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bogle on speculation vs investing
- Thread starter alphav6O3q
- Start date
The reason I put Bogle's name was because his views fell in line with mine. Not the opposite. I dont agree with everything he says. I am not trying to justify his views.
Well, financial industry provides a number of "societal values", the key ones being a conduit of funding for other parts of the economy, a source for the price discovery and real time manifestation of the economic activity. That is the societal value of the markets, like it or not. Note that there is no single developed economy without a functional and liquid stock market and funding infrastructure (obviously, liquidity is scaled to the size of the economy - e.g. Danish stock market does not need the same volumes as the NYSE).Quote from alphav6O3q:
Yes, that is what I was saying. Tabloid press does have a societal value, it provides entertainment to its readers.
Quote from sle:
Well, financial industry provides a number of "societal values", the key ones being a conduit of funding for other parts of the economy, a source for the price discovery and real time manifestation of the economic activity. That is the societal value of the markets, like it or not. Note that there is no single developed economy without a functional and liquid stock market and funding infrastructure (obviously, liquidity is scaled to the size of the economy - e.g. Danish stock market does not need the same volumes as the NYSE).
I guess I am back to the first question. My premise was that the above (directing funds, price discovery) should be the value that is produced by the trading/investing industry. But for the most part at present it is not doing that properly.
Why dont we try to encourage longterm investing more and try to curtail short term trading
a)price discovery is done better by understanding the fundamentals through modeling or intuitive understanding of various factors. Not based on the current and historical price and volume charts.
b)Why do you need millisecond level price discovery? Does the price of a stock(value of an organization) really vary at the speed that is shown by the stock market?
c)Even if you knew all possible information, could you really value an organization with a decimal level precision? Increasing the "tick" value to 1$ would reduce short term trading.
d)Most trading these days are in an out of a stock in a matter of minutes. How is that "being a conduit of funding for other parts of the economy"?
For the most part, short term trading seems to be trying to extract funds out of the market for its traders/clients, while providing little in value.
anyways enough of this discussion.
Quote from alphav6O3q:
I think there are 2 or more reasons why trading hasnt been banned and probably wont be in future
a)there are really smart traders in wall street, and they know how to extract money from the system very well. Because they have so much money their power over wall street is more than any body else in the market place. And since they make so much money from the current system they are never going to agree to change the current system.
b)because trading and investing are based on buy low and selling high, there maybe some difficulty in distinguishing between them from a regulatory viewpoint.
Fantastic!! People can bitch about traders, they can play music on the deck of the Titanic, they can Occupy.... and traders can bank some long coin..
(a) No. "Understanding" fundamentals etc has nothing to do with price. It has to do with value.Quote from alphav6O3q:
I guess I am back to the first question. My premise was that the above (directing funds, price discovery) should be the value that is produced by the trading/investing industry. But for the most part at present it is not doing that properly.
Why dont we try to encourage longterm investing more and try to curtail short term trading
a)price discovery is done better by understanding the fundamentals through modeling or intuitive understanding of various factors. Not based on the current and historical price and volume charts.
b)Why do you need millisecond level price discovery? Does the price of a stock(value of an organization) really vary at the speed that is shown by the stock market?
c)Even if you knew all possible information, could you really value an organization with a decimal level precision? Increasing the "tick" value to 1$ would reduce short term trading.
d)Most trading these days are in an out of a stock in a matter of minutes. How is that "being a conduit of funding for other parts of the economy"?
For the most part, short term trading seems to be trying to extract funds out of the market for its traders/clients, while providing little in value.
(b) Milliseconds have nothing to do with price discovery, you are perfectly correct. Millisecond traders are liquidity providers to the market. When John Doe wants to sell his 500 dollars worth of IBM and buy 500 dollars worth of Apple, it's the millisecond traders that are making it possible for a very small transaction cost.
(c) Again, tick size has more to do with liquidity. However, for a few-dollar stock tick size is a meaningfull increment and does factor in the price discovery. Increasing the tick size for 1 dollar will render the market illiquid and investors, knowing that every in and out is going to cost them dearly, will avoid getting involved all together.
(d) Well, somebody at the end of the day is left with a position in the stock and the "in-out" people do their part in connecting these long-term investors.
You are obviously not interested in having an intelligent conversation but rather keep pushing a singular idea of yours which is increasing the tick value to $1. While Tobin tax at least has it's merits (and drawbacks, which in my view and in global experience are larger), increasing the tick size is just plain stupid.
Quote from sle:
You are obviously not interested in having an intelligent conversation but rather keep pushing a singular idea of yours which is increasing the tick value to $1. While Tobin tax at least has it's merits (and drawbacks, which in my view and in global experience are larger), increasing the tick size is just plain stupid.
I apologize. It was not my intention. I cannot really say against what you said, because I only have intuitive, and now it seems rudimentary understanding of these concepts. Hopefully I will be back with better arguments, but it was an interesting discussion nonetheless.