January 29, 2009

BetAgainstYou.com


There's a lot of idiots out there investing in the stock market. And here's the typical business model. You have these online brokerage houses, etrade.com, etc. who charge a flat $8 or so per transaction. That's how they make their money.

Here's my idea. BetAgainstYou.com.

No transaction charges. Invest for free. But, here's the thing. I'm not really investing your money in the stocks that you want. It's almost like a fantasy stock market. I give you credit for getting in and out when you want, and I am liable to pay you for your earnings based on your actual performance as if you did own them. However, I know I'm smarter than you. I'm not basing my investments on short-term hope, but on long-term financial performance. And I'm using your money to invest in real winners.

Pretend we could get around the liability, and this was a big enough company where they were good for the money.

The competitive spirit behind the idea. All these people who want to prove that they can beat the "experts". Free transaction costs.

What do you think?

1 comment:

Bobby Teenager said...

In a sense, you just figured out how most of Wall Street already makes its money. They have standing short orders on stocks and options at certain prices and dumb shmoes or ill designed computer programs come along and buy those securities. They use the cash flow generated to purchase much more valuable short term plays, usually with a good deal of leverage so that the security only needs to go up a fraction or so, make a small profit and cover their short by buying the stock back from somebody else. Then they do it again. Problem is with the phrase "small profit" and how this clashes with the greed factor. The latest fad for these short term investments was mortgage backed securities leveraged out the wazoo and we all know how those turned out. Check out the literature on covered calls, in a sense you can do the same thing they do but as a retail investor and do pretty well preying on the "speculators" out there.