Entries Tagged 'Economics and Investing' ↓

Wall Street has coined the name for retail investors: ‘dumb money‘. And, as headlines like “Investors resist the siren call of equities” suggest, Wall Street is now surprised that retail investors are fleeing the market in droves? Who’s dumb?

Retail investors have lost confidence. They feel manipulated by brokers and betrayed by the market. Clearly the government hopes that more regulation will help. It won’t.

Regulation doesn’t build confidence; regulation prevents confidence from slipping away. It’s a bit late for that! What builds investor confidence is success. Success cements an “I can do it!” attitude.

What pari-mutuel betting means for investor confidence

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There is cheating in all kinds of gambling. But cheating in pari-mutual betting is different than cheating in gambling games of chance. Investing is pari-mutual betting. Investing is based on skill not luck. Investment scams work differently.

Market manipulation, insider trading, front-running, and banging the close. Why are all these things illegal in investing? We’ll see shortly. Continue reading →

Investing is an example of pari-mutuel betting. I discussed this topic in my last post, “Investing is Not the Kind of Gambling You Think! ”  Pari-mutuel betting is based on human intelligence, not on probability or mere chance. This means the more you know about investing, the better your “odds” are for winning.

Economists and financial writers often are blissfully unaware of this difference.

They use the word “gambling” in relation to investing in inappropriate ways. They also refer to probability betting as if it applies to betting on the outcomes of activities involving living beings. It doesn’t. Probability betting applies only to inanimate objects like dice, cards, or spinning wheels. It doesn’t apply to the hand or mind that manipulates those objects. Continue reading →