I find this idea that all the investment managers in the world exist simply by skimming off peoples retirement savings mind boggling.
There are two main kinds of retirement savings, those where the retiree is in control of where their money goes - in which case they can choose to invest it as they wish. In an index, a company or anything else, and those where a company is investing on their behalf but with a legal obligation to pay out.
Now, if the company goes bust then that is not the fault of HFTs or managers skimming. Either they failed to make adequate contributions or they simply went bust because the business failed.
If you invest your money in ACTIVE MANAGERS then you'd best know who they are, what they do, and why they think they can win in a negative sum game. By definition very few actually can.
HFT is not the cause of pensioners going without - that is a combination of lack of contributions (based on unrealistic expectations) and poor investment decisions. They don't prevent you from spending all your money on Apple shares and making a killing, and nor are they to blame if you invested in Northern Rock and lost everything.
It is a fact that more money is spent on portfolio transaction costs for large pension schemes than any other cost. It is also true that much of it is unnecessary. But these are functions of investment choices based on active management, along with poor implementation and usually high management turnover.
What a lot of people are missing is "the market" can't grow faster than "the economy" over the long term. There has been a huge influx of money into the stock market as an increasing percentage of people hoping for historical returns. Causing people to chase after ever lower returns. It's gotten so distorted that the 'smart money' practically ignores growth in favor of other games.
HFT is the perfect example of this as they don't chase growth. There goal is to tax cash flows and market inefficiency. So, they leave low churn stocks like Berkshire Hathaway alone in favor of cheap stocks with a lot of turnover. If you keep your stock for an average of 10 years then HFT is meaningless to you. But, with hedge-funds often doing quite a bit of trading they can extract money without you realizing your trading.
In the end it's yet another reason 401k's are growing a lot slower than many people predict. Sort of like how people expect the economy to 'recover' when it was what there remembering is an unsustainable bubble.
PS: And of course Dividends are something of a special case in the above analysis.
Compound interest is an exponential equation. Even 1% growth means doubling every 70 years and 1,000x growth every 700 years and 1 million x growth in 1400 years etc. Let's say US GDP is X$ and stocks are 'worth' a 100,000 X. At some point the market get's so far from the 'fundamentals' you get a crash, but it's more like a return to rational behavior.
PS: That's not to say tax breaks like 401k's cant shift things for decades. But, there is only so far you can inflate any bubble before it pops.
In terms of overall capital - money - this should be self evident. Money is a proxy for resources. Resources including labor are finite. There are only so many resources to chase. Even if the market extends control to all the world's resources there is a limit on its growth. Any numerical growth after that means nothing but inflation.
There are lots of ways to extract rent from the system.
I've read some stories where a pension / 401k plan was placing a large trade and HFT was able to detect it in progress and make money off the transaction. Look up front running, placing bids and withdrawing them, etc.
Even if you trust your investment manager, there are shenanigans going on in the system. The stock market isn't what it used to be.
There are two main kinds of retirement savings, those where the retiree is in control of where their money goes - in which case they can choose to invest it as they wish. In an index, a company or anything else, and those where a company is investing on their behalf but with a legal obligation to pay out.
Now, if the company goes bust then that is not the fault of HFTs or managers skimming. Either they failed to make adequate contributions or they simply went bust because the business failed.
If you invest your money in ACTIVE MANAGERS then you'd best know who they are, what they do, and why they think they can win in a negative sum game. By definition very few actually can.
HFT is not the cause of pensioners going without - that is a combination of lack of contributions (based on unrealistic expectations) and poor investment decisions. They don't prevent you from spending all your money on Apple shares and making a killing, and nor are they to blame if you invested in Northern Rock and lost everything.
It is a fact that more money is spent on portfolio transaction costs for large pension schemes than any other cost. It is also true that much of it is unnecessary. But these are functions of investment choices based on active management, along with poor implementation and usually high management turnover.