doesn't have its own investment products. (JP Morgan has been accused of favoring its own financial products, but it's also a classic stockbroker conflict.)
Then there's the question of whether you should use a brokerage firm at all — especially when lower-cost services like target-date funds or Wealthfront do all the work for you and are showing real promise … In the end it may be the case that our financial goals are simply too ambitious and that we need to lower our sights. What is clear is that we as a society have failed and are continuing to fail the average saver.
Okay, no … we disagree. "Society" has not failed. YOU have failed, if you trust others to provide systems and methodologies that will provide you with the wealth and leisure time that you seek – especially in old age.
Our paradigm, the one we try to preach here, DOES work however. It cautions that modern economies are subject to the whim of central banks and that endless surges of money printing cause both investment euphorias and then terrible busts.
People get caught in these busts because they do not understand the modern realities of the West's managed money system. As a result, people withdraw from various markets and these days people are often too frightened to do anything at all.
But you don't have to be so scared. You CAN figure out what to do. Use the Internet to study free-market economics and tune out mainstream rhetoric that treats "investments" as something divorced from the larger monetary control of huge sociopolitical entities.
Understand the generalities of business cycles and monetary history and you'll be in a much better position to do what needs to be done to protect your wealth and support yourself and your family.
Education of this sort is far preferable to asking, "Where the hell should I put my money these days?"
First of all, count on yourself.