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Letter to Senator Dick Durbin 5/26/09 -
Looking Out of the Darkness 12/29/08 -
Musings on a Credit Crisis 4/1/08 -
Leverage 8/16/07 -
Uses of Money 10/19/06 -
Asset Inflation 3/30/06 -
Brokers vs. Advisors 7/1/05 -
Hedge Funds 1/1/05 -
Annuities 10/1/04 -
Unherd of Risk 4/2/04 -
Scandal 1/23/04 -
Moderation 9/30/03 -
Simple Lesson 6/30/03 -
Basic Tips 1/1/03
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A LETTER TO SENATOR DURBIN
Published: 5/26/09
May 26, 2009
The Honorable Richard Durbin
Washington, DC 20510
Dear Senator Durbin
I would like to offer my simple suggestions that can greatly improve the domestic capital markets. The current system fosters volatility and extreme moves that displace the average investor and even the professional money manager while rewarding the day trading speculator. I do not want to completely eliminate traders; however I do propose that we do not prejudice long term investors while enriching short term traders. Our present tax laws and trading rules encourage trading behavior that subverts the system developed to cultivate successful businesses and build long term wealth for investors.
To present my credentials, I am currently an independent Registered Investment Advisor in the state of Illinois starting my own firm from scratch seven years ago. I hold an MBA from St. Xavier University where I am an adjunct professor teaching various business courses. Also, I hold the CFA designation considered the most rigorous of the many finance related programs. My career includes almost 25 years at the CME and the former Chicago Board of Trade so I am intimately familiar with long term investing, short term trading, equities, fixed income, and derivatives.
A few simple changes to the markets would restore confidence, lower volatility, and lessen the tumult that we have experienced over the past two years.
- First, allow short selling only when the seller actually possesses the shares. In other words, enforce the rules now on the books and do not relax them as they only favor short term speculators.
- Second, allow short selling, but do not encourage it. Abolish the ability of short sellers to deduct any losses on trades of less than 90 days even against other short term gains. This allows for bona fide hedging while discouraging day traders.
- Simplify the regulatory system. FINRA, SEC, the individual states, US Treasury, Federal Reserve Bank etc. There are too many groups, too many seams, too much opacity, and consequently too much finger pointing. A simple system is always the most effective.
Although, the last point is politically thorny, the first two points are truly simple and easy to effect. They will prevent many of the short raids that propagated the Credit Default Swaps market and allowed unwarranted attacks on viable businesses. Implementing just the first two suggestions would make our capital markets workable again for the individual investor.
We need a structure that encourages people to invest their savings, especially their retirement savings, in a market forum that is level, transparent, and fair. The current system is none of these, but should be all of them. The laws, including tax laws, should benefit the long term investor not the short term speculator. More than ever there is a need to encourage confidence in markets and promote ownership of stock in business. Day traders did not make this country great; capital formation using a fair and balanced system of stock ownership and fixed income did.
Sincerely,
Marty Gallagher
Written by: Marty Gallagher
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