Ooooommmm. Trust. Ooooommmm. Transparency.

Anyone who's read more than two posts on this blog (maybe even more than one) knows my twin mantras: Trust & Transparency.

I don't believe in them just because they're the right way to behave -- although of course, given the title of this blog, I do think the ethics of such behavior is important -- but also because they're the smart way to behave.

As a result, I believe in strong regulation ("Trust, but verify", if you like). I believe in prosecutors' pursuing those who violate that essential market trust (which is why I keep wondering why we haven't seen a steady stream of go-to-jail-go-directly-to-jail following the 2008 market collapse).

Today's New York Times has a great article by Julie Creswell that illuminates the importance of trust and transparency.

"Small investors provide the bedrock for the United States stock market through their mutual funds, 401(k) plans and other company-sponsored retirement programs," she notes. In the current roller-coaster environment, what's a small investor to do?

Some will stay the course, because that's what their investment counselors have told them to do (or because they don't know what else to do). Some will pull out, because they've been spooked.

But some are heading for the exits because they no longer trust the markets' essential fairness:

Some investors fear that the markets have become dominated by high-frequency traders blitzing in and out of stocks, or by sophisticated hedge funds running mind-bending algorithmic trading programs that can outsmart the ordinary investor.

These people said they feel that the game is rigged and they are the fool.

Creswell quotes one retiree who sold out completely in the fall of 2008 to buy Treasuries: "I simply have no confidence at all that the markets are fair...."

In other words, Fool me once, shame on you; fool me twice, shame on me.

Investment professionals at all levels should be worried about that sentiment. The comments posted by readers reflect similar concerns. The very first comment reads,

I was a small investor and I am totally out of the market. There's no way for the little guy to respond fast enough to the computer programs that are set to kick in at various levels. Between that and the Hedge Funds, market manipulations and insider traders (yes, I know you are out there) there is no way I'm going to make any money in the stock market. There are going to have to be new rules and new ways of doing business before I will even consider it.

And there are many more in the same vein.

But if small investors get really spooked, there's no way that the stock market, which has indeed been an engine of wealth creation for many, will be able to sustain the draining downward pressure.

If the investment community is smart, and in it for the long term (as they always tell us small investors to be), they will get out in front of this and press Congress for tougher rules and greater transparency, to prove that the market can be trusted, that a small investor has a fair chance.

Do I think that will happen?

I'm not that naive.