- Published on Monday, 12 December 2011 09:17
- Written by Sara Nunnally, Editor, Inside Investing Daily
- Hits: 2290
If you are going to get rich, you have to do it without the help of the thieves in Washington and on Wall Street. It will take hard work... and the truth.
Last Thursday, I was watching The Colbert Report and the guest on the show was none other than infamous lobbyist Jack Abramoff...
He's got a book out, called Capitol Punishment: The Hard Truth about Washington Corruption from America's Most Notorious Lobbyist.
In the interview, he basically said the game in Washington is rigged for corruption, and he was just following the rules. "Most of the notoriety and most of the things that are a little strange in Washington are legal. That's the problem. Most of what I did was legal. I crossed a few lines and did things that were illegal, and was punished for it," he said.
He's now a "changed man." Or so he says...
On Friday I talked about how no one tells the truth any more. But Abramoff isn't the only guy spilling the beans.
Lee Munson also has a new book out on how Wall Street is rigged. It's called Rigged Money: Beating Wall Street at Its Own Game.
The young broker made a name for himself in the 1990s, raking in hundreds of thousands of dollars playing the game.
He had a filthy mouth and a high-rolling lifestyle, and now he's written a book. In it are three ways Wall Street has an edge on individual investors.
Like how Wall Street invents products and creates demand for them, or how most ETFs are little more than scams. Specifically, he talks about leveraged ETFs. These, he says, are not leveraged or accurate, and are correlated on a day-to-day basis.
Let me explain what this means, with an example from our Macro Trader portfolio. Last Wednesday, we closed out our position on the PowerShares DB Gold Double Long ETN (DGP:NYSE) for a 25% gain.
The DGP gives investors twice the daily performance of gold. (More specifically gold futures, but let's keep things simple.)
This sounds like a great deal, right?
If gold moves 2% in a day, the DGP should move 4%, right? This performance is recalculated every day. So if gold -- over a five-day period -- moves 2%, 1%, 1%, 3% and 5% for a 12% gain in five days, DGP's return is 24%.
Not bad when gold is soaring, but things get hairy when gold is falling.
Say gold moves -3%, 1%, 1%, -3%, and 2% for a net move of -2%. The DGP falls -4%. If you're holding gold for the long term with DGP, these kind of bad streaks can really eat into your gains. And DGP's going to take 0.75% in fees every year no matter what.
That's why we took our gains when we could -- before they slipped through our fingers.
There's a strong connection here between Wall Street's moneymaking policies and Washington's law-making policies. They both take money, and neither gives guarantees for performance.
The difference, though, is that sometimes paying off a congressman does work. And that monkey is hard to get off your back.
For both the lobbyist and the congressman. I don't have a lot of faith that if Abramoff were to get back into the lobbying business all his deals would be on the up and up. And I don't have a lot of faith that the congressman is going to turn down $25,000 in campaign contributions.
But for investors, it takes a healthy dose of skepticism and a whole lot of independence to make your own wealth, through hard work and discipline.
Something that's been seriously lacking in our government and on Wall Street.
I'm really surprised that two insiders are exposing the inner workings and corruption in Washington and in the markets.
Take it all with a grain of salt, of course, but take it. The disconnect between Wall Street and Main Street, and Washington and Main Street for that matter, is not knowing how each thinks and makes decisions. An eye into how the "other side" works will always be valuable.
That's what we strive to do here at Insiders Strategy Group. Our editors show subscribers how Wall Street thinks, and the inside moves big institutional investors make that the little guy doesn't know about.
It comes down to one word. Trust.
I said it on Friday... no one tells the truth anymore. That two insiders are coming out with "tell all" books speaks a lot to the environment of lies and corruption. That one of them is a "former" thief says all the more.
Editor's Note: On Dec. 20, 2011, we'll be making a special announcement to readers. To learn all the details on what it involves and how it can save you as much as $133,000, put your name on our list of advanced registered recipients of the announcement. Go right here. We'll send you details.