Investing: Little Guy Deserves a Break

The little guy not only pays most of the taxes, as "Queen of Mean" Leona Helmsley once said, but, although Helmsley didn't say it, he nearly always gets the dirty end of the stick as well.

The more I watch the gyrations of the stock market -- I guess you could call it a hobby of mine -- the more agitated I get.

It is clear, I think, that the federal government not only allows the stock exchanges and big brokerage houses an unfair advantage over individual investors, it actually endorses the practice.

Initial Public Offerings: Unfair?

If you, like me, are one of the "little guys," you're probably talking to yourself -- as I do every time I see one of those IPOs go through the roof on the first day or two after it hits the market. That's because IPOs (initial public offerings of previously private companies) are not available to the average investor until days later when the price of the stock already has doubled, tripled or quadrupled. Is that fair?

I also can be seen talking to myself every time I see companies report bigger than expected losses or profits "after the bell." While a few savvy traders can sidestep this one, the big brokerages and wealthy investors can easily dump their shares or buy more, in after-hour trading or in stock exchanges outside the area before trading opens in the regular markets the next day. Is that fair?

Insider Trading?

Big brokerages get to talk with companies about their earnings in private consultations before the information becomes public. There's little question that some insiders take advantage of this information illegally, generally without getting caught. Is that fair?

I could give myriad specific examples of these unfair situations, but I believe anyone who has any interest in the market could tick off a long list of his own. Besides, the moment one brings up a specific company it's greeted by accusations of bias or special interest -- that would be a distraction.

Little Guy Left Holding the Bag

By virtue of their positions as full-time professionals, brokerages already know long before individual investors what the prospects are for companies before they report quarterly results (perhaps even the exact figures.) The little guy, as always, is left holding the bag!

Favoritism toward the big guy is nothing new, of course, but, now that large numbers of individuals are becoming involved in the markets either directly or indirectly through mutual funds or retirement accounts -- a few are getting a closer look at the shenanigans by way of the Internet -- the shouts of some victims are beginning to be heard.

Individuals should be given the same access to market-moving information that now is available only to the privileged few. That would be fair.

Time for Congressional Action

While the unequal access to information has existed for decades, the time is ripe for the Securities & Exchange Commission, the Treasury Department, the Federal Reserve Board -- and Congress -- to take a close look at the problem and end the shameless unfairness of the situation.

Maybe even the venerable Alan Greenspan could hop off his political fence long enough to point out that these inequities should be eliminated.

I wrote this column as a "My View" for The Hour newspaperof Norwalk, Conn., on March 3, 2000.