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Video Interview: Is The Investing Game Rigged?

  • Written by Syndicated Publisher 286 Comments286 Comments Comments
    March 12, 2012


    The U.S. Labor Department’s monthly employment report is one of the most-anticipated market-moving data points watched by investors and traders on Wall Street.

    But ahead of Friday’s February jobs data, CNBC reports that the Labor Department and other government agencies are concerned some traders are illegally accessing data ahead of its official release while others are jamming agencies’ websites to give only a handful of people access to information, slowing it down for everyone else.

    In an effort to prevent potential future data breaches, the Labor Department has asked the company responsible for securing the nation’s nuclear stockpile to analyze its security protocols. The U.S. Energy Information Administration is also targeting and blocking certain computer IP addresses that seem to show “malicious intent,” according to CNBC reporting.

    Jane Callen, a spokeswoman in the Office of Economic Affairs at the Department of Commerce, told CNBC the cat-and-mouse game has been around for a long time. “And at each turn, the government is going to make sure they’re doing their best to ensure the right protections are in place,” she says

    News of this brings us here at The Daily Ticker to ask again the age-old question: Are financial markets rigged against the individual investor?

    “Absolutely,” says Lance Roberts, CEO of Streettalk Advisors. “If you’re trying to look at the economic data that is coming out and you’re hitting refresh on your Internet browser you are so far behind Wall Street you’ll never catch up.”

    But the information lag time is not the only problem facing individual investors.

    High frequency trading also puts the little guy at a disadvantage. Traders who profit from this type of investing use powerful computers to react to market movements and patterns before any human possibly could. Along these same lines, major investing firms have moved their trading systems as close as possible to Wall Street to shave nanoseconds off the transaction time.

    “The average investor really is at a disadvantage these days,” says Roberts.

    Then there’s insider trading by members of Congress. Even our very own elected officials are using inside government information to profit at the expense of everyone else. The public outcry to ban this behavior, which has been going on for years, finally came to light after a CBS “60 Minutes” report last fall. Since then, a bill to prevent congressional insider trading has moved quickly through both the House and Senate, but likely still does not go far enough to make any real difference. (See: The STOCK Act: A Step Foward But Not Perfect, Says ‘Throw Them All Out’ Author)

    “The average American is starting to kind of be fed up with the way things are, the status quo,” says Roberts. “The best that the average investor can do is play along with the game.”

    By that, he means old strategies like buy and hold, do not necessary hold up in today’s market.

    “Understand that buying something and trying to hold it for three years or four years or five years and getting long-term capital appreciation might work for you, but it probably won’t because everybody else on Wall Street is trading all around you,” he says. For example, while fundamentals of a company may look good, there may be a breaking news event that tanks a stock. Take Netflix. (See: A “Spectacular Collapse”: Netflix Loses 800,000 Subscribers, Stock Plunges 35%)

    “Fundamentals still work and fundamentals determine what you buy, but you need to add a technical analysis to your [portfolio] management,” he says. “Timing and trends are going to be much more important in the short-term. The goal here is that long-term we can make money, but we have to avoid those short-term declines.”



    Images: Flickr (licence attribution)

    About The Author

    Lance Roberts – Host of Streettalk Live

    lance robertsAfter having been in the investing world for more than 25 years from private banking and investment management to private and venture capital; Lance has pretty much “been there and done that” at one point or another. His common sense approach has appealed to audiences for over a decade and continues to grow each and every week.

    Lance is also the Chief Editor of the X-Report, a weekly subscriber based-newsletter that is distributed nationwide. The newsletter covers economic, political and market topics as they relate to the management portfolios. A daily financial blog, audio and video’s also keep members informed of the day’s events and how it impacts your money.

    Lance’s investment strategies and knowledge have been featured on Fox 26, CNBC, Fox Business News and Fox News. He has been quoted by a litany of publications from the Wall Street Journal, Reuters, The Washington Post all the way to TheStreet.com as well as on several of the nation’s biggest financial blogs such as the Pragmatic Capitalist, Zero Hedge and Seeking Alpha.


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