Wall Street's 'Weapons of Mass Manipulation'

From Fox News, read the entire article

Are you sitting down?
Sorry investors, but you're at a distinct disadvantage. You're one of America's 94 million Main Street investors and the odds are 100:1 against you given the enormous firepower of Wall Street. And thanks to behavioral finance, it's getting worse, the gap's widening.

Can you hear the laughing and snickering?
On cable, in ads and sales pitches The Street panders to your ego: You're "the man," a "rational man." You can beat the averages, the indexes. But behind your back, they laugh; they know you're irrational when it comes to investment decisions. Moreover, they actually prefer a market filled with irrational investors. That way, they can manipulate you easily without you ever really knowing it.

Can you beat the Street?
Oh, they'll let you make modest gains, enough to keep you in line, to prevent a full-scale rebellion. But the playing field's not level and they're backed by an elite force of roughly a million in the financial-services industry — brokers, salesmen, advisers, analysts, talking heads, slick admen, slicker lobbyists — "foot-soldiers" armed with superior tools, advance data, huge monetary incentives and the protection of friendly legislators and regulators.

Is hope an investing principle?
In Robert Shiller's 2000 classic "Irrational Exuberance," Shiller says irrationality is simply "unjustified optimism ... wishful thinking on the part of investors that blinds us to the truth of our situation." Irrationality makes us our own worst enemy, and prey for sophisticated market predators.

In the 1990s our irrational exuberance blew a huge bubble. Then irrational pessimism popped it. It'll happen again. Because investors are irrational, cycle after cycle, day in/day out. That will never change. We are irrational investors.

Do you control your behavior?
Wall Street knows this, and thanks to their new behavioral-finance allies, knows how to capitalize on this weakness in the investor's psyche, use our naiveté and weaknesses against us and beat us in the market. Moreover, they have no incentive to share what they know; worse yet, they prefer we stay irrational!

Wall Street pros need "investors who are ... irrational, woefully uninformed, endowed with strange preferences, or for some other reason willing to hold overpriced assets." Get it? In order to succeed, Wall Street needs "irrational investors," that's spooky!

Is anyone on your side?
Business Week is quick to warn: "You and I can no more hope to do what [Wall Street] does than we can hope to rival such famously heroic stock-picking personalities as Warren Buffett and Peter Lynch. You and me and the rest of America's Main Street investors are outgunned and outsmarted in this game. We can't even speak their language, and what they do is cloaked in secrecy.

What can you do?
Very simple: Since you can't beat them, don't play their game by their rules. Build a lazy portfolio. Then leave it alone. Let it do its job automatically. Build wealth doing something you love in a business or profession you enjoy, and spend as much time as you can with family and friends.

Forget the irrational markets. With the quants now beefing up Wall Street, you're just wasting your time anyway ... surrender!

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