Are Stocks a Suckers Bet for the Little Guy?


Peter Morici at the University of Maryland thinks they are. I for the most part think so too.

I still have money in the market of course, but any gains I make I make in spite of the hedge funds and big banks “trading word clouds” around me, as David Stockman puts it. I’m happy for gains when I get them, but I know that I am “out gunned.” Morici goes a step further and calls the market “rigged.”

It’s a 2 tiered system. Actually it has more tiers than 2, and it has always had tiers, but in a nutshell there is the high frequency trading world of quant models and flashes of green and red on computer screens in Greenwich Connecticut, and then there is the world of the retail investor.

There are still lots of ways to win for the average investor, even in the stock market, even now. But just understand that more than ever the retail investor is playing a completely different game from the big guys.

(From Real Clear Markets)

With corporate profits at record levels and stocks regaining the ground lost during the financial crisis, Wall Street anxiously anticipates the return of individual investors to equity markets. It may be a long wait, because the little guy may have concluded stocks are a sucker’s bet.

Investors, as opposed to traders, buy stocks in companies whose profits they expect to rise. The conventional wisdom says stock prices will follow profits up, but over the last two business cycles, that simply has not happened.

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