11 reasons ‘investor literacy’ is a big hoax
by Paul B. Farrell
MarketWatch
April 15, 2008

Commentary: Wall Street prefers clueless, irrational investors

Arroyo Grande, Calif. (MarketWatch) — So Congress made April “Investor Literacy Month.” What a hoax, a cruel joke, yes, an insult to America’s 95 million investors.

What’s really happening? Here’s the short version: In the past five years Wall Street’s out-of-control greed (with the backing of Greenspan’s cheap-money Fed, an “anything-goes, free-market” White House and a banking industry that loves piling up debt in order to charge excessive fees) created a massive housing-credit bubble to rapidly replace their earlier busted dot-com bubble.

Then last summer the new bubble failed, exploding in our faces, nearly destroying the global monetary system. Result? These two bubbles triggered a diversionary, knee-jerk reaction: A wave of so-called “investor education” programs across the U.S. and world.

That’s the joke, the hoax, the insult. Get it? Wall Street’s greed nearly destroys the world’s economy twice in less than a decade. Solution? Bail out Wall Street, then blame it on the little guy, the Main Street investor, for not being “educated enough!” That’s a hoax.

The truth is, Wall Street needs an education, not Main Street! Wall Street needs some “antigreed, ethics education!” Until then nothing will change, we’ll just get more of these well-meaning but ineffective initiatives spelled out recently in The Economist:

Congress’s designation of April as Investor Literacy Month

The President’s Council on Financial Literacy chaired by Chuck Schwab

Project Hope created in the aftermath of the 1992 Los Angeles riots

Jump$tart, an American coalition of 180 groups promoting financial literacy

Cities for Financial Empowerment Coalition inspired by New York Mayor Bloomberg that now includes Miami, San Antonio, San Francisco, Savannah and Seattle.

Child Savings International educating 6- to 14-year-old “entrepreneurs” worldwide

The World Savings Bank Institute, representing 92 countries, recently held “a summit in Brussels about financial education in light of the subprime crisis.”

Yes, well-intentioned, but destined to fail. But before we focus on the real problem (Wall Street’s insatiable greed) we need to focus on the investor’s brain to see the first 10 reasons. Simply put: Educational initiatives are doomed to fail because the investor’s brain is not “rational,” never was and never will be. Read the rest of this article here.

Copyright © 2008 MarketWatch, Inc.

photo: eWatchman.co.uk