Summer reading
by James Helik

The summer season brings an ever growing pile of new books to this editor's desk. Indicating a firm trend in the making, many of them have startlingly similar titles: Day trade online, The day trader: from the pit to the PC, and Electronic day traders' secrets.

On first impression, it seems that those who want to place all of the current ills of the capital market on the doorstep of such e-traders, may have focused on the wrong group of conspirators. Day traders include, as exhibited by the authors of the above noted books, a 25 year old graduate of Colgate University, a former pit trader and some former stock traders who have previously written yet another book on day trading. Their books set forth some technical how-to, and lots of stories, but no complete theories, analyses, or plans for beating the market.

So why bother noting electronic trading at all? There are three things going on here. The first is the observation that we have always had day traders, but previously they were limited to those who chose to stand around on the floor or an exchange, or spend far too much time in their broker's office. What this required was a certain dedication to the cause, often involving a move to another city. The current day trade manuals seem to be appealing to a mom and pop crowd with less experience, probably less trading capital and thus less staying power. All told, a group largely unsuited for this type of investing.

Secondly, what has allowed this trend to move ahead is the rise of technology (for other advances, see the article in this issue). Retail investors can now act like institutions, but is this a situation that regulators and all participants in the markets are happy with?

The final point is less easy to pin down, but also important: the intrinsic appeal of the stock market to people of all types. Technology might make day trading possible, but there must be a fundamental appeal which draws people to this as opposed to other approaches to riches (do novices seek fortune by trading stamps at home)? Let's face it, it is really uplifting to believe that an individual can trade stocks at home--sure, part is the appeal of knocking off work at noon, but the overriding appeal is that any individual, even you, can outsmart the Wall Street Wizards and Bay Street Mavens. Stock picking, at its root, is fun. People like doing it, more probably as a hobby than as a profession. This shows itself in other ways as well: the continued appeal of active management, and the move towards in-house money management by some pension plans. Its human nature, and it will stay with us.

And never bet against human nature.

Transcontinental Media G.P.