Helping Hurts

Once again, the New York taxpayer takes it in the bottom for empathy’s sake. [The Rude Awakening] March 28, 2024 [WEBSITE]( | [UNSUBSCRIBE]( Helping Hurts [Sean Ring] SEAN RING Dear Reader, Besides living in an overcrowded, polluted, third-world shithole with barely any police, fire, or hospital services, NYC residents have to shell out between an extra 4% - 10.9% in income tax for the pleasure of earning there. That’s on top of federal, state, and sales taxes all Americans suffer - the correct verb regarding taxes is “suffer” - every year. I don’t get it, myself. But to each his own, I suppose. And now… the redistribution. It’s important to understand that government creates nothing. It earns nothing. And yet, as Thomas Sowell once said, “The welfare state is the oldest con game in the world. First, you take people's money away quietly and then you give some of it back to them flamboyantly.” By the Ides of April every year, Americans will have filled out a tax return and filed it. But the tax money was bled silently from Americans’ paychecks the previous year. That’s the quiet part. And then you’ll read a headline like this one, courtesy of Zero Hedge: “[New York Starts Handing Out Prepaid Debit Cards To Illegal Immigrants]( That’s the flamboyant part. What a mug that New York City resident must feel like! Those who commute from Long Island, New Joisey, or Connecticut must feel dumber. After all, if you earn in NYC, you pay NYC city tax. But this is about compassion and empathy, says those running NYC (into the ground). The more I hear people talk about empathy and compassion, the more I think evildoers are using those terms as weapons against good people of conscience. Who can argue that migrants need our help? Therefore, if there’s no argument against it, let’s do it! Well, here’s old Seanie with a bunch of arguments against it. 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There's a risk that such cards can be misused by the recipients or others who might exploit them. For instance, the cards could be used to purchase non-essential items, stolen, sold for cash, or used in fraudulent transactions. Ensuring the cards are used as intended would require oversight and administration, which brings additional costs and challenges. While providing immediate relief is indeed compassionate, there's an argument that such aids create a dependency that discourages long-term integration into society. Skills development, language training, and employment support are vital to helping migrants build independent lives. An approach focused solely on immediate financial aid overlooks these aspects. Managing a program like this involves significant logistical, administrative, and regulatory hurdles. From ensuring that the right people receive the cards to monitoring their use and preventing fraud, the complexity and cost of administration could be substantial. Migrants' needs vary widely depending on their circumstances, such as family size, health issues, or specific dietary requirements. Prepaid debit cards, while flexible, might not adequately address these varied needs, especially where specific services or support are required. There's also the risk of stigmatization and the accompanying civil unrest, where migrants using these cards could be identified and potentially discriminated against by others in the community. This could lead to social isolation or tension within communities. If not carefully managed, direct financial aid affects migrants' motivation for self-reliance. There is a delicate balance between providing necessary support and encouraging the development of independence. Redistribution, In and Of Itself The concept of redistributing income from taxpayers to migrants has stirred much debate, primarily because of concerns over misaligned incentives. Here are the main points: Redistribution policies discourage migrants and long-term residents from seeking employment if the benefits received are perceived as sufficient without the need to work. This could lead to fewer people being motivated to enter or remain in the labor market. Such policies increase the financial burden on taxpayers, leading to higher taxes or reduced services in other areas. We’ve seen this in NYC already. Over time, this generates resentment among the population, affecting social cohesion and the willingness of the public to support other forms of social assistance. Continuous financial support without conditions creates a dependency culture among recipients. This means that instead of encouraging integration and self-sufficiency, it might lead to a long-term reliance on state support. The UK’s welfare state is an excellent example of this. The resources directed toward income redistribution ought to be used for other initiatives to facilitate the integration of migrants, such as language training, education, or employment programs. These initiatives may have a more positive long-term impact on migrants and the host society. Effective economic integration of migrants is crucial for the economy's overall health—redistribution without focusing on integration delays or permanently blocks migrants' entry into the workforce. Finally, financial aid without accompanying measures to promote social integration leads to segregation and a lack of interaction between migrants and the host community, exacerbating social divides. (See: Sweden, Germany, and France.) Wrap Up Of course, I didn’t mention these migrants are illegal in the first place and that the taxpayer is compensating a criminal for a crime they committed. But this is why I say again: you can’t save society, but you can save yourself. Do everything you can to minimize your tax liability. When you pay your taxes, you’re not contributing to your country’s growth. You’re spending your money on other people’s families. Some can afford to do that. Most can’t. All the best, [Sean Ring] Sean Ring Editor, Rude Awakening X (formerly Twitter): [@seaniechaos]( In Case You Missed It… Chubby Digits [Sean Ring] SEAN RING Chubby digits are those five things on every trader’s hand that make him “fat finger” a trade. Today, I’ll share my horror stories of fat-fingering trades as a broker with you. Every time I read about banks losing huge sums because one of their brokers did something they shouldn’t have, I mildly wince. I wince because I’ve made every mistake in the brokering book. But luckily for me, over a decade and a half have passed since I was a broker, so the pain is mild. Below is a great example of a fat-fingered trade. Citi Trader Adds Extra Zero To Order; Loses $50 Million A Citi trader fat-fingered an extra zero onto a trade about two years ago. This sent the OMX Stockholm Index down over 100 points. From [Zero Hedge]( Fast forward to today when we find that said shitty math'ed fat-finger will cost Citi losses of at least $50 million, according to Bloomberg, while adding that the bank is still tallying losses from the mistaken trade and the final figure could balloon even higher. As we also reported before, the fat finger took place when a trader in the firm’s Delta One trading unit in London was working from home during a bank holiday on May 2 when the person incorrectly added an extra zero to a trade early in European market hours, sparking a furious five-minute selloff in the OMX Stockholm 30 Index which quickly spread across markets from Paris to Warsaw, wreaking havoc and wiping out 300 billion euros ($322 billion) at one point. [pub] Credit: [Zero Hedge]( A few words from me on this. Luckily, I was only a futures broker, so it was next to impossible for me to lose that kind of cash accidentally. My most significant error cost $125,000, and I’ll never forget it. That amount is enough to get you in the boss’s doghouse, but not enough to get you fired. At least the first time. However, a $50 million mistake will get you fired immediately. I’m sure this broker didn’t mean to make this mistake. Adding an extra zero when typing in a trade is surprisingly easy. But clients trading this amount early in the morning, before the market is liquid, seems dumb to me. [What a Trump Win Means for the U.S. Dollar]( Donald Trump has vowed to reverse Biden’s plan to replace the U.S. dollar… but it may be too late. Even a Trump win can’t save us from the “death order” that Biden signed. In fact, it could accelerate his plans. [See how to protect yourself here](. Remember — even a Trump win won’t save us… [Click Here To Learn More]( Why You Don’t Trade With Low Liquidity Unless You Want To Set Off An Avalanche I’ll never forget this one time when a hedge fund manager called me up. He said, “Sell 2,000 10-year futures at market.” A market order is when a client specifies only the trade volume, but not the price. Market orders incur “gap risk,” which means the markets can move far from the initial market price. This happens when the market is illiquid. As a broker with a fiduciary duty to my client, I said, “It’s 6:30 am London time, 1:30 am New York time. There’s no liquidity in the market right now.” “JUST SELL THE GODDAMN THINGS!” “Ok.” I sold 2,000 10 years, sinking the market one whole point. (It’s an enormous move in that particular market.) As a young broker, I didn’t divine that this client wanted to tank the treasury market. This client intended to set off all the sell stops to shake the weak longs out of the market. It worked. You see it all the time in the gold market nowadays. But most of the time, big moves like this are an accident. What Operational Risk Is And Why You Can’t Get Rid Of It The Basel Committee on Banking Supervision defines [operational risk]( Operational risk is defined in the capital framework as the risk of loss resulting from inadequate or failed internal processes, people, and systems or from external events. This definition includes legal risk but excludes strategic and reputational risk. The “people” part is the problem. And not just because people still input trades. People create processes. People build systems. And people can’t foresee the unforeseeable external events known as “black swans.” Now you may say, “Well, just be more careful!” Sure. Valid point. But things get dicey when a client is screaming down the phone to get his trade done. And sometimes, shit just happens. I’ll never forget when a trader blew up the German bond futures market. I was sitting at my trading desk with my feet up, as it was that quiet. The next thing I knew, my dealerboard lit up like a Christmas tree. At first, I thought it was a malfunction. But then I saw my biggest client’s button flashing. I picked up the phone. “What happened to the bunds?” Note: Germans can’t pronounce “bonds” correctly, so they say “bunds.” The bunds had fallen off a cliff. I had no idea why, but I said, “Institutional selling out of New York.” I always said that when I didn’t know precisely why something was happening. I stood up from my desk to see my colleagues also standing up with their hands in the air. No one knew what was going on. About two weeks later, we found out it wasn’t a fat finger. It was an errant tray. This trader was under a bit of stress. Allegedly, his wife was pregnant and imminently due to give birth. His dealerboard was flashing her phone number as he was coming back from lunch. He caught the blinking button as he came around the corner with his lunch tray. He put the tray down to pick up the phone. It was his wife, calling to say everything was ok. Except it wasn’t. This trader was looking at his screen, seeing the German bond market tanking. Since he was the German bond trader at his firm, he was puzzled. Until he realized he inadvertently set his lunch tray down on the “sell” button. Oops. He had sold nearly a quarter of a billion German bonds in a few microseconds. His bank was sympathetic and didn’t fire him. Ah, the good old days. Wrap Up The only reason why I don’t mind reading about other traders’ misfortunes is that I didn’t do it this time! But banks have been trying to solve these kinds of problems for a long time without much success. “Measure twice, cut once” works for tailors because they don’t have their clients screaming down the phone at them, “WHERE’S MY GODDAMN SUIT!” It’s much different when dealing with hedge funds, asset managers, and other banks. In the meantime, bathe in your schadenfreude. The so-called Masters of the Universe screw up regularly, with enormous consequences. Have a great day! All the best, [Sean Ring] Sean Ring Editor, Rude Awakening Twitter: [@seaniechaos]( [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2024 Paradigm Press, LLC. 1001 Cathedral Street, Baltimore, MD 21201. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. 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