When Will Small Investors Know They Are Wanted?

Ever since the dot-coms, and then the Towers, came down, over a decade ago, corporations have given small investors the back of their hand.

(As always when I use The Monopoly Man as an illustration, I point you to the fine game produced by Hasbro.)

Hedge funds have arisen that squeeze out small profits on fast action, play with leverage, and take control of trends like social networking. Small players are not invited. This is how the 1% of the 1%, and the 1% of that group, kept their lead growing over the rest.

The result is that the best returns aren't available to you or me. Popular stocks cost hundreds of dollars (in the case of Berkshire Hathaway BRK.A many thousands of dollars) per share. Entire booms (like social networking) start to bust before small investors can even get a taste. Instead we get the investment equivalent of mush, ETFs and mutual funds with limited risk but very limited return.

I think this is about to change.

One reason is the social networking crash, which has mostly happened out of sight and burned some very big checking accounts. With smart money getting suspicious, investment bankers are going to look for investment where they can get it.

Another reason is political. The atmospherics of giving all the best opportunities to a handful of people are bad. Spreading things out, even out toward the 5% of Americans with “mad money” to invest, is almost populist.

A third reason is technological. The Internet makes it very, very easy for small investors to move money around. Lots of people with small accounts still means a lot of money. Sites like Seeking Alpha give small investors the courage to play.

So they need the money, for practical and political terms, and the money is easier to get. How will we know when this claim is a real trend?

• Stock splits. It's true, 10 shares at $60 each are worth no more than one $600 share, after a 10-1 split. But psychologically it's very different. I'm constantly being told at Seeking Alpha that stocks such as Google and Apple can't be played at $650 and $425. More people might pile in at $65 and $42.50. When companies want customers they price the merchandise where people will buy it.

• Earlier IPOs. Increased regulation of pre-public companies, lower-cost accounting tools for compiling numbers, and the burning of big players by companies like Groupon and Facebook will combine to a desire by management for public participation for faster cash-out.

• A Desire for Publicity. Most public companies haven't been eager for publicity for years. They look to professionals to flog the stock. That's going to start changing with the rise of sites like Investorcandy, which make publicity cheaper, with sites like Seeking Alpha and Motley Fool, which make small investors into reporters, and with some success by mid-cap companies in raising money this way.

You may well be skeptical of everything I've written here. You'll know my case is made when the actions I've mentioned start happening. Until such actions do happen you are quite right to be skeptical, even cynical.

But for 2012 and beyond it's a trend to watch.