By Joel Warner
By Michael Roberts
By Alan Prendergast
By Michael Roberts
By Michael Roberts
By Amber Taufen
By Patricia Calhoun
By William Breathes
Traditional traders don't think SOES trading is for anyone, period. One of the biggest opponents of the scheme is Meyer Berman, who heads his own investment firm based in New York and Florida and was quoted in Inc. magazine as saying that "SOES trading is the biggest story in the financial world in the twentieth century." Berman went on to say that SOES-created volatility has lured swarms of unsophisticated investors into the market and pushed stock prices up to unsustainable levels. He predicted that when the bubble bursts, SOES traders will then drive the market down through massive selloffs. SOES are the "ruination" of the big firms, Berman told Inc., and when the big firms take a dive, the market will, too.
Gonheim dismisses Berman's argument. "Yeah, SOES are going to destroy the market," says Gonheim. "And the Pope is Jewish, too. Listen, all we're doing is making the market more efficient. Firms like Goldman Sachs still control the market. We just provide the small investor with the same market information that the big guys have. We give the individual more independence."
Lipman, who also works part-time for Insight as a trainer of new clients in how to use the SOES technology, understands why the market makers don't like day traders. "This isn't even close to investing," says Lipman. "It's playing the supply-and-demand game. It's like sitting down at a blackjack table in Vegas and counting cards without having to play every hand. I can sit there and watch a trend develop, and then when the card count gets in my favor, I'll throw down $1,000. But you can't sit out hands in Vegas. Here I can sit down and trade for thirty minutes out of six hours.
"The guys coming in here are all trying to make a living. It's just like starting up a business. If you think about it, for $50,000 you can start up your own company. But if I open my own company, I've got to worry about a whole host of things like inventory, employees and a lease. And then I go home every night and I'm shitting my pants worrying about if the place is going to get robbed or if my employees are stealing from me. Here, if I want to go home, I log off, leave and don't worry about it. If someone comes in here and steals the computers, it's not my problem."
More polished financial types say other types of problems may be just around the corner. "These are a bunch of new players in the market who don't know what they're doing," says Al Beimfohr, president of Canterbury Capital, an investment consulting and asset-management firm based in Newport Beach, California. "These sheep will be shorn before it's all over. I went down to the Block Trading office out here in L.A., and it was the funniest thing I've ever seen.
"Investing in stocks is a zero-sum game in the short run, meaning that for every dollar made, there's a dollar lost. If you're investing in the long run, it's not. That's the way you make money. What these SOES guys are doing is purely entertainment. It's like playing blackjack. The odds are stacked against you, and eventually you're going to lose. It's irrational and self-delusional for SOES traders to think that they're going to come out ahead."
When asked if SOES traders are a threat to the market as a whole, Beimfohr scoffs. "SOES traders are nothing more than an annoyance to the market," he says. "Maybe they help the market slide a little faster because they sell off so quickly when things take a downturn, but market makers like Goldman Sachs could give a shit about these people. They're very small potatoes. SOES people don't have the capital like the big companies on Wall Street. SOES people have got jack shit."
The traders at Insight are too busy to be pessimistic. At the end of the trading day, the same characters are still in front of their monitors, amid takeout sandwich wrappers and empty coffee cups, punching in and out of trades. Today, another record-setting day on Wall Street, finds most of them ahead of the game. At 2 p.m. the market closes, indicated by a Looney Tunes snippet piped through the in-house speakers--"That's all, folks!"
The traders stand up and stretch and chat about how everyone did for the day. Guys pat one another on the back as they head outside into the sunny afternoon. The mood is surprisingly somber.
"People have gotten over the hooting and hollering," says Lipman, "because tomorrow is another day. You learn to always keep your game face on, because even if you won today, you could lose your ass tomorrow.