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Only Fools Try to Beat the Insiders on Wall St.

It’s the myth that will never die.

Jim Cramer has made a career out of promoting it, as have countless other stock-picking gurus since the dawn of time.

What is this myth?

If only you “do your homework,” analyze those financial statements, and listen to such-and-such a stock-picking guru, you, too, can pick stocks well enough to beat the pros.

If there’s one thing that should ring out loud and clear from the recent Wall Street insider-trading bust it is that this is preposterous.

Even without illegal inside information, your competition is intense. The hedge funds, mutual funds, and other professional traders you are competing with have, at a minimum:

* Professional analysts and traders with decades of experience who work 20 hours a day
* Huge industry Rolodexes filled with primary contacts at companies whose stocks they trade
* Research budgets that run into tens or hundreds of millions of dollars a year
* Dozens of Wall Street brokers calling all day with every scrap of info they can dig up
* Instant access to 100% of Wall Street research and analysts from hundreds of firms
* Proprietary research services that can cost hundreds of thousands of dollars a year
* High frequency trading computers that act on any market info in milliseconds

To win the stock-picking game, you have to consistently beat folks who have all of these advantages and more.

And then there’s the sort of information that the busted hedge fund, Galleon, is alleged to have traded on. Yes, some of the information is clearly illegal inside information. The rest of it, however, is what is known on Wall Street as an “edge.”

There’s a saying in poker: If you don’t know who the patsy is at the table, it’s you.

Next time you feel like bellying up to the Wall Street poker table, therefore, ask yourself again who the sucker is. Chances are, it’s not Galleon.