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The ASX has to stop investors being burnt by the stock market!

Peter Switzer
26 May 2015

By Peter Switzer

Stocks are better than term deposits when it comes to building wealth, but term deposits are safer. Stocks can be better than property, provided you have the right stocks but property, generally, is safer.

Given the fear around stocks from the saving public, the question is why does the ASX allow people to be burnt by such things as the collapse of broking firm BBY?

In all my years of financial commentary and personal education, I have talked up the benefits of investing in shares and have always tried to talk people into minimising the risks of buying stocks in companies that can fail or underperform. I recommend 20 stocks, those that pay dividends and ones that are great company names. Now I might have to advise investors to deal with brokers, such as nabtrade and CommSec, who won’t go broke.

As a small business champion, I like the idea of competition and this is where the ASX — the Australian Securities Exchange — has an important role to play. However, right now, 1500 investors must be wondering about the value of the ASX!

I got this from a viewer of my show: “Could you do a segment informing all investors about the recent BBY stock broking disaster. I am an investor who has been dramatically affected, as have 1500 other investors. The ASX forced me to close all my option positions, regardless of the fact that I had no margin issues and met all my margin obligations. I was forced to take losses on positions for no reason at all. I have had to close positions, which would have expired worthless. I don’t know what the prices were when these positions were closed. I don’t know where my money is and I don’t know when we will get our money back. I can’t even trade.

I really hope my viewer is wrong about his fate and it’s an ASX communication problem. If he’s right, I will become a very loud critic of the process and the players that the ASX is meant to monitor and regulate.

I’ll be making sure that this “please explain” from me gets to the ASX today and I hope they have some good answers.

My viewer thinks the ASX has questionable behavior to explain. At this stage, I’ll give the ASX the benefit of the doubt. My viewer goes further telling me his broker at BBY argues that the ASX has not covered itself in glory! I hope my viewer is wrong.

He does have a case for optimism telling me that: “Apparently there is a fund to help out affected investors. Do you know if we could make a claim regarding our losses, or, if there are any lawyers pondering a class action for affected investors?”

I hope he’s right about a fund or a law firm willing to take this on. The ASX should be on the front foot, assuring investors they’re onto the issue. They should have come to people like me and my colleagues at Sky Business to ensure investors keep their faith in the system that the ASX runs.

Over to you ASX!

By the way, until I received this note from my viewer, I was going to talk about the Spanish local elections that went badly for the ruling party and how Greek, Italian and Spanish markets fell on the news. I suspect a correction is overdue when you look at the US stock market but I see it as another chance to make money on a sell off. 

I don’t care if I lose money in the short term with stocks because I get it back in spades in the longer run. However I don’t want to lose money for reasons like my viewer has had to endure.

I think we all agree with that.

And last but certainly not least, to the many people I bump into on my morning walks who read my outpourings, my family suddenly lost its beloved black Labrador George yesterday. All of you who love dogs will understand our loss. George taught me more about life, about loyalty and love, than I could possible explain in this short note. 

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