Reuters Investigates

Dumb money on Wall Street

Jonathan Spicer’s special report on dumb money in the stock market shows how a few powerful financial institutions make money from retail investors, and why the system is coming under scrutiny.

If you’re wondering what “dumb money” is, it basically refers to most trades by amateur investors like you and me.

To read the story in multimedia PDF format, click here.

Here’s what the Columbia Journalism Review had to say about it.

Escape from Wall Street

Leah Schnurr and Edward Krudy report today on retail investors fleeing the stock market. Will the Lost Decade create a Lost Generation of investors who avoid the market in a way not seen since the Great Depression?

Here’s what one of the authors had to say about the story:

By Edward Krudy

The perception that the stock market is a place where the average person can share in the wealth of the nation has been a cornerstone of American society throughout the twentieth century. That’s why we felt it was a big deal when small investors started to abandon the market.

After two big declines in stocks prices – one during the dot-com bubble at the turn of the millennium and another barely a decade later – we felt we needed to ask if this time it was more than just the post-crash doldrums keeping investors away. This time, would they be coming back?

The report touched on the lives of individual investors around the country. It took us to Princeton’s leafy campus, into conversations with scores of analysts, professional investors, and brokerages, and even into the archives of the Museum of American Finance beneath the floors of Wall Street’s banks.

We found a range of opinions, some pessimistic, some less so. But everyone agreed on one point: this really matters – whether it’s a question of individual investors having enough to retire on, the reputation of America’s capital markets, or the profitability of the brokerage industry.

SAC Capital’s Steve Cohen yells fore!

Matthew Goldstein

Wall Street and golf have had  a long and storied love affair. And over the years, many a hedge fund manager has given up the trading game to spend more time on the links.

But the revelation that SAC Capital has hired a former institutional stock broker to spend most of his time on prestigious golf courses, schmoozing corporate executives and wealthy investors, is another stark example of what separates hedge fund managers from mere mortal investors.  As several securities experts told me, it doesn’t really matter whether or not a corporate executive says anything of real substance to Steve Cohen’s unofficial golf pro, Sam Evans. What matters is that Cohen and his traders are getting the kind of unique and intimate access to corporate executives that ordinary investors can never dream of.

The story comes at a time when regulators are trying to create a level playing field for investors. But as Donald Langevoort, a Georgetown University Law Center professor says, the notion of creating fair markets where all investors are treated the same is a “myth” and it is a “myth that a lot of people put to good use.”

To read this special report in multimedia PDF format, click here.

Club Fed: the ties that bind at the Fed

 We’re getting a lot of good feedback on our special report on cozy ties between Wall Street and the Fed. As one Wall Street economist put it: “I’ve never seen the ‘Fed Alumni Association’ used more extensively for back-channel communications with the Street than has been the case since June.”

The story pulls back the veil on the privileged access that Federal Reserve officials give to big investors, former Fed officials, money market advisers and hedge funds.

Another economist from a European bank thanked us for the report, saying: “I hate the idea that monetary policy is communicated through non-official channels, be it old friends or newsprint.”

Personally, I’d argue that if it comes via the press, at least the information is available to everybody in the market at the same time, but then a journalist would say that.

For a printable version in PDF format, click here.