Wall Street & Main Street -- A rigged game.

[Cyrano]

When the stock market goes down, those who make a living on Wall Street lose, and the rest of us who make a living on Main Street lose even worse. When the stock market goes up, those who make a living on Wall Street win and the rest of us who make a living on Main Street still lose.

My parents had always told me that the stock market was a rigged game. As a result, I've never invested in stocks and I'm fairly ignorant about the stock market. But for my entire adult life, I've noticed one unchanging pattern. Wall Street always comes out ahead in the end. For some reason, that sounds like the rule of any gambling casino -- "The House Always Wins."

For the past few weeks, the financial news seems to be all bad. Since I have no idea of the mechanics of how the game is rigged, it's hard for me to follow exactly who's screwing who. But one thing I'm certain of is that if the Wall Street "Rulers of the Universe" are getting hurt, the rest of us are going to get mauled. So I'd suggest that you put any assets you have under your mattress.

And there's one thing we can be sure of. Wall Street will get bailed out by the government. The rest of us won't.

[rfranklin]

1. Well, they raided the savings & loans during Reagan (Bush I)

And we the people paid off all the losses. Meanwhile, connected dickheads like Neil Bush walked away with millions.

[nashville_brook]

2. it might be worse than you think -- in a way, they *are bailing us out* b/c

it's a band-aid on a failing dike -- the money being put into the market today is to prop-up the failing sub-prime markets (funds, etc). what's happened is that the people who own our mortgages can't pay their bills. mortgage companies are tanking (Countrywide is the latest). worse case scenario, as a legal means to clean up the mess, mortgage loans could be called in -- meaning that people would have to pay up the total owed on their property thru refinance at much higher interest rates. obviously this can't happen as it will send us into hyperinflation.

[StrongBad]

3. It's rigged if you're ignorant about investing

As a semi-professional trader I've studied the market for many years. I've come to conclude that yes, Wall Street does target in predatory fashion the money of the ill-informed when it comes to how to make money in financial markets.

However, if you know the basics about investing and trading, especially the discipline of money management and trading psychology, you can consistently take advantage of market conditions and make money in any type of market. I've had great returns on my investments because I pay attention to finance everyday.

If Americans were taught some basic financial literacy and what it means to make money, many would benefit immensely from the stock market.

However, I'd say that 90% of those with money invested in the market are in way over their heads and ripe for the picking for those that do know what they're doing.

[A HERETIC I AM]

16. "The Stock Market is an extremely efficient mechanism of taking money from the stupid...

and giving it to the smart"


Author unknown. (It isnt my quote, so don't flame me, you guys)

Sure as hell is true, though.

BTW, what do you mean by "Semi-Professional Trader"?

Are you licensed? Or have you just been handling your own portfolio for so long that that is an appropriate moniker?

[StrongBad]

23. Not licensed, but do actively trade everyday

I make enough trading that i only have to work part-time (30 hrs/week) to make a decent living. I'm only 25 and once I had trouble finding a decent job in the Bush economy I decided to put a lot of effort into making the market work for me. I would greatly encourage people to look into investing for their own good, albeit very very cautiously!

[KharmaTrain]

4. For Every Loser There's A Winner

Money just doesn't vanish down a rat hole...someone has collected it or is making it. In that respect, yes, the markets are a very rigged game, but an investor should know that going in. Anyone fool who thinks the market is some kind of ATM or money making machine deserves to lose it all. Playing the market is no different than going to your nearby casino and throwing money on the crap table...if you're lucky or a good player, you'll stay above water...if not, you'll be flushed out. Either way, the house makes money.

I know several people taking a white knuckles ride with this market...earning a majority of their income off their stocks and they're not happy campers now, but on the year the market is still up 6%...that's still better than most other investments offer. The fact they base so much of their income that was is another problem and issue.

For the past several years, smart investors have seen the rising debt and crumbling consumer market here and invested off shore...in Euros and other foreign currencies...that's where the big money has gone...hediging itself as the little guys again get wiped out.

[EVDebs]

5. The money goe outta your pocket to Wall St and then offshore

where it's wasted in some third world overbuilding scheme to build office/manufacturing plants that further export jobs and capital offshore. Think Thailand a few yrs ago and the LTCM hedgefund collapse. Which came first and did it even matter ?

"Remember that it was the devaluation of the ‘exotic’ Thai Bhat back in ‘97 that triggered a chain of events that would eventually snowball into the first worldwide financial crisis of our era. "

http://www.financialsense.com/fsu/editorials/2006/0711.html

The hedgefund/capital outflow of course made the Thai overbuilding possible in the first place...

[daa]

6. Since you admit you don't kn ow anything about it

the HOUSE is getting creamed right now. The takeover boys can't get any money. The no down payment, no income verification loan sharks are going out of business. Unless you owe $200K on a $100K house you are not getting screwed.

[Cyrano]

7. Perhaps we're not getting screwed at the moment.

And as I said in the OP, my knowledge of how the market works is virtually non-existent. Yet, I instinctively feel that if major losses are being sustained, the rest of us are going to eventually end up with the bill one way or another. I hope I'm wrong, but as a friend of mine used to say, "wish in one hand, pee in the other and see which one fills up first."

[wiggs]

8. You are generally correct. Most of us have no chance of picking stocks and

mutual funds more effectively than the experts, especially if your goal is to beat the market average. I got killed on the only individual stock I've ever bought...Worldcom. So if I put money in the stock market it is only in low fee index funds. If the stock market is doing well generally, I will too...and over time, it should do well enough although I am pessimistic for the next several years.

Glad I moved at least some of my small investments into CD's 6 months ago and again last month...

[Cyrano]

9. My aversion to the stock market cost me big time -- as in millions of dollars.

In the 1980s I was working in the software industry. For anyone in that industry who was halfway conscious, it was impossible to miss the fact that two companies were dominating their particular disciplines.

I had friends who were constantly investing in the market on "tips" and their own "instincts." I told them about these two companies that I was sure were "winners" and suggested they buy some stock in them. Since they thought that software was something sold in Macy's women's department, and hardware consisted of only nuts or bolts, they totally ignored me. And since it was against my "don't-get-involved-in-the-stock-market religion", I too bought nothing.

So to make a long story short, the two companies were Microsoft and Intel.

[wiggs]

10. Holy crap. My one regret for not buying when I thought I should was Apple. nt

[Cyrano]

11. I remember that, at the time, most people in the industry thought that

Apple was a "flash-in-the-pan," and that their product was a passing "gimmick."

[LondonReign2]

15. Unless we all move to Lake Wobegone

"most" of us can't be "above average".

[LondonReign2]

12. Huh?

If, as you say, your knowledge of the market is virtually non-existent, how do you know it is a rigged game (other than your parents telling you that long ago)?

[Cyrano]

13. That's exactly the point I was making. I believe it's a rigged game

because my parents told me so.

However, during my adult life, their "wisdom" seems, at least to me, to have turned out to be, for the most part, true. This is based on nothing more than personal observations of stocks, winners, losers and the ways of the world.

Right or wrong, I have stated a belief (as opposed to an indisputable fact).

[LondonReign2]

14. Your own experience seems to prove the opposite

You could easily have invested in Intel and Microsoft. There was nothing "rigged" that stopped you from doing so, just as nothing stopped anyone from investing in Starbucks, EBay, etc.

If it were rigged, only those with inside knowledge could have made such investments, and/or there woudl have to be some sort of mechanical barrier (such as no access to a brokerage account, or prohibitive trading fees)preventing you from investing.

Actually, investing is the opposite of the "casino" analogy where the longer you play, the higher the odds you will lose money. The stock market is "rigged" in the investor's favor, in that they longer you invest the greater your chance of makign money. Just take a look at a chart of the market over long periods of time.

Sure, we'll go through market corrections like this from time to time, that is the nature of the market. It could certainly drop further from here, but you have to keep in perspective that we are down only 6% from the peak of the market. That doesn't even qualify as a correction (which is 10%) or a bear market (which is a 20% correction).

[Cyrano]

17. Read post #3 above. I really believe that the vast majority of people

are not as knowledgeable about the market as you are. As far as I'm concerned, anyone would have to be a fool to walk into a casino without knowing the odds connected with blackjack, roulette, craps, etc. Yet millions of people do it every single day and the majority of them lose (a little or a lot, depending on how ignorant or addicted they are).

The same is true of the stock market. I would venture to guess that the majority of people are as ignorant as I am about the workings of the market and therefore are really stupid to risk hard-earned money on something about which they know so little. In this sense, the market is as "rigged" as any casino. And this tends to support P.T. Barnum's statement about a "... sucker born every minute."

[A HERETIC I AM]

20. There have been many posts of late decrying the market as "Rigged" and a "Ponzi scheme"

but you bring up a point i hope you yourself would act upon;

Educate yourself about how things work and why. It does not take a 4 year degree in Economics or a complete understanding of Keynesian Theory to understand what a stock is and why it goes up or down.

I would venture to guess that the majority of people are as ignorant as I am about the workings of the market and therefore are really stupid to risk hard-earned money on something about which they know so little. In this sense, the market is as "rigged" as any casino.

Here is some free advice;

Google the words "Mutual Funds" and you get 37,700,000 results. (http://www.google.com/search?hl=en&q=mutual+funds ) The first page or two will give you enough info to keep you busy reading for most of tomorrow, but when you get done with that reading, you will know twice as much as that majority you speak of.

One of the best resources appears on page two of that search;
http://www.morningstar.com/Cover/Funds.html

Morningstar is an excellent data gathering firm and used by almost every professional in the business. While some of their more complex reports are available only by subscription, you can get a free trial, so check it out. They do extensive reporting on every single publicly traded Mutual Fund out there. (Yes, there are Mutual Funds that are not publicly traded, often for institutional investors like pension funds and states) There are over 10,000 Mutual Funds the everyday American can access.

Too many Americans seem to suffer from two things.
1) Fear of asking for help
2) Lack of understanding of what they already have through their work 401(K)

These two things are so easy to remedy it is amazing that there is such ignorance. (NOT stupidity, just ignorance)
People take the time to learn how to do their work, why don't they take the time to learn how to make their money work too?

Those imposing buildings downtown with the names on them that look intimidating (every brokerage firm you have ever heard of) actually have people in them that will help you. You won't be charged to sit and ask a few questions and if you don't trust the person, you don't do business with them. Trusting a professional to help with investment choices is not a bad thing, even though many on DU that post on these subjects will tell you that you can do it yourself if you just learn a little more. Sure you can, but will you reach your goals and will you have the kind of returns on your money that professional guidance consistently provides? If you get to the point that you can consider yourself a "semi-professional Trader" then so be it but for most Americans, sorting through 10,000 Mutual Funds is a daunting task. A Licensed Financial Professional can make that task much easier.

If you think that 5% returns on your savings is going to be enough to let you do what you want, when you want then you don't need any help at all. Just buy CD's. But if you want to stay ahead of inflation and actually see your money grow over time to a greater degree, get professional help.

[Cyrano]

22. Thanks for the info. I'll take a look and try to work my way through it.

More knowledge and understanding is always good, however, I doubt that I'll ever turn into a market investor. I'm probably a product of a bygone era, but for some reason, I have a (perhaps unreasonable) bias against Wall Street. I think that much of it has to do with the unregulated capitalism -- or capitalism run amok -- that we've seen ever since Saint Ronnie got to be president in 1981.

I've become mistrustful of capitalism, and all politicians. Perhaps a "golden age" will come along which will restore trust in our institutions. But as much as I hope for it, I will not hold my breath.

[A HERETIC I AM]

18. Quiet. Opinions based on sound reason and facts are often derided on threads like these.

You have absolutely no business injecting a voice of calm into an otherwise satisfyingly depressing topic.

[question everything]

19. Or simply in mutual funds offered by

respectable companies, in index funds or in the recent life cycle ones.

We have been investing our 401K and IRAs and have been doing fine.

As a matter of fact, last week when the market lost, I quickly sent a check to my IRA account..

[A HERETIC I AM]

21. There you go! When the market is down, everything is on sale!

and look at that...7 minutes left on this supposed black Friday and the Dow is basically flat for the day (down 3.50 for the day)