Mark Cuban asks: What Business Is Wall Street In?

[DMT]

http://blogmaverick.com/2012/09/21/what-business-is-wall-street-in-3/#comment-78032

The best analogy for traders ? They are hackers. Just as hackers search for and exploit operating system and application shortcomings, high frequency traders do the same thing. A hacker wants to jump in front of your shopping cart and grab your credit card and then sell it. A high frequency trader wants to jump in front of your trade and then sell that stock to you. A hacker will tell you that they are serving a purpose by identifying the weak links in your system. A trader will tell you they deserve the pennies they are making on the trade or the rebate they are getting from the exchange because they provide liquidity to the market.

My 2 cents is that it is important for this country to push Wall Street back to the business of creating capital for business. Whether its through a use of taxes on trades(hit every trade on a stock held less than 1 hour with a 10c tax and all these problems go away), or changing the capital gains tax structure so that there is no capital gains tax on any shares of stock (private or public company) held for 1 year or more, and no tax on dividends paid to shareholders who have held stock in the company for more than 5 years

There is value to trading automation. It is here to stay. There is absolutely NO VALUE to High Frequency Trading. None. We need to bring our markets back to their original goals of creating capital for business.

Why isn't our government addressing this? His recommendations seem simple enough and the argument for instituting them is an easy one.

[GwynnInTheHall]

http://blogmaverick.com/2012/09/21/w...#comment-78032



Why isn't our government addressing this? His recommendations seem simple enough and the argument for instituting them is an easy one.

Second term....be patient.

[The Feral Slasher]

http://blogmaverick.com/2012/09/21/w...#comment-78032



Why isn't our government addressing this? His recommendations seem simple enough and the argument for instituting them is an easy one.

And why don't they close some of the tax loopholes for the super wealthy ? It seems like that would be easy too, if they wanted to do it. So why don't they want to do it ?

[OaklandA's]

Most studies have indicated that high frequency trading does not produce any major negative effects on the market. And it does result in lower average transaction costs for everyone. HFT is often confused with flash trading, where some are allowed to see incoming buy/sell orders before others, but neither the NYSE or NASDAQ allow flash trading.

As for closing loopholes, no one can even agree on what is a loophole. Are long-term capital gains a loophole? Mortgage deductions? Charity Deductions? Medical Costs? Education Costs? Probably the most controversial is the carried interest for hedge funds. Obama has tried to change this in his budgets for 2010, 2011, and 2012.

http://taxpolicycenter.org/taxtopics/Tax-Carried-Interest-as-Ordinary-Income.cfm

[The Feral Slasher]

Most studies have indicated that high frequency trading does not produce any major negative effects on the market. And it does result in lower average transaction costs for everyone. HFT is often confused with flash trading, where some are allowed to see incoming buy/sell orders before others, but neither the NYSE or NASDAQ allow flash trading.

As for closing loopholes, no one can even agree on what is a loophole. Are long-term capital gains a loophole? Mortgage deductions? Charity Deductions? Medical Costs? Education Costs? Probably the most controversial is the carried interest for hedge funds. Obama has tried to change this in his budgets for 2010, 2011, and 2012.

http://taxpolicycenter.org/taxtopics...ary-Income.cfm

I don't accept that as a valid excuse. Is the real reason that some millionaires pay so little tax is because it is just too difficult to figure our a fair law ? If our representatives can't figure it out then maybe we should elect someone who can.

[OaklandA's]

I don't accept that as a valid excuse. Is the real reason that some millionaires pay so little tax is because it is just too difficult to figure our a fair law ? If our representatives can't figure it out then maybe we should elect someone who can.

I pointed out almost all of the loopholes up above. Which ones would you want to eliminate? Obama has tried to change carried interest from the capital gains rate to the ordinary income rate in each of his last three budget proposals.

The other deductions affect almost all taxpayers, so they would hurt middle income earners in addition to millionaires. And if you are proposing that those deductions be eliminated only for high incomes, then you should realize it's unlikely to happen. The Democrats have been trying to raise the marginal tax rate on high earners by 3-4%, and half the country is up in arms, saying things like "socialist" and "class warfare". Taking away their charitable contributions deduction, or taxing all capital gains as ordinary income would cause way more craziness. Most Republicans are actually proposing the opposite - eliminate all capital gains taxes entirely.

[nullnor]

i don't know the correct statistics but 75% of all trades are computers not people doing it. i don't know how much volume is attributed to high frequency and flash trading but a market with a high volume appears to be a more healthy market. what do you think would happen if the volume suddenly fell 75%? you'd have a financial panic. growth is key to all things money and a growing volume is part of it. i guess. it's also why the capital gains on short term trades were lowered.

if you could figure out who the real traders and who the computers are you'd have a big advantage in trading. so in a sense it lessons the chance of wild swings in stock prices. if you knew what that 25% of real people were doing, then everyone would be buying or selling that stock. you'd have fewer but bigger bubbles.

[The Feral Slasher]

I pointed out almost all of the loopholes up above. Which ones would you want to eliminate? Obama has tried to change carried interest from the capital gains rate to the ordinary income rate in each of his last three budget proposals.

The other deductions affect almost all taxpayers, so they would hurt middle income earners in addition to millionaires. And if you are proposing that those deductions be eliminated only for high incomes, then you should realize it's unlikely to happen. The Democrats have been trying to raise the marginal tax rate on high earners by 3-4%, and half the country is up in arms, saying things like "socialist" and "class warfare". Taking away their charitable contributions deduction, or taxing all capital gains as ordinary income would cause way more craziness. Most Republicans are actually proposing the opposite - eliminate all capital gains taxes entirely.

I don't have time to respond to everything right now, but the home interest deduction is an excellent example, primarily it benefits the wealthy and upper middle class. Here are a couple articles that discuss this

http://reason.org/files/midsummary_final.pdf

http://www.businessinsider.com/only-rich-people-benefit-from-the-home-interest-mortgage-deduction-2012-7

[The Feral Slasher]

I pointed out almost all of the loopholes up above. Which ones would you want to eliminate? Obama has tried to change carried interest from the capital gains rate to the ordinary income rate in each of his last three budget proposals.

The other deductions affect almost all taxpayers, so they would hurt middle income earners in addition to millionaires. And if you are proposing that those deductions be eliminated only for high incomes, then you should realize it's unlikely to happen. The Democrats have been trying to raise the marginal tax rate on high earners by 3-4%, and half the country is up in arms, saying things like "socialist" and "class warfare". Taking away their charitable contributions deduction, or taxing all capital gains as ordinary income would cause way more craziness. Most Republicans are actually proposing the opposite - eliminate all capital gains taxes entirely.

Of course eliminating deductions for high income people is unlikely to happen, that was my point to begin with. My comments were that the reason the loopholes aren't changed is because our elected representatives (as a whole) don't want to change them. It wouldn't be that hard to make a system that is more fair and without loopholes, they just don't want to. And yes it is probably much more the fault of Republicans if you want to assign blame. It is unclear to me how much the Dems are really interested in change and how much they are content to not change anything knowing that they have the convenient scapegoat of the Republicans at all times.

[onejayhawk]

http://blogmaverick.com/2012/09/21/w...#comment-78032

Why isn't our government addressing this? His recommendations seem simple enough and the argument for instituting them is an easy one.

You do understand that he is arguing for eliminating long term Capital Gains tax, right?

J