A dealer recently said to me that even though everyone has been giving their feedback on how to improve volume in the stock market, the answer is actually very simple: "bring the cowboys back''. By "cowboys'' he means the syndicates, those shadowy operators that manipulate stocks who are believed to have fled to other reigional markets following the penny stock crash last year that prompted an investigation into rigging and manipulation. Bring them back, allow them to resume their activities and all will be well.
So is the dealer right? All we need to entice the absent retail investor back into stocks is to allow syndicate activities to thrive?
This goes back to an earlier blog posting "Exactly what confidence are we talking about?'' in which I mentioned that there is plenty of hypocisy associated with investing/speculating in stocks. People will say they want a completely level playing field, strong governance and no insider trading but they may well practise the opposite, simply because when there is money to be made, principles can go out the window. And the bigger the money, the greater the hypocrisy. The authorities know this - someone once told me that if they clamp down on everything, the "cowboys'' will simply go elsewhere and we will lose out "because every market has it''. I disagree with this view - just because other markets might close an eye and allow a certain amount of illegal activity, doesn't mean Singapore should.
Or should it?