Riff Raff Stock Investors
Are Here to Stay
by

This first appeared in the
North Hills News Record

Not too long ago I was catching up with my dad on the latest stock market buzz. That's hardly an unusual topic for us, but part way through the conversation, he shook his head and started lamenting about how everyone seemed to be talking stocks these days.

He was fairly convinced it wasn't a good thing. That's when our little chat got a bit heated.

He's certainly not alone in his sentiments. Many people involved in the traditional stuffed-shirt Wall Street institutions, including the news media that cover it, have been wringing their hands over the number of individual investors buying stocks. Add the recent shootings by the two wacko day-traders into the equation, and it doesn't take long to figure out things just aren't like the good old days anymore.

Yeah, I remember those good old days. I remember when access to important information was limited to those with proper connections. I remember when stock brokers wouldn't even consider investing your money unless you had at least $20,000 to burn. And I remember when most individual investors were excluded from the hot deals except for a few hand-picked favorites.

The Internet sure has made a mess out of that cozy arrangement. Now even common riff-raff have access to investment information, real-time quotes and discount online brokerages allowing stock trades to be made by people sitting at home in their underwear.

Sure, more people are playing the stock market like it was the latest video game. But gambling stock speculators certainly aren't new to the Internet age and neither are day-traders despite the dozens of recently published books on the subject.

All the hype, however, helps explain why the self-righteous traditionalists hate the dot-com stocks so much. The Internet has not only helped bring Wall Street to Main Street, Internet companies also are redefining what makes a company valuable.

In cyberspace, human capital, the ideas and skills a company's employees possess, is far more valuable than physical capital. Unfortunately, it's not easily measured.

That annoys the traditionalist bean-counters because standard accounting practices that emphasize equipment, buildings, inventory, etc. can't explain why some Internet stocks are worth so much.

The traditionalists believe these stocks have been overvalued by the influx of riff-raff investors. Every time the market takes a nose-dive, they self-righteously squeal with delight hoping the little guys will get squashed, learn their lesson and get out of the market. When the market rebounds, the traditionalists go back to their ‘just you wait' mantra.

But companies like eBay and Amazon.com may not seem like much in the brick and mortar universe, but they're on the forefront of new ideas and in a digital economy. That's a far more valuable asset.

Like it or not, the world of investing has changed. For now, individual investors make up just a tiny fraction of the overall market capitalization even though they've made things a little more chaotic. Financial markets are no longer the exclusive domain of the rich and powerful. That's definitely a good thing.

© Copyright Deborah A. Ayers 1999. All rights reserved.