August 22, 2016
What We’re Reading This Week
TradeMasters USA, LLC is facing action from the Commodity Futures Trading Commission. According to the Commission, TradeMasters marketed membership to an online trading software that was “automated” to the extent that you could “set it and forget it” and make as much as 300% by trading commodity futures on their algorithm. It was a great premise except none of it was true. The returns that were advertised came from a testimonial from a “real customer” that turned out to be a “paid actor” that was “full of crap.” Besides not generating 300% the robo-advisor turned out to not even be a robot. The program was an off the shelf trading platform rebranded by TradeMasters that required a fair amount of user input. Also, for a monthly coaching fee, the owner of the company would “coach” users on how to choose what markets to trade, how much to trade and how to get out of a trade due to a loss or gain. This is great not only because it’s not a robot, but because this isn’t the first time a “robo-advisor” has marketed its human element under false pretenses. The business model is old – pay this really smart guy to teach you how to get rich quick in the market. The basis of the sales pitch is that the guru made money and now wants to spend time teaching instead of continuing to make money in the market. This sort of thing mostly appeals to a segment of the population that believes the stock market and finance in general is some sort of magic trick. These aren’t real numbers, but if I looked at the finance shelf in a book store I would guess that roughly 40% of the titles have the word “secret” in them. But everyone is getting into the robo-advising game, including 2 bit hucksters. It’s an exciting time to be alive.
So, Goldman Sachs launched an online retail bank and the results have been…interesting. Probably only to people like me, that have a retail banking background. Because of new regulations, banks have been reaching for new revenue sources. Goldman has never really been able to make the leap to retail consumers but most recently, they decided to change the retail bank’s name to Marcus. The goliath investment bank is attempting to connect with the common man and emulate small tech startups by eschewing the long standing tradition in finance of using the names of two old, rich, white founders (Morgan Stanley, Merrill Lynch, Raymond James, etc.) and choosing a folksy, simple name. I mean, sort of…Marcus is still the name of a founder, Marcus Goldman. I guess Joseph Sachs should feel bad about that? Banks have faced a tremendous PR nightmare since the financial crisis with Rolling Stone referring to Goldman as a “great vampire squid wrapped around the face of humanity.” But this is a new company, this is “Marcus.” They are humble and friendly and definitely not a vampire squid.
There has been no shortage of insider trading prosecutions in recent years, but frustratingly, there have been plenty of insider traders that have not been prosecuted. When is insider trading insider trading? When is it a crime? When do you get prosecuted? When do just pay a fine? Peter Henning at The Times wrote a nice article about this dilemma. He reviewed several cases that have similar data points and attempts to draw some conclusions. This is difficult. Sometimes these cases are handled by the SEC, who usually just charge a fine, while others are handled by the Justice Department who levels civil charges and occasionally criminal prosecutions. Insider trading is already a murky, gray area of the law because no actual law exists prohibiting it. In relation to an insider trading case I once wrote, “If you’re stuffing money in a gym bag, you’re doing something bad, so don’t do it.” Essentially, insider trading is bad even if it can’t be clearly defined. If you’re not sure what you’re doing is insider trading that may be your first clue that you might be prosecuted.
This commentary on this website reflects the personal opinions, viewpoints and analyses of the Gainplan LLC employees providing such comments, and should not be regarded as a description of advisory services provided by Gainplan LLC or performance returns of any Gainplan LLC Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Gainplan LLC manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
Gainplan LLC provides links for your convenience to websites produced by other providers or industry related material. Accessing websites through links directs you away from our website. Gainplan LLC is not responsible for errors or omissions in the material on third party websites, and does not necessarily approve of or endorse the information provided. Users who gain access to third party websites may be subject to the copyright and other restrictions on use imposed by those providers and assume responsibility and risk from use of those websites.