WSJ: Despite Raj Being Convicted, Some Still See the System as Stacked

By @ibtimes on

I hope some of these folks read Matt Taibi...their suspicions are only scratching the surface. :)

Via WSJ

  • In scoring their biggest insider-trading victory in a generation, regulators have a message for a nation of nervous individual investors: When it comes to information about stocks, the playing field is getting a little more level.  The little guy isn't so sure.
  • Certainly, the insider-trading conviction of Galleon Group founder Raj Rajaratnam on all 14 counts of securities fraud and conspiracy was a major victory for the Justice Department and, by extension, the Securities and Exchange Commission.
  • Yet while some investors have praised the government's recent efforts, many say they still feel at a disadvantage in a market dominated by large Wall Street firms and hedge funds.  I'm certainly happy with the verdict, and I hope it empowers the investigators and prosecutors to go much deeper in trying to solve some of what I consider the systemic problems with the markets, says Steve Borsher, a retired computer programmer who trades stocks and futures from his home in North Easton, Mass.
  • Yet he says the government's efforts are still more reactive than proactive, comparing them to anti-terrorism measures at airport security check-ins.  Someone carries on a liquid to make a bomb, then suddenly all liquids are denied on the plane, the 64-year-old Mr. Borsher says.
  • The problem is to solve the systemic dishonesty at the root level, but all this chopping off troublemakers at the top, it's like Whac-A-Mole, he said.
  • Audrey Lewak, a retired Merrill Lynch sales associate in Berkeley, Calif., is convinced that stocks are driven by a small circle of knowledgeable insiders—somebody with a lot of money and skill, banding together with other people to make a movement up or down.  Far from capitulating, though, investors like Ms. Lewak, 72, are deciding that, if they can't beat the big boys, they're going to join them.
  • Ms. Lewak took a technical-analysis class at a local university (well looks like I can go teach at a community college, if this mutual fund thing doesn't work out)  to hone her techniques, trying to mimic the moves of hedge funds and other players that may be privy to insider information. I don't care if you don't know why [they have the information], as long as you can piggyback off them, she says.  (indeed, isn't that the whole point of tracking things like options?  Week in and week out out 'strange movements happen', and people try to piggyback - in fact there are entire services dedicated to such 'strange movements')
  • There has been no shortage of fodder for stock-market cynics in recent years: the collapse of overhyped dot-com stocks at the turn of the century, malfeasance at Enron and WorldCom, a housing bubble, the near-implosion of Wall Street and the flash crash of 2010.
  • .........many people have simply abandoned stocks. Investors in the U.S. pulled $280 billion from stock mutual funds between 2008 and 2010, according to the Investment Company Institute, a trade group based in Washington. At the same time, they have poured their money into bond mutual funds, which have attracted $645 billion in the same period, as well as commodities and currencies.
  • There's a general sense that there are people on Wall Street profiting in ways that aren't available to the average investor, says Charles Rotblut, vice president of the Chicago-based American Association of Individual Investors,. Over the history of the financial markets, there has always been some malfeasance going on, but individual investors have still been able to profit while playing by the rules, he says.
  • Jeevan Anand, 62, a semiretired utilities manager in Los Angeles who has been investing for more than two decades, says he no longer trades individual stocks after concluding that price movements were being driven too much by insider trading. And, he says, no high-profile convictions are likely to change that.
  • Not all investors are so jaded. Mark Booker, 46, a computer technician in Louisville, Ky., is resigned to the divisions between institutional and individual, but he takes a relative view. There's always going to be the Wall Street big guys, and they're always going to be able to make more money than me, the little guy, but I'm going to be able to make money as well.

And that last sentence pretty much sums it up, from this vantage point...

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