May 5, 2009
As a retiree, there are few avenues for compounding income that one can employ for savings and to benefit retirement accounts. The real estate investment trusts and financial sectors do offer higher compounding yields,(sufficiently to grow capital and offset inflation) in the preferred stocks in particular and the common stocks as well. I think the elimination of the uptick rule, the advent of short trading, private equity hedge funds have rendered it nearly impossible for the retail investor to accumulate savings and capital. Mutual funds in practically every type are down about 20% over the last 12 years. Short trading has grown to the extent to create panic/fear among many less sophisticated investors, much of it unwarranted. Consequently, it has precluded access for many fine publicly traded companies with very good track records and has not only led to capital destruction, the inability to acquire capital at reasonable cost, thus ultimately placing many of these companies near the verge of bankruptcy. This has happened to companies with relatively stable cash flows and has even put the mothers of all financial institutions, i.e. Bank of America, Wells Fargo, at severe risk of continued viability. Somehow, rules need to be established for a more level playing field. I suggest taxes on derivative trading(to exact a cost on each trade) among the possibilities or imposition of taxes on quick trading exchanges of the same security.