Cynical Nation

This bill is one of the worst ideas I've seen come before Congress in a while, and that's saying something. The idea is to make "Wall Street" pay for the TARP bailout by imposing a 0.5% tax on stock transactions.

These days it's hard enough to find winning stocks period, even without having to take a whole percentage point off a round-trip stock purchase. Do you ever rebalance your 401k? Well then that makes you "Wall Street" in their eyes, and you're going to get hit with penalties. And even if you don't move your funds around, chances are your fund manager is doing it for you, which means you'll get hit this stupid tax even if you do nothing at all. And if (like me) you're a trader, then forget it. Especially a day trader. You're out of business.

Now I know that traders aren't viewed with a lot of sympathy out there. It's almost as if they're doing something sleazy or vaguely immoral, unlike the sainted "investors" who aren't constantly buying and selling every second of the day. But here's the problem. Whether you're a trader or investor, you benefit from a liquid market. For most listed stocks, you can always buy or sell at pretty damn near the officially quoted price. Why is that? Because there's a sufficient volume of traders out there who are always looking to buy or sell a given issue at a given time. Markets aren't liquid because the Warren Buffetts of the world come along every decade or so and buy a million shares of Coca-Cola and sit on it for eighty thousand years. Markets are liquid because of the dirty little traders out there, always looking to make a quick turnaround. Despise them if you want, but if you run them out of business, then your market doesn't work anymore, even if you're an "investor."

I really, really wish Congress would spend two seconds thinking about this kind of stuff because engaging in such stupidity.