Yesterday was a tough day on the internet. There was this article by Paul Farrell wherein he says no matter what you do your retirement plan will fail, this interview with Jeremy Grantham detailing how short the world will be on food in a couple of decades and this quick interview with Mark Cuban who has little to no faith in the current state of equity markets and seems to be saying do it yourselfers have no shot of a level playing field.
The articles, especially the first two, are genuinely depressing but of course the end of the world has always been a best seller. Much of the world is many years into some sort of financial deterioration that is unlikely to wrap up soon. There is also a stretching of the world's resources whose outcome is yet unknown.
With regard to Farrell's assertion that our attempts at retirement are futile, he focuses a lot on the extent to which Wall Street is out to get people (my words not his although he has probably said that before). Even if you believe that Wall Street is out to get people it is pretty clear that a much greater percentage of market participants (the ones who are left which is an issue for another post) do not rely on Wall Street advice or the more complex Wall Street products. I don't believe that ETFs that track baskets of stocks are complex Wall Street products.
The advent of simple ETFs and sites like Seeking Alpha give do-it-yourselfers who are willing and able to spend the time a decent shot of having enough money when they need it. The notion of 0% savings rates, $25,000 401k balances and financial illiteracy absolutely are problems for society at large but far less so for people who by whatever circumstance are engaged in markets.
People willing and able to spend the time (and save some money) can build a portfolio of a few dividend stocks, a couple of country funds and a broad index fund, then pay some attention to what is going on in the world and their portfolios and probably come out at least OK (no guarantees). This can occur with little to interaction with Wall Street in the way that I think Farrell is using the term.
There are a couple of rays of hope from the Grantham interview. He seems to believe the food shortage will be much less of an issue (maybe even a non-issue?) in the U.S. Yes that can be taken as being horribly selfish but if things are OK here then it will be easier for the U.S. as the world's richest nation to be part of the global solution. The other thing is that whenever I read this line of thinking from Grantham there is never mention of technological advancements that could help stave off what might be coming. I tend to believe there is a Moore's Law aspect to all types of innovation and while the problem may not be solved by the time it needs to be there can be dramatic progress made.
Cuban uses the Flash Crash as a microcosm for what is wrong with capital markets. The argument as laid out in the interview linked above actually seems disjointed. He seems to be saying that high frequency traders are like hackers who are disadvantaging investors but as he acknowledges that spreads might be tighter it doesn't really matter for investors because they are buying for the long term.
It is very unlikely that HFT is a net positive but in the example above of a buying a few dividend stocks, a couple of country funds and a broad index fund it shouldn't impact your long term result. A point I have made before is that it would of course be better to not get hosed by a nickel a share when you buy a stock you plan to hold for many years but the difference in performance over your holding period is very unlikely to be measurable.
As far as the flash crash, it was a lightning fast panic that turned out to be a malfunction of some sort. It should have never happened but it did and some other type of malfunction could easily happen again. Recognize these for what they are, panics or as I said during the flash crash; puke downs. Also repeated from past posts is that a basket of stocks that was worth $50 a share at 2pm is not worth a penny 20 minutes later. Same with an individual stock where there is no deathblow news. Congress can try to figure out how to prevent past malfunctions, all we need to do recognize a malfunction and not panic into it. With the last few blowups people have not been made whole in anywhere near the fashion I would have expected. You don't have to be made whole if you don't panic in the first place.
On a philosophical note the best thing would be to leave yourself as many options as possible. Saving more, spending less, living below your means, staying fit and figuring a way to monetize a hobby would all be relevant here.