Market Pulse: Yes, Wall Street is rigged
Perhaps you saw the recent “60 Minutes” segment in which author Michael Lewis said the stock market is “rigged.” There has been a lot of talk and press about it since. A few comments.
First, Michael Lewis has a book out, so kudos go to his publisher and PR firm for landing the “60 Minutes” gig. He’ll sell lots of books. That said…
Investment professionals will surely take issue with the word “rigged.” They should. Yes, some firms with the latest communication and computer technology can and do gain an edge over slower-moving institutions and larger investors.
I won’t defend that. That said, individual investors get far better executions, with lower commissions, now compared to any time in the past.
If a “60 Minutes” producer is in the area and naturally reading this column, I suggest he or she do this: Try a segment on how the stock market is overwhelmingly “rigged” in favor of long-term investors in high-quality stocks with rising earnings, not day-traders and especially not high-frequency traders.
The evidence: every long term chart of the market starts in the lower left corner and ends in the upper right. The long-term return on stocks is close to 7 percent after inflation.
When I entered the business, the Dow stood at 2,200. Now it’s 16,450. Yes, the market is rigged, rigged in favor of long-term investors.
Consider also the Forbes 400 richest Americans. Most own stock in companies they founded or expanded. Some are real estate developers.
Will you find any high-frequency traders on the list? I doubt it. Not now, not ever. If the stock market were truly “rigged against investors” they’d be there.
Long-time readers of this column, and clients of my investment advisory service, know that the way to build wealth is not to day trade but to own leading equity ETFs and quality companies that increase their earnings and in most cases dividends year after year.
That’s the message “60 Minutes” should give investors.
David Vomund is an Incline Village-based fee-only money manager. Information is found at http://www.ETFportfolios.net or by calling 775-832-8555. Clients hold the positions mentioned in this article. Past performance does not guarantee future results. Consult your financial adviser before purchasing any security.