Six Flags Over Wall Street...The Case For Applying Amusement Park Management Concepts To The Stock Market

Dear Pals,

This may seem like another nutty Birk idea.

Okay, maybe it is a nutty idea!

So, unbuckle your mind, throw caution to the wind and enjoy the ride on The Screaming 401(k) Eagle!

Here's my plan to permanently stabilize the stock market and greatly mitigate the 500-up/500-down daily volatility that is driving the record-breaking sales of Pepto-Bismal, Tums, Prozac, Jack Daniels, Grey Goose and Depends.

I call it...

Six Flags Over Wall Street

Here's How It Works:

First, we divide the stock market into niche sub-markets that I call Investment Ride Categories.

Which Investment Ride Category a company is placed in is determined by these factors; 

A) Each company gets to select which Investment Ride category it wants to be in.

B) Each company chooses the risk tolerance of the investor-type(s) they seek

C) Each company sets the duration of the investment they'd like  

D) And, the size of the minimum investment  

E) The company determines the forecast for the range of combined rate of return on the investment (dividends+value growth)

F) And, the SEC sets the buy-sell rules and regs that are specifically tailored for each investment ride category.

Under this plan, we separate the systematic, low-risk, long-term, patient money investors from the high-risk/high reward stock speculators, short-sellers and the hyper-active day-traders.

We don't allow the predatory wolves to feed off the grazing sheep any longer.

INVESTMENT RIDE CATAGORIES:

I. Choo-choo, Carousel and Model-T- Cars Type Companies - these companies ride on tracks that move at predictable speeds. Companies like General Mills, RJR Nabisco, Gillette, WalMart, Coca-Cola, Pepsi-Cola, utilities and railroads.

By and large, these are safe and measured rides that are longer in duration and far less emotionally jarring...the comfort of Investor Riders is a paramount concern to companies in this sub-market niche.

There would be no Internet trading or speculative short-selling permitted on companies in this category. It is reserved for the long -term regular investing of patient money matched up with the low risk tolerance investor types. IE: Minimum Investment of $100 per month and/or 100 shares for a period of 3-years.

Typically, these Choo Choo type companies chug along in good markets and bad filling everyday needs.

Their management typically has a longer range business model and they do not worship like crazed idolators at the Sacrificial Altar of Each Quarter's EPS. The Steady Eddie Investor is made for them. 

II. Bumper-Cars, Tilt-A-Whirls and Log Flume Type Companies - still predictable, but at a higher  speed and a mid-level of risk/thrill - Apple, MicroSoft, ATT, Cummins, Merck, Eli Lilly, Kroger, Osco, UPS, FedEX, Casinos, fast food restaurants - they'll give you a spin and occasionally they'll make a splash.

III. Ferris Wheels and Parachute Drop Type Companies - A wide range of highs and lows, but predictable risk cycles and usually nonfatal -Starbucks, GMAC, REITS, Amex, Hotels, Airlines, oil companies

IV. Screamer Types - conventional roller coasters - abnormal highs, scary lows, screams and thrills galore - reserved for day-traders and Internet trading - Indexes, SPYDRS, Fannie Mae, Freddie Mac. Wear Depends!

V. Barf 'n Fling Types - high speed roller coaster investments that twist and turn inside out and upside down and even do it in reverse - the ride's not over until the fat lady flings! - dotcoms, hedgefunds, commodity funds, mortgage backed securites, Russian Stock Market, Emerging World Funds. No belts, no buckles and no safety nets.

Second, we divide investors into different types based on individually-validated and proven risk tolerance models and economic knowledge levels.

We call these Investor Rider Categories.

INVESTOR RIDER CATEGORY TYPES:

Steady Eddie, The Risk Averse, Systematic 401(k) Investor is only allowed to ride on Category I rides: These are pure play investments for patient money and long term investments offering both value growth and dividend earnings - and the earnings are automatically reinvested via DRIPS. Stock splits over time can also increase the value of holdings.

The Rush Seeker, seeks a little buzz and an occasional tingle - is allowed on Level II ride for sure...possibly Level III

The Thrill Seeker - is allowed on Level III for sure - possibly Level IV.

The Ultimate Thrill Seeker and Pure Adrenalin Junkie - is allowed to ride Level III, IV and V...but is really ONLY drawn to where the risk and rewards are highest. He makes "Action Jackson" look like "Mr. Peepers." (For those of you who remember Wally Cox.)

WARNINGS - RISK MATURITY AND LOSS PROTECTION SCREENS:

Amusement Parks have WARNING signs that say things like: Must Be Accompanied By Adult or No Children Under Age 12 or You Must Be This Tall To Ride or Seatbelts and Retraints MUST BE fastened at all times or KEEP ARMS INSIDE!

Under my plan, potential investors must past 3-Tests before they can get a specific-level Investor's License.

FAIR WARNING - YOU MUST BE THIS TALL TO INVEST:

1. You must take a psychological test to determine your risk tolerance - LEVEL I through V

2 You must understand a basic financial concepts and economic terms. You must understand the fundamental difference between SAVING and INVESTING.

3. You must have a sufficient level of non-fatal or "lose-able" discretionary income to invest.

Then and only then will you be granted a 5-year Investor's License which comes in Risk Tolerance Tiers and with use restrictions, just like a driver's license. IE: must wear glasses, cannot drive after dark, cannot drive without adult present.

INVESTOR LICENSE PERSONAL RESPONSIBILTY LEVELS:

Level V License - Good on Level III, IV and V investment rides. If this type of Investor Rider gets killed in the market send the battered, decapitated, dismembered and disembowled body to next of kin, nearest dumpster or Potter's Field.

Level IV License - Good on all investment rides Level IV or lower

Level III License - Good on all investment rides Level III or lower

Level I License - Good only on Level I investment rides

If a person cannot qualify for an Investor's License, they must go to The Savings Sandbox of guaranteed CD returns and FDIC-insured savings vehicles until such time as they "financially" grow up.

All licenses expire after 5-Years and each Investors must be retested before reissuance can occur.

ADDITIONAL MARKET VOLATILTY REDUCERS:

1. Internet Day Traders - will pay an annual Internet trading fee of $2500.00 per exchange - IE: Trade on AMEX and NYSE costs $5000.00

2. Transaction Costs would be regulated like a Utility - a minimum $25.00 per trade

3. Internet Trading Volume Activity - 1 to 10 trades per day is considered the normal range

4. Over-Trading Fee - over 10 trades per day incurs an increased fee. Trade from 11+ upwards - goes to $100.00 per trade

5. Inactivity Fees are NEVER charged ever. Period.

6. Interest on Investor Cash in Individual Trading Accounts is automatically swept into FDIC-insured Individual Money Market Funds overnight.

KEY ISSUES THAT CAUSE MARKET VOLATILITY ARE ADDRESSED:

1. Market Volatility is reduced and high volume transactions per person per day that is currently driven by low transaction costs is greatly mitigated by Annual Internet Exchange Trading Fee and transaction fees that escalate with individual transactions per person per day.

2. Market Volatility driven by unregulated Internet Day Trading/Programmed Trading Activity is mitigated by transaction limits and escalating fees tied to high transaction levels per person per day.

3. Matching Of Risk Tolerances and Patient Money and Long-Term Investing strategies to Companies offering  value growth and dividend income is fostered. Company management is better able to plan and forecast outcomes with a more stable investor base and systematic investing scenario.

4. Elimination of penalty for Trading Inactivity means forced buy-sell activity is stopped.

5. Standardizing of Internet Trading Costs - using a Utility model - with heavy-users or "volatility-creators" paying more for the priviledge.

6. Separation of long term low-risk investor-types from opportunistic day-trader and speculator-types who have completely different levels of risk tolerance, financial goals and motivations.

The wolves are permanently separated from the sheep. And that's not a Baaaaaaaaaaaaaaaaad thing.

7. Upgrading the financial educational level of all potential investors - that's good!

8. Providing separate sub-market niches and non-comingled investment pathways allows for different types of participation - on the part of different company-types and different investor-types.

9. Investor choice and market dynamics are stll allowed to work - but within more stable and predictable risk/return ranges

10. Helps prevent small investor panic which in turn causes forced stock-selling by mutual funds and greatly mitigates the major 500 up-and-500 down swings that create sector volatility, uncertainty and personal economic dislocations.

Whaddya think?

Weigh in on this topic. Feel free to pass it along to the head of the SEC, your favorite financial advisor, psychic, witch doctor or to your pals!

Invite them to tweak, rant and rave, ridicule, heap scalding scorn upon me or even contribute better ideas. Of course, if you believe in and like the consequences of less regulated, wide open markets and the systematic shearing of 401(k) investor-saver sheep with the shears of greed at the expense of steady growth in a range of stability, then just leave things as they are.

Birk, Commonsensetarian and Citizen Of The Republic

PS: Remember when everybody laughed at The Birk Plan: "Zillion, Trillion, Billion, Million...what's a few zeros among friends?" (Archives September 18, 2008)

Well, $900+ Billion in Bailouts later...doesn't The Birk Plan of giving $297,000 after-taxes to every taxpayer in the USA over 18 years of age seem a little bit better than what the geniuses in DC have done thus far.

How many mortgages would have been paid off under The Birk Plan?

How many new cars would have been bought?

How many holidays would be brighter?

How many charities enriched?

How big an economic stimulus would it have created?

I freely admit that The Birk Plan was a tongue-in-cheek Tsunami-Sized "We Deserve A Dividend" plan...but, even as a farce, it will beat any Trickle-Trickle-Trickle Out Economic Stimulus plan that the drips in DC have come up with thus far.