Who cares if the stock market is rigged?

One of the most interesting bits of the debate over high frequency trading sparked by Michael Lewis’s new book is the question of why we should care that some Wall Street firms are ripping off other ones. One reason might be if Main Street’s money is disproportionately tied up in the funds that are getting ripped off. That raises the question of just who has how much money in the stock market. Not surprisingly, the vast majority of stock is owned by the wealthy.

Start with this overview of the stock market via Business Insider:

chart-of-the-day-who-owns-the-stock-market-november-2012The first thing to note here is how small the pension fund slice is, and how it has shrunk over time. So pensions make up a relatively small slice of stock ownership, but the average American still might be holding stock via a mutual fund or as individuals, right? Well, here’s a look at the percentage of Americans at each income level that own any stock or bonds, including via a mutual fund:

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And here’s a look at how much Americans have put away for retirement, by income level:

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As for the households piece, fewer and fewer Americans are investing in the stock market:

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So can we put this all together to get a sense of how much of the stock market is owned by whom? Here’s one attempt that goes beyond just stock by the Institute for Policy Studies via ThinkProgress:

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And here’s confirmation that that distribution holds for stock by The New York Times:

The richest 10 percent of households own about 90 percent of the stock, expanding both their net worth and their incomes when they cash out or receive dividends.

The point is clear: the vast majority of stock is owned by the rich, even once you take into account retirement funds. Of course, that doesn’t mean we don’t have to care about the stock market. Among other reasons, the small amount of money the non-rich have invested there represents a decent chunk of their wealth.

But it’s nonetheless worth keeping this distribution in mind when talking about who is ripping off whom in the stock market. For most Americans, the great economic injustice is stagnant wages, not high frequency trading.

UPDATE: Ben Walsh vs. Michael Lewis on stock ownership as it relates to HFT.