The movie title â€œDinner for Schmucksâ€ suggests that, perhaps the small individuals, are the SCHMUCKS invited to play the investment game and being shown up as fools. There is no question that the market today is a traderâ€™s market as opposed to a long term investors market. Everything seems to be geared to constantly repositioning ones portfolio to take advantage of the web and flow of stocks popularity. But, it is also obvious that the small, individual investor is at a tremendous disadvantage unless they constantly monitor the market like the pros do and make instant decisions to buy and sell. Most small investors obviously donâ€™t do that and, if they wanted to, they do not possess the research tools, computer programs and other analytical aids necessary to implement a trading strategy. Despite the advertisements for programs that will provide trading platforms, the small individual investor is just not equipped or trained to move with the pros. So, the inescapable conclusion is that the small investors are the â€œSchmucks invited to the dinnerâ€.
The Wall Street Journal today had an article about two billionaire brothers being charged for violating insider trading rules through the use of several off shore entities to hide their trades from the regulators and Oracle, a giant in the high tech world was charged with defrauding the U S government. It is hard to read the WSJ daily without running into one or more articles reporting criminal behavior by a range of market players from investment bankers to money managers to corporate directors etc. Small investors must feel that they are the â€œschmucksâ€ for doing everything honestly and believing that long term investments in good companies will usually reward them well while others are taking â€œshortcutsâ€ to wealth building. Reading bad stuff in the WSJ must suggest that what gets reported is just the tip of the iceberg and only represents those who were caught. Is it any wonder that individual investors have lost confidence and trust in Wall Street?
Maybe the financial reform legislation will correct a great deal of the ills, particularly through the â€œwhistleblowerâ€ provisions that reward people for reporting bad deeds. But, in the meantime, individual investors should continue to fight the abuses in the financial markets that place them at substantial disadvantage and impair the safety of their investments.