16 The stock market is not a level playing field


In his book ‘Broke’ (Fourth Estate 2014), David Boyle wrote:

The Financial Sector no longer sees its main function as raising money for productive enterprise run by the middle classes.  It buys, sells, and repackages financial assets in a great swirl of useless and corrosive activity, sucking in the money that might play a more useful role.  It has become a new kind of landlord, living off rents and charges of a financial system that funnels wealth upwards-while real wages and real salaries have been declining since 1970.

Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway.

Warren Buffett

To develop the metaphor, the playing field is vast and uneven, with playing areas around the world and the game is risky.  The aim is to accumulate as many chips as possible and convert them to cash. Surrounding the players are helpers who want to get their hands on as many chips as possible without taking any risk.  There are many rule books and the big players find many ways around them.  Too few referees struggle to keep up and swap places with players from the big teams on a regular basis.  Usually, the referees are not well-supported by their governing bodies around the world. The number of participants is beyond counting.  They range from large, well-equipped teams, often working closely together, to a great many individuals with little training and experience.

The value of the chips varies with time and playing area.  Sometimes nearly everyone is playing together and winning everywhere.  Other times it is a zero-sum gain with both big winners and big losers.  Every now and again panic sets in and nearly everyone loses.  Some of the individual players always seem to lose, though there are always small areas of the playing field where the most skillful individuals can find some valuable chips.

In this chapter, a number of areas in which the retail investor is at a systematic disadvantage are described. […]