Link: Never Bet Against the House

Dec 11, 2007: 11:13 AM CST

The staff at Minyanville posted a thought provoking article entitled “Never Bet Against the House,” in which the author discusses some of the consequences and unintended effects of the increasing willingness by the government to “bail out” risk-seeking investors.

In the opinion piece, Malcolm states:

“Not only have risky investments been deliberately supported by government policy, but less risky paths have been infected by overspill from the risk-taking activities; worse yet, my very own government is treating me as a sucker. I mean openly, which is kind of new.”

“The increasing role of federal intervention in stimulating certain segments of the economy and bailing out risk-takers has made it increasingly clear that the choice to be a conservative investor was not only foolish, but is being deliberately singled out for punishment by our own government.”

Furthermore,

“The net effect of these bailout activities is to reward the people who took wild risk and ignored generations of wisdom about debt and gambling.”

Read the entire piece for complete insights.  It really makes you wonder, especially to the traders who continuously refer to the “Plunge Protection Team” which always seems to sweep in and save the market at its absolute worst moment.

What will be the consequences in such policy when many investors ‘catch on’ that their risks will be rewarded in the end?

And what will happen when a new administration or a new policy is adopted that is more akin to the ‘old way’ of thinking?

It’s worth a few minutes of your time to ponder such possibilities.

4 Comments

4 Responses to “Link: Never Bet Against the House”

  1. Jason Says:

    Hi Corey,

    I just stumbled onto your site and I’ve read a few of the posts. Your writing is very good and your knowledge superb! But I have one question that I didn’t see answered (forgive me if you touched on this in one of the posts I haven’t read yet). Are you making money? More specifically, are you coming out ahead at the end of a trading day/month/quarter/year?

    Thanks, and I look forward to reading more.

    Jason

  2. Corey Rosenbloom Says:

    Hey Jason,

    Thank you for the comment.

    The short answer is yes, although not every day and not every week if I over-leverage and get slammed on a particular trade.

    I don’t play for huge, eye-popping profits or percentage gains, but strive to make a few hundred dollars per day trading index futures for smaller targets.

    I do have a swing trading account (utilizing sector rotation) that’s utilized a little differently that has outperformed the indexes almost all year (is ahead currently).

    This is my first year of full-time trading and both accounts are happily positive, though not where I had anticipated or projected at the start of the year I must say. I spent most of the months after May being sidelined (in bonds) in my swing account, and I am now focusing more on index futures and other futures/commodities, which is a new and unanticipated path for me.

    Thank you for reading,

    Corey

  3. ainkurn Says:

    I love the guys over at Minyanville. I get their “Buzz and Banter” through TD Ameritrade. Their insights are very thought-provoking. BTW… your doing great if you are positive your first year of full-time trading. Nice work!

  4. Corey Rosenbloom Says:

    Minyanville is indeed a great site.

    Although it’s my first full year (I actually began last December 2006), this is my 5th year of trading and 7th or 8th since I was introduced to investing in the market actively. I’m not a newbie but I’m not an expert by far either.
    I’m in that strange period in the middle, where I’m still somewhat shaky but am far more grounded than I used to be.

    It’s all a journey, anyway!

    Thanks, Ainkurn.