Doug Casey on the Rise of Day Trading and Why it Will Lead to Financial Disaster

Take it from a former bond trader: trading is one of the toughest ways in the world to make a living. Your biggest enemy is yourself—your own psychology. From Doug Casey at internationalman.com:

International Man: The Fed’s unprecedented money printing, trillions of dollars in government bailouts, and artificially low interest rates have changed people’s behavior.

There’s a shift from saving to spending, borrowing, and gambling.

Many people are becoming day traders who otherwise would not. They’re treating the markets like a casino.

What are your thoughts on all this?

Doug Casey: The stock market originated as a means for raising capital for new productive ventures, a means of price discovery for what they were worth, and a means of providing liquidity when investors wanted to buy or sell. An entrepreneur provided an idea and the labor, and the public provided the capital. It was simple, and useful to everyone. But a relatively minor part of the economy.

The stock market has mutated tremendously, however. Now trillions of new politically-created dollars are inundating the system. Over the last decade especially, it’s become a vehicle for speculation more than anything else.

There’s nothing wrong with speculation, of course. But it’s very different from investing. An investor adds his capital to others’ labor, plants a seed, and hopes to reap a harvest. A speculator, however, is generally someone who attempts to profit from facts or events that aren’t well-known or understood. Often things with a political flavor. There would be few speculators in a true free market economy with sound money.

Worse, when billions and trillions of new currency units are created—like now—the public is almost forced to do things they normally wouldn’t and shouldn’t. Like make wild bets on things they don’t understand, for “fear of missing out” on a runaway bull market. At some stage they’ll gamble on anything, trying to outrace the currency’s depreciation.

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