The Money Scale of Wall Street

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How much money is a lot on Wall Street? Ask this question to any 10 people in the finance world and you’ll get 10 different answers. I’ve thought a lot about this over the years–when you make $2 million before your 22nd birthday and lose 1/3 of it before your 27th, you’re guaranteed to have a ton of money issues–so let’s take a look at some different viewpoints and start from

the bottom up.

Recently, while trying to promoting my book , I was amazed at how many people wouldn’t consider reading it or reviewing it because I’ve “only made a few million” and my hedge fund never “made it past most fund’s minimums.” Since when is a few million not a lot of money? Granted the hedge fund industry is a $2 trillion industry so these people aren’t that crazy, but there are 10,000 hedge funds under $100 million and the vast majority of those have under $10 million in assets. Oh yeah and just about every average investor would love to have $1 million! Welcome to the snobbery that is Wall Street.

I’ve created the majority of my wealth by trading microcaps (companies) valued under $100 million) like Giga-Tronic (NASDAQ: GIGA) ($17 million) and smallcaps (companies valued under $250 million) like Premier Exhibitions (Nasdaq: PRXI) ($407 million), but most stock traders like to play much larger companies like Sirius Satellite Radio (Nasdaq: SIRI) ($5.3 billion), Apple (Nasdaq: AAPL) ($145 Billion) and Google (Nasdaq: GOOG) ($193 Billion). Go figure–I’ve tried, but those companies’ charts are much too random for me. Microcaps and smallcaps are much simpler and the big money doesn’t touch them (except sometimes taking long-term positions)–this means the competition is lesser, the market players dumber and potential profits, while lesser, easier!

When writing for TheStreet.com, MSN Money, or AOL, they won’t accept stories about companies worth less than $100 million and I have to add a disclaimer when I write about any companies worth less than $500 million. They have a point–most microcaps and smallcaps are illiquid; why risk any legal issues?

When appearing on major networks like CNBC or FOX, I’m not allowed to talk about any company worth less than $500 million. Many fine companies are left out, but the networks don’t want to deal with any legal issues. Make sense.

What does this all mean for you? Well, it means that Wall Street doesn’t care about tiny players and tiny companies, as defined by those worth “only a few million”. Tiny players, at least those who don’t close their funds and start publicly detailing everything they know and have experienced and tiny companies still have the chance to grow over time and finally get picked up by the Wall Street system, but until that happens, all you’ve got is tiny players and companies trying to get bigger, a bunch of message boards posts, paper thin research and hype galore.

It’s a gift and a curse–it means my book probably won’t sell very well, but more importantly, there’s opportunity down here in the gutters because misinformation rules and there are new suckers every day. Plenty of opportunities to profit. The key of course is to learn from the experiences of and to see what’s worked for others, and outside of what I’m trying to accomplish, there’s not much of that going on in microcaps and smallcaps! OK, so maybe my book does have a chance to sell well :)

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