Speaker unverified: evaluation

Transcript context

…Listeners, the next topic that came up was retail stock trading and the idea that for many Americans, this is akin to gambling. It’s the way it's organized. They don't really know anything about the companies or anything. They just gamble on going up and down the price. If I were running the world, I would have a tax on short-term gains with no offset for losses on anything. I would just driving this whole crowd of people out of business. What do you think about the algorithms like Renaissance and stuff like that? Well, of course, Renaissance, the first algorithm was so simple. They sifted all this data for the past and what did they decide? Up, up, which were two closing prices, and down, down were more common than down, up, or up, down. Once they realized that's the way it was for various reasons deeper than the psychology of man, man is a natural trend follower, he's been gambling short-term, and they just program the computers to automatically buy on one thing on the first up day and sell before the end of the second day. It did it day after day after day. Every day the central clearing agent would say, your check today is $8,500,000. Your check tomorrow is $9,400,000. What happens is that the easiest trade is to front run, but you know what the average is that the index funds have to buy, and you know what it is exactly. They all know that. The way they get their returns year after year is by taking the leverage, that midday leverage, up higher and higher and higher and higher. They're making smaller and smaller profits off more and more volume, which gives them this big peak leverage risk, which I would not run myself. That's the only way they make these big returns, is to have this huge leverage. It would make you crazy if you were already rich. I had the good fortune of speaking with someone you know well, Richard Galanti at Costco, and spending a few hours.…

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