Some Use Financial Markets to Invest in Addiction

Former commodities trader Christopher Anderson learned to gamble where millions of Americans win and lose every day--in the financial markets.

He hit it big out of the blocks, doubling a $150 investment overnight. With that, he began pushing his luck with bigger and bigger trades.

“My mind was swimming with numbers so large,” he recalls, “I couldn’t count the zeros.”

Soon, however, he was drowning in a riptide of addiction, pulled under by one risky investment after another. He ended up losing his family and more than $300,000 in cash and real estate.

Today, Anderson heads the Illinois Council on Problem Gambling, calling attention to an issue beginning to make rumbles on Wall Street: a small but significant share of investors--perhaps 1% to 4%, according to experts--are habitual gamblers.

Wall Street insiders and addiction specialists say the problem is sure to worsen as investors get hooked on the ease of trading on the Internet, where stocks can be bought, sold and monitored with the click of a mouse.

Although no significant studies have been done, compulsive gambling on the Nasdaq exchange is probably as common as it is in the population overall, where at least one person out of 100 has a serious problem, says San Francisco therapist Paul Good, who specializes in problem stock traders.

“Just as with any other type of gambling,” he says, “investors can turn into outright compulsive gamblers who really aren’t investing with a plan, but for the action, the sense of excitement and thrill of having money at risk.”

Good says that, at the extreme, such addictive behavior can create havoc far beyond the life of the individual investor. He cites the sensational case of a trader who compulsively chased one bad investment after another in Japan’s Nikkei exchange. In the process, he brought down an entire financial institution, London-based Barings Investment Bank, which collapsed with losses exceeding $1 billion.

Marvin A. Steinberg, director of the Connecticut Council on Problem Gambling, persuaded the Securities and Exchange Commission this year to begin making available questionnaires to help stock buyers assess whether they have a problem. In a recent survey of about 60 stockbrokers, 10% acknowledged being habitual gamblers, Steinberg found.

“It’s a hidden problem,” he says.

Not all firms keep an adequate watch on their brokers, who stand to reap commissions by encouraging trades, says former SEC Chairman David S. Ruder. Moreover, because of the Internet, more investors are bypassing brokers by trading on their own.

“There are people who don’t know the first thing about investing who buy and sell with rapidity,” Ruder says. “We know . . . people get injured.”

People like Christopher Anderson. When his losses sent him spiraling into financial ruin, Anderson’s thoughts turned to a solution pondered by millions of other compulsive gamblers: suicide.

At 45, he looks back with horror at how he tried to determine whether he could kill himself without jeopardizing the life-insurance pay-out for his family.

“I simply perceived myself as a financial commodity.”