Speaking for the 95th Percent

NEW YORK ( TheStreet) -- Almost a year ago The New Yorker ran a clever cover of tuxedoed gentlemen lounging in a lifeboat while the economy, in the form of the "Titanic," sank behind them.

The Occupy movement followed soon after.

Most of the protesters last year were students and ordinary workers, often at the median income or below. (Median family income was $49,445 last September, according to USA Today.)

There were exceptions. There were some wealthy celebrities, even a politician or two. Since then, the "wealth gap" between the rich and the middle class has become a salient issue.

But today I want to talk about the 95th percent. I'm talking here of people who are quite comfortable, with family incomes up to $200,000 per year. People who live in nice houses, who have money to invest, but who don't consider themselves rich. The retail investor.

Retail investors buy stocks, bonds, mutual funds and exchange-traded funds, mostly for retirement accounts. Retail investors often use discount brokerages, investing or trading online. I'm a retail investor. I tell friends I have a bookie named Chuck, also known as Charles Schwab ( SCHW).

But in the last few years the pickings for retail investors have become slimmer and slimmer. The social boom wasn't made available to us until it was ready to bust, as I noted here at TheStreet.com in May.. All the good deals, and all the big gains, are being sucked up by venture capitalists and private equity, by the 1%. More accurately, by 1% of the 1%.

The JOBS Act signed earlier this year will make things worse, not better. You can now have up to 2,000 people investing in your company and not have to report your finances to regulators, as the law firm of Lathrop & Gage explains. The result is a vast new unregulated market, private companies issuing stock to employees and investors that is traded privately.

The CEOs behind these deals love the new game. They don't have to talk to reporters or analysts. They don't have to worry about what retail investors think, or the coming quarter. They no longer go to public markets to get investors. They go to public markets to cash out, to find suckers. Like those who bought Facebook ( FB) at $38 a share.

I would love to invest in the great new industries being created in this country right now:
  • There's a huge boom in apps. No one writes applications any more. They all write apps, which can be downloaded quickly, which are often free, and which are fueling the phone and tablet boom.
  • There is a renewable energy boom in this country. There are a ton of small solar panel companies, hosts of biomass companies and dozens of startups working on making this intermittent power the center of tomorrow's electric grid.

But retail investors can't get a taste of either boom. Most publicly traded companies in either area are penny stocks, easily manipulated, thinly traded, often of dubious quality. The good plays, the big profits, they're all in the hands of the 1% of the 1%.

Here is an inconvenient truth for you: Wall Street is a TV studio. Nothing really happens there. The markets are all computerized. Much of what is being traded on those computers isn't worth buying. It's a day-long game show. It may reflect the economy, but it does not reflect opportunity.

As hard as the 90% are being pressed by the 10%, and as hard as the 95% are being pressed by the 5%, almost 99% of that 5% are also being pressed, by the 1% above them. The reason this feels like the Gilded Age is because it is, with ordinary American progressive ideas like financial regulation and anti-trust enforcement derided as "socialism" by the smug.

But it's the retail investor who will save this country. The most important reform we can make is to give retail investors something better to invest in, because we're catching on to the game and we don't like the way it's rigged.

At the time of publication the author had a position in SCHW..

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.