However, we humans often compare ourselves to whoever is better off than us and feel jealous. So instead of appreciating good roads, food, shelter, health care, etc. we see where things could be better (either our parents had it a bit better or these people I see on TV or in this other country, etc.). It is good to see how we could improve if we then take action to improve. To just be frustrated that others have it better doesn’t do any good, it doesn’t seem to me.

There are significant ways governments can help or hinder the economic well being of their citizens. I am a big believer in the power of capitalism to provide wealth to society. That isn’t the same as supporting the huge push to “crony capitalism” that many of the political parties throughout the world are promoting. The “capitalism” in that phrase exists for alliteration, the real meaning is the word crony.

street scene in Seoul, South Korea (photo by John Hunter)

These Are the World’s Most Innovative Economies

These type of rankings are far from accurate, what does most innovative really mean? But they do provide some insight and I think those at the top of the list do have practices worth examining. And I do believe those near the top of this list are doing a better job of providing for the economic future of their citizens than other countries. But the reality is much messier than a ranking illustrates.

With that in mind the ranking shows

1. Korea
2. Sweden
3. Germany
4. Switzerland
5. Finland
6. Singapore
7. Japan
8. Denmark
9. USA

One thing that is obvious is the ranking is very biased toward already rich countries. When you look at the measures they use to rank it is easy to see this is a strong bias with their method.

China is 21st. Malaysia is 23rd and an interesting country doing very well compared to median income (I am just guessing without actually plotting data). Hong Kong is 35th, which is lower than I imagine most people would have predicted. Thailand is 44th. Brazil is 46th and even with their problems seems low. Brazil has a great deal of potential if they can take care of serious problems that their economy faces.

In a previous post I examined the GDP Growth Per Capita for Selected Countries from 1970 to 2010, Korea is the country that grew the most (not China, Japan, Singapore…).

Related: Leading Countries for Economic Freedom: Hong Kong, Singapore, New Zealand, Switzerland – Economic Consequences Flow from Failing to Follow Real Capitalist Model and Living Beyond Our Means – Easiest Countries in Which to Operate a Businesses (2011)

The damage to the USA economy due to inflated health care costs is huge. A significant portion of the excessive costs are due to policies the government enacts (which only make sense if you believe the cash given to politicians by those seeking to retain the excessive costs structure in the USA the last few decades buy the votes of the political parties and the individual politicians).

In 2015, Humira (a drug from Abbvie to treat rheumatoid arthritis that is either the highest grossing drug in the world, or close to it) costs $2,669 on average in the USA; $822 in Switzerland; $1,362 in the United Kingdom. This is the cost of a 28 day supply.

All the prices shown here are for the prices reported are the average allowed costs, which include both member cost sharing and health plan payment. So it only includes costs for those covered by health plans (it doesn’t include even much larger price tags given those without insurance in the USA).

Harvoni (a drug from Gilead to treat hepatitis C is also near the top of drugs with the largest revenue worldwide). This is also a drug that has been used as a lightning rod for the whole area of overpriced drugs. One interesting thing is this is actually one that is not nearly as inflated in the USA over other countries nearly as much as most are. Again, for a 28 day supply the costs are $16,861 in Switzerland; $22,554 in the United Kingdom and $32,114 in the USA. Obviously quite a lot but “only” double the cost in the USA instead of over triple for Humira (from Switzerland to the USA).

Tecfidera is prescribed to treat relapsing multiple sclerosis. The cost for a 30 day supply vary from $663 in the United Kingdom to $5,089 in the USA ($1,855 Switzerland).

There are actually some drugs that are more expensive outside the USA (though it is rare). OxyContin is prescribed to treat severe ongoing pain and is also abused a great deal. The prices vary from $95 in Switzerland to $590 in the United Kingdom ($265 in United States).

The report also includes the cost of medical procedures. For both the drugs and the procedures they include not only average but measures to show how variable the pricing is. As you would expect (if you pay attention to the massive pricing variation in the USA system) the variation in the cost of medical procedures is wide. For an appendectomy in the USA the 25th percentile of cost was $9,322 and for the 95th was $33,250; the average USA cost was $15,930. The average cost in Switzerland was $6,040 and in the United Kingdom was $8,009.

As has been obvious for decades the USA needs to stop allowing those benefiting from the massively large excessive health care costs in the USA from buying the Democrats and Republicans support to keep prices so high. But there has been very little good movement on this front in decades.

Related: USA Heath Care System Needs Reform – USA Health Care Spending 2013: $2.9 trillion $9,255 per person and 17.4% of GDP – Decades Later The USA Health Care System is Still a Deadly Disease for Our Economy – USA Spends $7,960 per person Compared to Around $3,800 for Other Rich Countries on Health Care with No Better Health Results (2009) – Drug Prices in the USA (2005)

Effectively the rich end up subsidizing the low rates for the poor, which is a very sensible setup it seems to me. The market functions fairly well even though it is distorted a bit to let the poor (or anyone that uses very little electricity) to pay low rates.

In a country like Malaysia as people become rich they may well decide to use a great deal of electricity for air conditioning (it is in the tropics). But their ancestors didn’t have that luxury and having that be costly seems sensible to me. Allowing the poor to have access to cheap electricity is a very good thing with many positive externalities. And subsidizing the rate seems to be a good idea to me.

Often you get bad distortions in how markets work when you try to use things like subsidies (this post is expanded from a comment I made on Reddit discussing massive bad investments created by free electricity from the power company to city governments – including free electricity to their profit making enterprises, such as ice rinks in Puerto Rico).

View of downtown Johor Bahru from my condo (a small view of Singapore visible is in the background)

With the model of low residential rates for low usage you encourage people to use less electricity but you allow everyone to have access at a low cost (which is important in poor or medium income countries). And as people use more they have to pay higher rates (per kwh) and those rates allow the power company to make a profit and fund expansion. Often in developing countries the power company will be semi-private so the government is involved in providing capital and sharing in profits (as well as stockholders).

The USA mainly uses central air conditioning everywhere. In Malaysia, and most of the world actually, normally they just have AC units in some of the rooms. In poor houses they may well have none. In middle class houses they may have a one or a couple rooms with AC units.

Even in luxury condos (and houses) they will have some rooms without AC at all. I never saw a condo or house with AC for the kitchen or bathrooms. The design was definitely setup to use AC in fairly minimal ways. The hallways, stairways etc. for the “interior” of the high rise condos were also not air conditioned (they were open to the outside to get good air flow). Of course as more people become rich there is more and more use of AC.

Related: Traveling for Health Care – Expectations – Looking at the Malaysian Economy (2013) – Pursuing a Growing Economy While Avoiding the Pitfalls That Befall to Many Middle Income Countries – Singapore and Iskandar Malaysia – Looking at GDP Growth Per Capita for Selected Countries from 1970 to 2010 – Malaysian Economy Continues to Expand, Budget Deficits Remain High (2012) – Iskandar Malaysia Housing Real Estate Investment Considerations (2011)

With each loan you may lend as little as $25. Lending Club (and Prosper) deal with all the underwriting, collecting payments etc.. Lending Club takes 1% of payments as a fee charged to the lenders (they also take fees from the borrowers).

Borrowers can make prepayments without penalty. Lending Club waives the 1% fee on prepayments made in the first year. This may seem a minor point, and it is really, but a bit less minor than I would have guessed. I have had 2% of loans prepaid with only an average of 3 months holding time so far – much higher than I would have guessed.

On each loan you receive the payments (less a 1% fee to Lending Club) as they are made each month. Those payments include principle and interest.

This chart shows the historical performance by grade for all issued loans that were issued 18 months or more before the last day of the most recently completed quarter. Adjusted Net Annualized Return (“Adjusted NAR”) is a cumulative, annualized measure of the return on all of the money invested in loans over the life of those loans, with an adjustment for estimated future losses. From LendingClub web site Nov 2015, see their site for updated data.

Lending Club provides you a calculated interest rate based on your actual portfolio. This is nice but it is a bit overstated in that they calculate the rate based only on invested funds. So funds that are not allocated to a loan (while they earn no interest) are not factored in to your return (though they actually reduce your return). And even once funds are allocated the actual loan can take quite some time to be issued. Some are issued within a day but also I have had many take weeks to issue (and some will fail to issue after weeks of sitting idle). I wouldn’t be surprised if Lending Club doesn’t start considering funds invested until the loan is issued (which again would inflate your reported return compared to a real return), but I am not sure how Lending Club factors it in.

Return shown for my portfolio. My portfolio is currently 3% A, 25% B, 44% C, 19% D and 9% E loans. The terms of my loans are 81% 36 months and 19% 60 months.

They also don’t credit the money to you until what seems like about 5 days after the payment has been received. This also reduces your achieved rate of return, from the nominal rate charged to the borrower. I would like to assume they factor this into their calculated returns, but given the other decisions they make when calculating the return I am not certain they do.

In any case the real return is still very good compared to my other options and so if they inflate the results by 40 basis points (I don’t know what the actual discrepancy is and the uncertainty looking forward is much larger than that anyway). The expected rate is likely around 5-8% compared to about 0-.25% for me, so the slight exaggeration doesn’t matter to me.

For my portfolio (shown in the graphic above) Lending Club shows a current return of 12% with an expected return through the completion of the outstanding loans of 5.7% to 8.5%. The current return is very inflated when your portfolio is very new as you have experienced no, or very few, defaults. I will explore historical returns, returns as the portfolio ages and the expected returns in a future posts. My portfolio is currently 3% A, 25% B, 44% C, 19% D and 9% E loans. The terms of my loans are 81% 36 months and 19% 60 months.

You can read details on the loans (and filter loans on those details) for things such as: loan type, state of borrower, debt to income ratio, months since a delinquency, months since a default, monthly income, credit score, own/mortgage/rent. Lending club scores the loan quality and determines the loan interest rate depending on that (and 36 month versus 60 month term).

The more risk taken by borrowers the higher the expected returns. So if you take riskier loans you get a higher interest rate on the loan and historically even after losses from defaults the returns are greater. This brings up my biggest concern with these loans: underwriting risk. As long as Lending Club does a good job evaluating underwriting risk and properly assigning interest rates commensurate with that risk this should work very well as an investment.

As long as you have a well diversified portfolio of personal loans there is a long track record of the risk. And while plenty of risky personal loans will default, and more will default if the economy has a downturn the interest rates on the loans provides good income even after such losses. And even if things go poorly the actually losses of capital should be small (over the whole portfolio).

The discussion of investing in peer to peer loans using LendingClub will be continued in next post (next week, updated to add link to the post: Peer to Peer Portfolio Returns and The Decline in Returns as Loans Age).

Related: Looking for Yields in Stocks and Real Estate (2012) – Taking a Look at Some Dividend Aristocrat Stocks – Looking for Dividend Stocks in the Current Extremely Low Interest Rate Environment (2011) – Where to Invest for Yield Today (2010)

I think one of the things I would do is to make it cost more to hire foreigners. Just slap on a tax of something like $10,000 per year for a visa. If what I decided was actually going to adopted I would need to do a lot more study, but I think something like that would help (maybe weight it by median pay – multiple that by 2, or something, for software developers…).

It is a complex issue. In general I think reducing barriers to economic competition is good. But I do agree some make sense in the context we have. Given the way things are it may well make sense to take measures that maybe could be avoided with a completely overhauled economic and political system.

I believe there are many good things to having highly skilled workers in your country. So if the problem was in recruiting them (which isn’t a problem in the USA right now) then a tax on the each visa wouldn’t be wise, but I think it might make sense now for the USA.

I think overall the USA benefits tremendously from all the workers attracted from elsewhere. We are much better off leaving things as they are than overreacting the other way (and being too restrictive) – but I do believe it could be tweaked in ways that could help.

Outsourcing Made by India Seen Hit by Immigration Law

Related: Relocating to Another Country – Working as a Software Developer – Science PhD Job Market in 2012 – Career Prospect for Engineers Continues to Look Positive

Discover to refund $200 million to credit card customers

It is very good to see the Consumer Financial Protection Bureau taking action to protect the consumers from the financial institutions continued efforts to evade the law and take a little bit from millions of consumers. This type of behavior has been tolerated previously, and should never have been. The financial institutions strategy to take small amounts from millions of people was a wise way of dealing with the tendency of law enforcement to ignore such “small infractions” – they didn’t seem to bother seeing that taking small amounts from millions of people results in hundreds of millions of dollars in ill gotten gains.

Far too much of the bad practices are continuing. And when they are caught the consequences are far too small (which is why they keep behaving unethically). Discover is only being charged $14 million in civil penalties for their lapses (and has to return $200 million it took unfairly).

It is good to have police to try and catch literal pickpockets. And it is good to have the Consumer Financial Protection Bureau to catch financial institutions that take far more than pickpockets can dream of away from the wallets of consumers.

Related: Capital One Bank Agrees to Refund $150 Million to 2 Million Customers and Pay $60 Million in Fines – Very Bad Customer Service from Discover Card – Credit Card Regulation Has Reduced Abuse By Banks – Continued Credit Card Company Customer Dis-Service – I Strongly Support the Consumer Financial Protection Bureau

It will take much more than this small, good step, to catch and reserve their bad behavior, before they will modify their ethical compasses or be replaced by those that treat customers honestly (as the costs of the un-ethical behavior are too much too tolerate). Undoubtably the ethically challenged “leaders” will attempt to pay politicians enough cash to stop enforcement of the laws and get even more lax laws then they have already paid for.

As I have stated before you can’t count on the system providing trust-worth financial institution that behave with integrity. If you don’t want to be ripped off you have to assume your financial institution is going to try everything they can to trick you out of your money and think of them as you would someone you see picking the pockets of others all around you. If you are nice, ethical and have a desire to help you might try to stop the pick-pocket (you might even tell the police to stop this person that is taking others money). At the very least you will be very protective anytime you are close to the pick-pocket.

Even with congressional attempts to stop the CFPB from being able to enforce laws against their big donnors, the CFPB has announced their first public enforcement action: an order requiring Capital One Bank to refund approximately $140 million to two million customers and pay an additional $25 million penalty. This is a good, small step that is helping creating a rule of law instead of a rule of those capturing regulators and giving lots of cash to politicians. But it is a very small step. The system is still mainly about captured regulators and giving lots of cash to politicians.

This action results from a CFPB examination that identified deceptive marketing tactics used by Capital One’s vendors to pressure or mislead consumers into paying for add-on products such as payment protection and credit monitoring when they activated their credit cards.

“Today’s action puts $140 million back in the pockets of two million Capital One customers who were pressured or misled into buying credit card products they didn’t understand, didn’t want, or in some cases, couldn’t even use,” said CFPB Director Richard Cordray. “We are putting companies on notice that these deceptive practices are against the law and will not be tolerated.”

Consumers with low credit scores or low credit limits were offered these products by Capital One’s call-center vendors when they called to have their new credit cards activated. As part of the high-pressure tactics Capital One representatives used to sell these add-on products, consumers were:

• Misled about the benefits of the products: Consumers were sometimes led to believe that the product would improve their credit scores and help them increase the credit limit on their Capital One credit card.
• Deceived about the nature of the products: Consumers were not always told that buying the products was optional. In other cases, consumers were wrongly told they were required to purchase the product in order to receive full information about it, but that they could cancel the product if they were not satisfied. Many of these consumers later had difficulty canceling when they called to do so.
• Misinformed about cost of the products: Consumers were sometimes led to believe that they would be enrolling in a free product rather than making a purchase.
• Enrolled without their consent: Some call center vendors processed the add-on product purchases without the consumer’s consent. Consumers were then automatically billed for the product and often had trouble cancelling the product when they called to do so.

One of the less obvious costs of a poor credit rating these days is large companies see you as someone to take advantage of. They often target those with poor credit for extremely lousy deals that they wouldn’t try to sell to those with good credit. The presumption, I would imagine, is someone able to maintain a good credit rating is much less likely fall for our lousy deals.

Related: Protect Yourself from Credit Card Fraud (facilitated by financial institutions) – Anti-Market Policies from Our Talking Head and Political Class – Banks Hope they Paid Politicians Enough to Protect Billions in Excessive Fees

Enforcement Action
Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has the authority to issue Consent Orders and take action against institutions engaging in unfair, deceptive, or abusive practices. To ensure that all affected consumers are repaid and that consumers are no longer subject to these misleading and high-pressure tactics, Capital One has agreed to:

• End deceptive marketing: Capital One has ceased all marketing of these products, and will not resume doing so until Capital One submits a compliance plan, acceptable to the Bureau, which helps ensure these unlawful acts do not occur in the future.
• Complete repayment, plus interest, to two million consumers: Capital One will pay approximately $140 million to all of the estimated two million consumers who feel victim to this scheme.
• $25 million penalty: Capital One will make a $25 million penalty payment to the CFPB’s Civil Penalty Fund.

Today’s action is being taken in coordination with the Office of the Comptroller of the Currency (OCC), which is separately ordering restitution of approximately $10 million from Capital One. The OCC’s order has restitution for additional consumers harmed by unfair billing practices taking place between May 2002 and June 2011 in violation of Section 5 of the Federal Trade Commission (FTC) Act. For the combined activity, the OCC is assessing a $35 million civil money penalty against Capital One.

Sadly we have been (and continue to be) forced to suffer through an massive imbalance in power. Large financial companies, through large cash payments to politicians and capturing regulators, have been able to create a system where widespread illegal actions go unchecked. The CFPB has been able to make some progress, even while those in congress try to prevent such enforcement against those giving them cash. You might think the politicians would care more about protecting those who will vote from organizations trying to rip them off, but the evidence shows you would be wrong. If we start voting for people that have that attitude it will be a very good day for the USA.

• Front running – having orders executed milliseconds in advance to gain an edge (there is no market benefit to millisecond variation). In the grossest for it is clearly criminal: putting in orders prior to known orders from a customer to make money at the expense of your customer and others in the market. My understanding is the criminal type is not what they are normally accused of, of course, who knows but… Instead they front run largely by getting information very quickly and putting in orders to front run based on silly price difference (under 1/10 of a cent).
• Putting in false orders to fake out the market – you are not allowed to put in false orders. It is clear from the amount of orders placed and immediately withdrawn they are constantly doing this. Very simply any firm doing this should be banned from trading. It wouldn’t take long to stop. Of course the SEC should prosecute people doing this, but don’t hold your breath.

Several things should be done.

• Institute a small new financial transaction tax – adding a bit of friction to the system will reduce the ludicrous stuff going on now. Use this tax to fund investigation and prosecution of bad behavior.
• Redo the way matching of orders is done to promote real market activity not minute market arbitrage and manipulation – I don’t know exactly what to do but something like putting in a timing factor along with price. An order that is within 1/10 of cent for less than 1,000 shares are executed in order of length of time they have been active (or something like that).
• Institute rules that if you cancel more than 20% of your order (over 10 in a day) in less than 15 minutes you can’t enter an order for 24 hours. Repeated failures to leave orders in place create longer bans.
• Don’t let those using these strategies get their money back when they do idiotic things like sell bull chip companies down to 20% of their price at the beginning of the day. You don’t get to say, oh I didn’t really mean to buy this stock that lost me 50% the day I bought it, give me money back. There is no reason high frequency traders should be allowed to take their profits and then renege on trades they don’t like later.

Speculation is fine, within set rules for a fair market. Traders making money by manipulating the system instead of through beneficial activities such as making a market shouldn’t be supported.

To the extent high frequency trading creates fundamental buying opportunities take advantage of the market opportunity. Just realize the high frequency traders may be able to reverse you gains (and if you lose you are not going to be granted the same favors).

Related: Naked Short Selling – Misuse of Statistics, Mania in Financial Markets – Failure to Regulate Financial Markets Leads to Predictable Consequences – Fed Continues Wall Street Welfare

The truth is the billions of dollars high frequency traders steal from others market returns matters much less to true investors. For long terms holdings the less than a cent they steal from other market participants is small. It is still bad. Just people really get more excited about it than they need to. I would love to just get 1/1000 of cent on every trade made in the markets, I could retire. But they are mainly stealing very small amounts from tons of different people. Now the fake orders and trades that go against them that they then get reversed are a different story.

Those that conflate freedom in every form and free markets don’t understand that free markets are a tool to and end (economic well being for a society) not a good in and of themselves. Politically many of these people just believe in everyone having freedom to do whatever they want. Promoting that political viewpoint is fine.

When we allow them to discredit free market capitalism by equating anti-market policies as being free market capitalism we risk losing a great benefit to society. People, see the policies that encourage allowing a few to collude and take “monopoly rents” and to disrupt markets, and to have politicians create strong special interest policies at the expense of society are bad (pretty much anyone, conservative liberal, anything other than those not interested in economics see this).

When people get the message that collusion, anti-competitive markets, political special interest driven policies… are what free market capitalism is we risk losing even more of the benefits free markets provide (than we are losing now). That so few seem to care about the benefit capitalism can provide that they willingly (I suppose some are so foolish they don’t understand, but that can’t be the majority) sacrifice capitalism to pay off political backers by supporting anti-market policies.

Allowing businesses to buy off politicians (and large swaths of the “news media” talking heads that spout illogical nonsense) to give them the right to tap monopoly profits based on un-free markets (where they use market power to extract monopoly rents) is extremely foolish. Yet the USA has allowed this to go on for decades (well really a lot longer – it is basically just a modification of the trust busting that Teddy Roosevelt tried). It is becoming more of an issue because we are allowing more of the gains to be driven by anti-competitive forces (than at least since the boom trust times) and we just don’t have nearly as much loot to allow so much pilfering and still have plenty left over to please most people.

I am amazed and disgusted that we have, for at least a decade or two, allowed talking head to claim capitalist and market support for their special interest anti-market policies. It is an indictment of our educational system that such foolish commentary is popular.

Free Texts Pose Threat to Carriers

This is exactly the type of behavior supported by the actions of the politicians you elect (if you live in the USA).

It is ludicrous that we provide extremely anti-market policies to help huge companies extract monopoly profits on public resources such as the spectrum of the airwaves. It is an obvious natural monopoly. It obviously should be managed as one. Several bandwidth providers provide bandwidth and charge a regulated rate. And let those using it do as they wish. Don’t allowing ludicrous fees extracted by anti-free-market forces such as those supporting such companies behavior at Verizon, AT&T…

Related: Financial Transactions Tax to Pay Off Wall Street Welfare Debt – Extremely Poor Broadband for the USA (brought to us by the same bought and paid for political and commentary class) – Ignorance of Capitalism – Monopolies and Oligopolies do not a Free Market Make

I guess the 99% are protesting against the culture of allowing bought and paid for politicians to put their donors interests above the countries interets. But this is no change from what has been going on for a long time. The “solution” is easy. Elect people with ethics and a concern for the country instead of those that are bought and paid for. But we have shown no interest in doing so, and don’t show much of one now. My prediction is we will chose to elect the same people have sold the countries interests down the road for decades.

Those that believe in special interest politics and against free market capitalism (instead supporting large business special interests against the free market system) dominate the talking head and political leaders in the USA. Until that changes nothing will change in any real way. yes occasionally you will have minor successful measures such as restricting some of the abuses by large banks (while allow most of the abuses to continue instead of dealing with the problem of restraint of competition and free markets) but the effectiveness of such measures is very limited.

All we have to do to change is elect smart, decent, ethical people like Elizabeth Warren. But we need to elect hundreds of them. There are probably 20 or 30 in Washington now but that can’t do much against the bought and paid for politicians.

I understand the sensible criticism of overregulation. Fools that think the EPA is a bad thing are another matter entirely. Criticizing the poor implementation of regulations, is a good expenditure of resources. Debate over how we regulate externalities in the markets. Perfectly sensible. Market based solutions are great. I understand some far out people will even argue for not regulating pollution and the like (those that think the EPA needs to be abolished for example – the EPA is already so de-neutered it is amazing to see people still fighting against the institution). Fighting against bad regulations or execution, yes, sure, that makes lots of sense. But the idea that we shouldn’t have the government concerned about the externalities of pollution for our health is crazy. There is no other way to see it. We are all free to have crazy ideas. We shouldn’t be taken seriously when we do, however. Mostly, it isn’t crazy, but paying off people giving large amounts of cash in order to have special rules to allow them to harm society. Why we accept such behavior from anyone we take seriously is beyond me.

Visa, Mastercard Accused of Price Fixing

It is pretty obvious ATM fees are ludicrously high. The most likely reason (given the political economy culture [essentially the support of anti-market forces that aim to help interests collect profits gained by restricting the ability of the market to provide value to society] we have right now) for such a situation is collusion to prevent free markets from providing value to society and instead a few players extracting profits from anti-market policies.

We should also note that in many locations (all?) we have allowed the judicial branch to be bought and paid for as well as the legislative branch of government. The executive branch is bought less directly with “capture” by the regulated and the promise of jobs that pay well later, for those who provide favors today (plus, of course, buying the political leaders at the top of the executive branch). Also the top of the executive branch organizations are often seeded directly by those that gave the politicians money. This is a very bad situation. And the corruption it leads to is not something that is easy to fix. When even the judicial branch is so highly tainted it is a very bad state of affairs.

And a big problem for investors is that while I think there are plenty of inefficiencies to take advantage of finding them and investing successfully is quite hard. And so most that try do not succeed (do not get a return that justifies their time and risk – overall trying to take advantage of inefficiencies is likely to be more risky). Some Inefficiencies however seem to persist and allow low risk gains – such as investing in boring undervalued stocks. Read Ben Graham’s books for great investing ideas.

There is also what seems like an increase in manipulation in the market. While it is bad that large organizations can manipulate the market they provide opportunities to those that step in after prices reflect manipulation (rather than efficient markets). It is seriously annoying when regulators allow manipulators to retroactively get out of bad trades (like when there was that huge flash crash and those engaging in high frequency “trading” front-running an manipulation in reality but not called that because it is illegal). Those that were smart enough to buy stocks those high frequency traders sold should have been able to profit from their smart decision. I definitely support a very small transaction tax for investment trades – it would raise revenue and serve reduce non-value added high frequency trading (which just seems to allow a few speculators to siphon of market gains through front running). I am fine with speculation within bounds – I don’t like markets where more than half of the trades are speculators instead of investors.

Related: Market Inefficiencies and Efficient Market Theory – Lazy Portfolios Seven-year Winning Streak – investing in stocks – Naked Short Selling