If you're only trading long term, then sub-second differences are essentially irrelevant.
I think there's a perfectly reasonable point here. Fundamentals as "trading against the future profit of the company". HFT as "trading against the system".
According to the theory that stock prices are a martingale (which is well established), there is no qualitative difference between long and short run price movements. In particular, there is no reversion to the mean in stock prices [0].
[0] Of course, there are going to be literally hundreds of papers exhibiting some reversion to the mean effect. But this effect is always tiny.
Okay.
I also think you don't know what a martingale is. It is impossible to make any expected value betting on martingale movements, by definition. If you believe traders are purely "betting on price movements" of martingales then profit is impossible. So either prices aren't martingales or trading is not purely a process of betting on the movements of market-clearing prices. Actually, both assumptions are false.
Regarding martingales, a martingale is defined relative to an information set (you know what a martingale is so you already knew that, right?). Saying that there is no reversion to the mean implies being a martingale with respect to the weakest possible information set (the history of prices). Traders, whether high frequency or others, may have extra information outside this information set.
In short, stop nitpicking and revise your understanding of what a martingale is.
http://www.thenation.com/article/why-cuomo-leaving-wall-stre...
The tax is instantly rebated since 1981 (thanks, Reagan-era politicians!), so no money around this tax ever changes hands. It seems like it could be an interesting place to start looking as a model for a federal-level tax on financial trading.
1: China $2.9bn, 2: United States $1.9bn, 3: Japan $904m, 4: Germany $745m, 5: Korea $368m
Manufacturing in Germany may contribute a higher percentage of GDP, but it does not appear to have a larger (in dollars, according to this data) manufacturing base than the US in absolute terms.
[0]: http://data.worldbank.org/indicator/NV.IND.MANF.CD?order=wba...
With its population 4x higher, the US only produces 2.5x more stuff.
That's a huge difference.
A large component of US output is agricultural or natural resources which are not included in that number (nor is software for that matter).
My advice to any retail investor though is just dollar cost average into an index fund as a function of your age and forget about it. If you are going to try to 'beat the market' (and worry bout things like transaction taxes and spreads) you will lose.
When people talk about retail traders in this conversation, they are either totally clueless or working in the industry and just don't want to be taxed.
Anyone who says a retail trader should be trading enough to worry about spreads is not your friend.
So no, that argument very much does not carry.
How anyone outside the industry can argue against a transaction tax is beyond me. You have no idea how much the market has been rigged to suck as much money as possible out of you. Wall Street does not generate wealth. Everything they make is a tax on those that do.
I'm a little concerned that we're not talking about the same thing, by the way. Should retail traders care about modern spreads? No. Modern spreads are tiny. But before electronic trading pushed out the crooked human market makers, they were not.
edit to add: Thinking more about it, likely their more profitable accounts (ie, not their index funds) would be destroyed by a transaction tax and so they don't want to see it implemented. The salad days of just doing a simple honest index fund with 3% annual turnover are long over for Vanguard.