In considering George Will’s Newsweek column yesterday, I blamed him for ignoring "the stock and bond markets’ rules and regulations and schemes that give them an edge over John Q. Investor."
That was imprecise.
I would like to improve upon it with examples borrowed from Charles Jaffe’s "Your Funds" column in today’s Albuquerque Journal.
o Massachusetts charged A.G. Edwards (brokers) with illegal rapid trading that effectively defrauded fund shareholders. Supposedly, the firm allowed preferred clients some 31,000 timing trades that moved more than $2 billion and resulted in transaction costs paid by other shareholders. Arcane? Hard to grasp? Exactly.
o Putnam and Franklin Templeton have admitted to similar practices.
Jaffe’s point is that big funds generally deny wrongdoing, then promise no more of it and complain that regulators are overzealous - all to the end of getting away with slaps on the wrist.
My point, you remember, was that Wall Street investors take not only the obvious risk – losing money when their stocks or bonds disappoint – but also the risk of being cheated by some little-known scheme like "illegal rapid trading."
Something to think about before considering putting Social Security dollars into the markets.
Unless, of course, you are George Will shilling for the Administration, which is shilling for Wall Street firms.