Corporate & Securities Law

The NOSMART Petition

To:  The 110th and the Incoming 111th United States Congress

From:  The National Organization of Silly Men Against Risk Taking (NOSMART)

Distinguished Congressmen and Congresswomen:

Our nation is in crisis.  It is a nation of gamblers.  If ever your help was needed, now is the time.  Will you heed the call and come to the rescue of those who do not help themselves?  Of course, we are referring to the extreme risk-taking, profit-obsessed, stock market gamblers.

How many people lost all of their life savings with the demise of Bear Stearns?  How many lost most of their life savings with investments in Lehman Brothers, Washington Mutual, or the auto industry?  How many people close to retirement have lost 40% or more of their portfolio value?  Are these people not reckless risk-taking gamblers?  Did they not make a huge bet on black only to have the roulette ball land on red?  NOSMART insists that it is your duty to prevent these gamblers from making such poor decisions.  These choices impact not only the lives of the so-called ?investors,? but also the lives of their wives, husbands, parents, girlfriends, boyfriends, and children.

Some will say that these investors did not have the skill or wherewithal to see what was coming and avoid losses or even make money by adequately diversifying their portfolio, cashing out their positions, or short-selling the oncoming downturn.  This is precisely why it is of the utmost importance that you get involved.  Those with investing skill were able to make money or avoid significant losses while the unskilled gamblers have potentially lost everything.  They unilaterally choose to risk it all and, as the government, it is your duty to preclude the activity altogether in order to prevent them from bearing such risk.

We at NOSMART call on you to do your job and protect the unskilled gamblers and their families.  We believe the best way to achieve this protection is to simply prevent everyone from making investment decisions.  For certain people, these decisions are nothing more than investment gambling.  The sort of government intervention we call for is not without precedence.  We refer you to the United States poker industry and the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) which you wisely ?Christmas Tree?d? into the Security and Accountability For Every Port Act of 2006 (SAFE Port Act).

First, NOSMART proposes passage of the No Risk Taking and Gambling Via Investing Over the Internet Act of 2008 (NRTGVIOIA).  This act will be analytically similar to the UIGEA in that it will prohibit the transfer of funds from any U.S. financial institution to Internet investing sites (e.g. Scottrade, eTrade, TD Ameritrade, and the like).  By passing the NRTGVIOIA, you inhibit everyone?s access to the very trades at the heart of this tragic problem, making it significantly more difficult for the next round of stock market gamblers set to throw away their life savings.

Second, NOSMART proposes a national ban on brick-and-mortar investment institutions with exceptions for New York, Chicago, and various Indian reservations across the country.  This second element is critical because, if access on the Internet is restricted, an investment gambler will travel locally in order to engage in hazardous risk-taking.  A partial ban will minimize this behavior while still leaving an opportunity for some people to legally engage in their investment gambling vice while on a relaxing vacation.

We ask you to consider poker in this context.  Some will argue that, just like investing, there are skilled participants and unskilled participants.  The former avoid bad situations and tend to earn a profit while the latter are simply a group of reckless gamblers.  Just like the savvy investor, the skillful poker player anticipates the future behavior of his opponents and makes proper adjustments to avoid negative outcomes.  The unskilled, gambling poker player is not able to or does not wish to do this and will lose, perhaps a significant amount of money.  By restricting Internet poker sites (and with state restrictions on brick-and-mortar card rooms), you have already shown the wherewithal to restrict access for all as a means to protect the unskilled poker player and his family from himself.  Now is the time for you to apply the same brilliant, forward-thinking thought process to the unskilled investor!

In addition, we at NOSMART do not buy into the mathematically-sound, yet still nonsensical, hogwash that focus, observation, and learning make poker a game of skill with a positive expectation for some as opposed to a game of luck with a negative expectation for all.  In investing, when I use better information or predictive abilities to make a savvier decision than the person whom I bought the stock from or sold it to, I gain while they lose.  They lose because they could have had my gain had they not traded with me.  However, in poker, information clearly is irrelevant.  Players? cards are randomly dealt.  Therefore, chance imposes an advantage on the player dealt better cards than the others.  It is a game of luck.

The idea that a poker player can observe his opponents, gather information on them, and then use that information to get an advantage is like claiming football is a game of skill because it involves strategy, information gathering, and physical domination.  Hello?the coin toss is random!  Each team has a 50% chance of winning the toss.  The winner of the toss has been granted a random advantage in that it gets to decide which team is likely to have more or less possessions in each half.  They can use knowledge of their team and their opponent to make the best decision.  Or, the winning team could use knowledge of physical factors such as the sun or the crowd to gain an advantage by selecting which goal to defend.  Notice that chance has bestowed these advantages on one team over the other.  It doesn?t matter that skill can be used after the chance occurrence.  Skill cannot overcome the advantages gained from the coin toss in football just as it cannot overcome the advantages gained from the dealing of the cards in poker.  It shouldn?t take a member of NOSMART to figure this out!!!!!  Thus, you were wise to protect poker players from themselves as all poker players are gamblers.  However, even if you bought into the seemingly logical, yet in our opinion nonsensical, arguments that poker is a game of skill, you were still bound by duty to deny access to all in order to protect the unskilled.  We commend you on this.

NOSMART has an entire master plan in which we will rid the country of the ability to engage in poor decisions.  True, this will impact the ability of individuals to make savvy and socially valuable decisions as well, but everything has a cost and we are prepared to accept this cost no matter how high.  Once we take the first baby step of banning Internet investing and restricting brick-and-mortar investing, we will move on to the second step: banning small businesses.  These dastardly devices of risk regularly lure entrepreneurial gamblers who end up flushing their money down the toilet, thinking they have a great idea.  We will ban these reprehensible businesses for everyone, prevent savvy and poor gambling decisions, and live in a less well-off, less developed country.  NOSMART thanks you in advance for the support you are rationally bound to provide.

Sincerely,
Bob B. Safe
President
National Organization of Silly Men Against Risk Taking (NOSMART)

Full post as published by Truth on the Market on December 18, 2008 (boomark / email).