With all the unfolding shenanigans--from stock analysts pimping companies they know aren’t worth the ink and paper used to report trades on your brokerage statements to hedge funds and prime brokers getting to play by different sets of rules--the market continues to get more and more dicey for the average stock investor.

And that’s before we get to the economic woes hindering the operational performances of the companies behind the increasing number of crummy stocks.

But who is the “average investor” nowadays?

The answer to that question back in the 1950s would indeed be an individual just like you. But today it’s a whole different game. You’re almost an afterthought when it comes to the stock market.

Back in 1950, 94 percent of all public shares were owned by individuals. The market depended upon the average investor to buy if the market was to work at all. By 1980, that number had dropped to about 60 percent, quite a decline in just a few decades.

Today, only 34 percent of all shares traded in the US are owned by individuals. And only 24 percent of the shares outstanding for the top 1,000 stocks by market capitalization are owned by individuals or households. The rest--76 percent--are owned by institutions.

The most recent exchange data reveals that US institutions own about $27 trillion of stock. That amount, despite crummy conditions, has actually gone up by 11 percent recently. Institutions control the vast majority of shares in the US, in terms of volume and value.

“Institutional investor” is a broad term. It includes pension funds, which account for an estimated 30 percent of institutional stock holdings. Mutual funds--there are about 21,000 of them, according to Benjamin Shepherd of Louis Rukeyser’s Mutual Funds--own about 26 percent of shares outstanding.

Should this bother individual investors? Perhaps. If you look at all the problems in the stock market--naked short-selling, non-delivered shares for trades, abuses in margin borrowing--the question becomes, who’s watching the market for our benefit?

Are we really the focus of regulators’, market makers’ and exchanges’ concern?

Because we’re no longer the majority of the market, and are in fact a shrinking minority relative to our larger, supposedly professional peers, perhaps the responsible authorities concentrate now on their best customers, the big guys as opposed to us small fry.

This Strategy Will Protect You From Increases in Taxes

No matter which candidate gets into the White House, post election changes to the tax law could wipe out companies profits and with it, most investors portfolios.

MLP’s avoid taxation, which will shield them from the new tax laws. I’ve selected a special handful that’ll protect your portfolio while giving you returns as high as 43% in a year.

Go here to get my free report and see why MLP’s pay much higher dividends –– like 21.1% a year for the past 5 years.

The market can’t, however, devolve into a betting or trading parlor. Were that to happen, slowly and surely the number of individual investors would eventually disappear. Some might consider that a fine state of affairs, individuals turning over our cash to institutions. But that’s definitely not an attractive scenario.

Just because you’re bigger doesn’t mean you’re smarter. And the ability to get away with trading abuses doesn’t mean you’ll make more money.

The past year is a perfect illustration: Of the thousands upon thousands of diversified mutual funds, 17 beat the general market. Seventeen funds, not 17 percent of all funds. More and more fancy hedge funds are going broke as their leaders try to scrape up what’s left and try to become individual investors by choice or necessity. This is troubling, and not just because the big guys aren’t better investors.

Their behavior--bad trading practices--as well as that of regulators--allowing different types of investors to operate under different sets of rules--is driving off individual investors. And those forces could drive them away from even funds or pension accounts.

Back before Charles Dow stocks were seen to be for chumps only. But Dow’s method of indexing and analyzing rationalized investment decisions as well as a lot of work by many more folks leveled the stock market playing field. It was no longer akin to a game of Three-Card Monte.

Before stocks become the rage, bonds--the vehicles I continue to pitch--were it for individuals. Guess where more and more wealthier investors are now putting their money? ?According to a recent survey of high-net-worth US households, the No. 1 asset class on the list of gainers is bonds.

Not all stocks are sunk, and not all stock markets are doomed. But before you devote anymore time and money to equities, consider bonds. My favorite closed-end bond fund collection includes PIMCO Strategic Global Government (NYSE: RCS), which is up 175 percent over the past 10 years, 20 percent for the past year. That looks good to me.

Another favorite collection comprises corporate bonds packaged specifically with the individual investor in mind. I call them mini-bonds; I cover them in the current issue of Personal Finance and on an ongoing basis in The Yield Letter.

The mini-bond collection I’ve put together is generating an average yield in excess of 8 percent, and it’s stable. Sounds like just the right trade for the average individual investor.

Ship Out

After all the work you’ve had to do to keep your portfolio intact, how about some spoils? I’d like to extend an invitation to join me on a Caribbean cruise this fall.

If you haven’t been on one with me, you haven’t had the pleasure of sharing a bottle of something French along with a nice cigar as background music plays and our ship plies the waters of one of the seven seas. And in the morning, we can get on with the business of figuring out how to make the most of the markets.

Now Is the Time to Get In To Make a Killing

I’ve found 7 irresistible bargains whose stocks prices are down today, but these companies have strong balance sheets. Their prices will soon rocket back and give you the chance to double your money.

My readers are already enjoying annualized returns of 28.9% from buying Wall Street’s bargains.

Follow this link and see what discounts you can take advantage of today.

Even though 2008 has been a difficult year for many of our favorite stocks, bonds and funds, we can commiserate and plan our regrouping for 2009 over a glass of cognac and a fine cigar while cruising the warm waters of the Caribbean.

We’ll talk about out what investments will help our portfolios grow while enjoying warm waters from Miami, on to island stops including St. Barthelemy, through the Panama Canal and finally to Costa Rica.

Click here for details.  

Dead Guys of the Week

Ever wonder who’s behind your favorite comic strip? For generations now, the characters from the mind of Charles Schulz have kept us entertained and laughing, a particularly necessary respite after getting through the day’s news.

Although the strip is excellent, thanks to the work of Schulz and his appointed animator Bill Melendez, Charlie Brown, Lucy, Linus, Snoopy, Woodstock and the rest of the Peanuts gang came to life beyond the funny papers back in 1965. “A Charlie Brown Christmas” was the first in a series of holiday television specials starring the Peanuts gang, and they also made it to the big screen.

All that work was overseen by Bill, who’s dead at 91 years.

Then there’s the darker side, the life of organized crime. Who was really behind the likes of John Gotti and his brothers? Well, their mother, of course.

Philomena Gotti is dead at 96 years. Born in Naples, Italy, Philomena came with her now-departed husband to the US back in the 1920s. Who would have known that a nice Italian mother would be the matriarch of the infamous Gotti brothers?

Speaking Engagements

Fall is the perfect time to enjoy Washington, DC’s outdoor treasures and catch a glimpse of nature’s splendor. And this year you can enjoy the immediate aftermath of the presidential election in the seat of the federal government.

Join Roger Conrad, Elliott Gue and me for the DC Money Show Nov. 6-8, 2008, at The Wardman Park Marriott.

Click here or call 800-970-4355 and refer to priority code 011363 to register as my guest.

I’ll also be appearing at the following events:

  • The Financial Advisors Investment Conference, October 2008
  • North Bay Investors Forum, Santa Rosa, CA, Oct. 11, 2008
  • The World Money Show, London, England, November 2008
  • The 2008 KCI Investing Cruise, Dec. 1-12, 2008

If you’re interested in having me or one of my cohorts address any investment or professional groups, please e-mail me at paymeweekly@kci-com.com with ideas or suggestions.