Wall Street--Call A Casino A Casino

A further comment on Wall Street. I am by no means advocating a lack of regulation—in fact I think the Street should be far more rigorously regulated than it is today. Falsified figures should be dealt with as the crimes they are; arcane instruments created for investors—who have no way of understanding or validating them should be ferociously banned.
Banks should not be allowed to speculate like crazed slot machine players in a casino. The Depression Era dividing lines should be re-imposed. I’m talking very specifically about the act of buying a stock on an exchange floor.
If we don’t regulate casinos—any fool is allowed to go in and spend his entire paycheck on the spin of a roulette wheel or the flip of a card—we should not impose criminal penalties on people who take advantage of the natural “house odds” on the street.
The Street began as a gathering place for speculators, and I think it should stay that way. Then, at least, people know what they are getting into if they want to play. Criminal activity like breaking into a safe and stealing someone’s data should be punished, but not rational acts like dumping a stock if you learn it’s going to flat line through an overheard or confidential source.
Punishing that is like punishing a poker player who is better at reading “tells”. Years ago I had a friend who was born rich and did a lot of investing. He worked for a government agency, doing good works. His investing consisted mainly in doing precisely what his well connected daddy told him to do.
I once asked him if he had any advice on how a novice should invest in the market. He thought a moment. “If you don’t have connections, start with about [modern dollars] half-a-million and diversify widely. You can hope something will go up.
“Better,” he said, “have somebody like my dad call you—as mine did a month ago—and tell you to buy an IPO coming out tomorrow at about six dollars. (He should also have the connections so you can get in at that price.)
“Hold the stock until dad calls again—when it’s up to seventeen—and says, ‘Sell’. I sold. Next day it was down to nine and falling.” He shook his head. “I don’t know where my dad gets his information, and I don’t ask.”
He obviously didn’t think the market was anyplace for someone unconnected and underfunded. I had another friend, a wealthy man from the Midwest. His family had most of its money by having the good sense each generation to buy lots of land where their city was likely to expand.
But he also played the market. I saw him a lot because his broker was NOT in his Midwestern city. He picked a broker in New York who had good sources on the street and used them effectively for affluent clients. He told me, “I don’t want a broker who only knows what they know in Peoria or Louisville. I can read the ticker tape in the newspaper.”
He regularly flew to New York to have a face to face with his broker. That’s how it’s done. That’s reality. I would no more try to pick stocks with my assets and in my location than I would challenge a serious poker pro to a “friendly game”.
To pretend that all of our laws—like the stupid one that caught Martha Stewart off guard—are going to change things among big time and serious investors is silly. Let casinos be casinos, and for you and me, Wall Street is a casino—the stock market should be regulated accordingly.
Caveat Emptor. You’re on your own. (Warren Buffet may be a special case—he seems to have had a special sense of what products the American people were going to go on liking and using into the future. But even he got clobbered in a major downturn. Sometimes the best poker players have to hock their watches to get out of town. Even for him, house odds can be stacked.)
Just remember, unless you have connections, it’s a casino. If you want to take your retirement money to Vegas, hey—why not the Stock Market? Otherwise, find some connections. (And you will never convince me that Buffet doesn’t have any—just shop talk, of course.)