I was asked to hang out with Steve Clemons and Richard Vague to talk about markets from high level. Specifically, is Wall Street Rigged? Well, yes, it’s rigged, but what can consumers to do prevent getting ripped off? While I literally wrote the book called Rigged Money, Richard has decades of insight and currently the Pennsylvania State Secretary of Banking and Securities.
What I really want to talk about was what we talked about off air. After the interview Richard made the comment to me that, despite my suggestion that investors should think more like institutional investors rather than retail gamblers, institutions get ripped off on a scale inconceivable compared to retail investors. You know - he’s right! In my defense, I suggested that the bulk of individual investors don’t know this, and assume that large pension funds are run by competent managers. I like to point out Calpers or very large pensions that have rid themselves of expensive underperforming hedge funds and focus on low cost index funds and reasonable strategies. Yet, I can only point to a handful that really run pensions well. In short, I was telling people to invest like they think pension funds invest, not how most actually do it. Crazy, right? And what I mean by all of this is to have a structure, a plan, and not wing it. Looking at the fundamentals of investing and not simply buying whatever your neighbor is doing for fear of missing out should be the focus. So, let us continue to lie to ourselves and believe that major pension funds make thoughtful decisions based on hard work, math, and a little bit of luck - because the truth is, an institutional investor is simply a retail investor hiding in a blue wool suit who expects a lobster dinner from a Wall Street wholesaler. . . hardly a setup for success.