To: michael r potter who wrote (2847 ) 5/16/1999 3:58:00 PM From: Sir Francis Drake Read Replies (1) | Respond to
Great post, Mike. Couple of caveats, if I may. A lot depends on what your definition of "big guy" is. Multibillion dollar institutions are big, no question, and they have a hard time investing/trading smaller cap, less liquid stocks. But that does not mean those stocks somehow are a more "even" playing ground for the individual investors. There are any number of trading/hedge funds that do nothing but short term trading in such stocks that borders on manipulation. The only reason many of the tactics these funds use are not illegal, is because necessarily SEC is behind the curve, always. I can mention to you a virtually endless number of stocks that have been viciously controlled by such activity. To call this an even playing field for the individual investor is a travesty. The little guy is getting screwed, no doubt about it - and can we really say that those who screw him are not "big guys"? Sometimes a few million dollars can make a huge difference - sure doesn't qualify you as a "big guy" by the standards of most MF, but can you be called a "little guy"? Bottom line, the "little guy" in this scenario is frequently at a much greater disadvantage than vis a vis the real "big guys". Second point - the absence of the real "big guys" from many small/micro cap illiquid stocks is actually a net negative - not only does it skew the whole market toward the liquid big caps with consequent distortions to valuation, but leaves the field open to the aforementioned manipulation by well financed predatory funds, which can play the kind of outrageous games that would be impossible to pull off with stable institutional presence. The "little guy" is often powerless to enforce market discipline on valuation - up or down even when it's wildly out of whack, simply because his 10-100K means little to the funds 1 - 10 million - institutional money would put an end to such nonsense. Anyway, I'm not disagreeing with you, just wanted to shade the situation a little less black and white.
