Yeah, I thought I'd keep it simple and not mention A and B shares, that type of shenanigans. But better keep it simple. You have stock, you can vote. And hey, is it voluntary or not to buy a stock? If the stock you are interested in doesn't have the voting rights you want, well, you decide whether you want to buy it.
The money necessary to trade in the market is minuscule. What regulations are you talking about? The only people who are on a different level are the market makers, because of their rather central position in the system. And that's both meat-and-bones MMs and the HFT kind. And there's nothing stopping you from becoming one either...
The problem is that we now have a lot more speculators and they dominate the system, so the ability of a company to raise capital no longer depends on whether it's a good long-term investment, but on the opinions of the speculators.
And what do you think the speculators use to determine prices? That's right, they make a judgement as to the long-term prospects of the company. In fact, they freely give out this information for everyone, for free. If you didn't have a market in a company, (suppose it's a privately owned restaurant) you'd have to do a lot of legwork figuring out what it was worth.
First of all, stocks DO have voting rights. The fact that you can't control Coca Cola with your 100 lot is due to other people owning more shares than you. This is no different from your 1 vote for president not mattering at all. Except of course people with more to lose in Coca Cola have more votes, which is entirely appropriate.
Your comment about dividends is telling. Here's the standard explanation that you'll hear in any course about why it doesn't matter: if a company doesn't pay out a dividend, it keeps the cash. Investors can then adjust their valuation accordingly.
"That public perception may need to be adjusted according to this recent research by finance PhD candidate, Jonathan Brogaard (Kellogg). The paper looks at the effect of HFT on equity markets and through analysing the strategies used by these firms it considers their profitability, impact on market liquidity and volatility.
There is evidence that high frequency trading contributes to price discovery and liquidity. There is also evidence that it has a minimal impact on volatility and may even reduce it. There is also no evidence that they engage in front-running. HFT demand for liquidity (42.7%) is slightly higher than their supply of liquidity (41.1%) and they provide the inside quote about 65% of the time."
Even without a single computer based trade, the system as so complex that "we will quite literally be unable to ever quite figure out what's going on, until, of course, it all collapses..."
Computers are a new angle, but let's not pretend the market ever made sense before that.
You do realize that when you buy a share at the NYSE, none of that money goes to the company, right? That's because what we call the stock market is the secondary market. Now, why do we need a secondary market? Because it makes primary investors, who DO give money to the company a little less uneasy about risking their money. If there's someone else they can dump it on, they'll be more willing to put up the money.
I'm afraid it wins in terms of money, but often also in terms of interest. Depends on what you end up in. Of course there are dead end jobs everywhere. I bet you could work at Google and NOT think your work was interesting. Or you could sit in some investment bank and think syndication was interesting. Personality matters too.
But regarding the money, you don't just earn more by a factor of 2. You also have the slight chance of earning say, 50x more. This is talking from the perspective of a middling finance guy who could have gone the tech route. No, I wasn't ever gonna be the next Yang, Zuckerberg or Jobs, and I knew it (well, Zuck is younger than me). I'm just not as smart. I'm not the next Soros either, far from it, but I'm doing far better in finance than in tech. If that's the pay for mediocrity, you can see what's more attractive. Just have a look at Wilmott and you can see what kinds of numbers are being thrown around.
I often wonder whether we're sending the right signal to young people. You see the thing is, if you don't like your finance job, it ends up being a millstone round your neck. You make so much money that a change would mean reducing your budget drastically, so you never make the leap. But at the same time, you don't put maximum effort in. At least in a less well-paying job, you'd feel more or less free to pursue something else, because the opportunity cost is lower.
Regarding contributing to the world, I don't know what you mean. There's an awful lot of jobs in finance, and I doubt you'd think they were all "stealing from the world" if you knew what they were about. Also, I presume people who make more money than you pay more in tax (even if rates were lower, they make so much more), and the tax system is the agreed upon way to contribute to society. Well, not so much agreed as forced upon you, but hey, you get the picture.
Yeah, keep in mind that you're trying to hire from the same pool of applicants who are having finance jobs dangled in front of them. When you're 22, 35K + bonus sounds like winning the lottery.
A favorite tactic is also to suggest that someone you are working with is about to leave, and has suggested you as a prospect. Normally I turn to the 3 other guys I work with (all partners) and ask which of them is leaving. The recruitment guy normally hangs up at this point.
It's NOT minimal. If it government intervention were minimal, would there be a central bank dictating the interest rate? Would there be capital requirements? Would there be a fit-and-proper test to get a banking license? Would every single person who works with securities need to pass an exam? These are not things that merely stop crime from happening.
But there can't be "no model". Whatever you decide to do with someone, you're making at least some implicit assumptions about how they're likely to react. I suppose you mean hybrid models? I always thought people are well... sometimes selfish, sometimes generous. Nothing like the extremes that are being touted here.
What you're describing is a problem with democracy and the constitution, not capitalism or communism. A suitably constructed constitution could ensure the survival of the mom-and-pop store economy (which I favor). Instead, what we see is the centralization of power by two different elites, the political and the corporate. They have their own rhetoric, but it's much the same: give me your work/money/life and I (the government/big corp) will take care of you.
If the constitution (and this goes for many countries) were not set up in a way that voters could be bribed with other people's money (govt jobs/ corp subsidies) it would be much healthier. We also wouldn't end up in a situation where we periodically had to bail out one of the two.
Most of what you write actually makes sense, in sharp contrast to most of the nonsense posted under this article. My main issue with it is that something isn't a good idea if there isn't a snowball's chance in hell of implementing it.
The old religions had it figured out (and Marx actually pointed this out), because they didn't ignore the fact that people act under incentives. So, you invent a guy in the sky who will punish them if they don't act a certain way. Now, this is still a form of totalitarianism, which is why I oppose religious control, but that's another story.
Have you ever worked in financial markets? Taken one of the mandated exams? If you had, you'd have seen a raft of regulations that you needed to know about to get your accreditation. To claim that financial markets are laissez-faire is simply to ignore the facts.
Slashdot Mirror
Do you want to explain how they skim this money? I have yet to see anyone come up with an example that had anything to do with market reality.
Yeah, I thought I'd keep it simple and not mention A and B shares, that type of shenanigans. But better keep it simple. You have stock, you can vote. And hey, is it voluntary or not to buy a stock? If the stock you are interested in doesn't have the voting rights you want, well, you decide whether you want to buy it.
The money necessary to trade in the market is minuscule. What regulations are you talking about? The only people who are on a different level are the market makers, because of their rather central position in the system. And that's both meat-and-bones MMs and the HFT kind. And there's nothing stopping you from becoming one either...
What's not free about it? You're not prevented from doing it...
Good point. But I'd say companies buying/selling their own shares is still more akin to a primary market operation. Much as when a fund does it.
If they get a bailout, that's a problem with politicians, not the market!
Doesn't make anything? There's load of container vessels sailing around the oceans delivering "things".
don't give me "market liquidity" crap.
The problem is that we now have a lot more speculators and they dominate the system, so the ability of a company to raise capital no longer depends on whether it's a good long-term investment, but on the opinions of the speculators.
And what do you think the speculators use to determine prices? That's right, they make a judgement as to the long-term prospects of the company. In fact, they freely give out this information for everyone, for free. If you didn't have a market in a company, (suppose it's a privately owned restaurant) you'd have to do a lot of legwork figuring out what it was worth.
First of all, stocks DO have voting rights. The fact that you can't control Coca Cola with your 100 lot is due to other people owning more shares than you. This is no different from your 1 vote for president not mattering at all. Except of course people with more to lose in Coca Cola have more votes, which is entirely appropriate.
Your comment about dividends is telling. Here's the standard explanation that you'll hear in any course about why it doesn't matter: if a company doesn't pay out a dividend, it keeps the cash. Investors can then adjust their valuation accordingly.
Someone wants to buy and sell the same stock in the same second. What's wrong with that? He's got his investment strategy, you have yours.
I Googled it. Here's a report about what some researchers think:
http://www.tradersnarrative.com/what-if-hft-is-actually-good-for-the-market-4723.html
"That public perception may need to be adjusted according to this recent research by finance PhD candidate, Jonathan Brogaard (Kellogg). The paper looks at the effect of HFT on equity markets and through analysing the strategies used by these firms it considers their profitability, impact on market liquidity and volatility.
There is evidence that high frequency trading contributes to price discovery and liquidity. There is also evidence that it has a minimal impact on volatility and may even reduce it. There is also no evidence that they engage in front-running. HFT demand for liquidity (42.7%) is slightly higher than their supply of liquidity (41.1%) and they provide the inside quote about 65% of the time."
Even without a single computer based trade, the system as so complex that "we will quite literally be unable to ever quite figure out what's going on, until, of course, it all collapses..."
Computers are a new angle, but let's not pretend the market ever made sense before that.
Dude, that doesn't explain the original idea.
You do realize that when you buy a share at the NYSE, none of that money goes to the company, right? That's because what we call the stock market is the secondary market. Now, why do we need a secondary market? Because it makes primary investors, who DO give money to the company a little less uneasy about risking their money. If there's someone else they can dump it on, they'll be more willing to put up the money.
I'm afraid it wins in terms of money, but often also in terms of interest. Depends on what you end up in. Of course there are dead end jobs everywhere. I bet you could work at Google and NOT think your work was interesting. Or you could sit in some investment bank and think syndication was interesting. Personality matters too.
But regarding the money, you don't just earn more by a factor of 2. You also have the slight chance of earning say, 50x more. This is talking from the perspective of a middling finance guy who could have gone the tech route. No, I wasn't ever gonna be the next Yang, Zuckerberg or Jobs, and I knew it (well, Zuck is younger than me). I'm just not as smart. I'm not the next Soros either, far from it, but I'm doing far better in finance than in tech. If that's the pay for mediocrity, you can see what's more attractive. Just have a look at Wilmott and you can see what kinds of numbers are being thrown around.
I often wonder whether we're sending the right signal to young people. You see the thing is, if you don't like your finance job, it ends up being a millstone round your neck. You make so much money that a change would mean reducing your budget drastically, so you never make the leap. But at the same time, you don't put maximum effort in. At least in a less well-paying job, you'd feel more or less free to pursue something else, because the opportunity cost is lower.
Regarding contributing to the world, I don't know what you mean. There's an awful lot of jobs in finance, and I doubt you'd think they were all "stealing from the world" if you knew what they were about. Also, I presume people who make more money than you pay more in tax (even if rates were lower, they make so much more), and the tax system is the agreed upon way to contribute to society. Well, not so much agreed as forced upon you, but hey, you get the picture.
Yeah, keep in mind that you're trying to hire from the same pool of applicants who are having finance jobs dangled in front of them. When you're 22, 35K + bonus sounds like winning the lottery.
A favorite tactic is also to suggest that someone you are working with is about to leave, and has suggested you as a prospect. Normally I turn to the 3 other guys I work with (all partners) and ask which of them is leaving. The recruitment guy normally hangs up at this point.
It's NOT minimal. If it government intervention were minimal, would there be a central bank dictating the interest rate? Would there be capital requirements? Would there be a fit-and-proper test to get a banking license? Would every single person who works with securities need to pass an exam? These are not things that merely stop crime from happening.
You clearly haven't waited hours for a tank.
But there can't be "no model". Whatever you decide to do with someone, you're making at least some implicit assumptions about how they're likely to react. I suppose you mean hybrid models? I always thought people are well... sometimes selfish, sometimes generous. Nothing like the extremes that are being touted here.
What you're describing is a problem with democracy and the constitution, not capitalism or communism. A suitably constructed constitution could ensure the survival of the mom-and-pop store economy (which I favor). Instead, what we see is the centralization of power by two different elites, the political and the corporate. They have their own rhetoric, but it's much the same: give me your work/money/life and I (the government/big corp) will take care of you.
If the constitution (and this goes for many countries) were not set up in a way that voters could be bribed with other people's money (govt jobs/ corp subsidies) it would be much healthier. We also wouldn't end up in a situation where we periodically had to bail out one of the two.
Most of what you write actually makes sense, in sharp contrast to most of the nonsense posted under this article. My main issue with it is that something isn't a good idea if there isn't a snowball's chance in hell of implementing it.
The old religions had it figured out (and Marx actually pointed this out), because they didn't ignore the fact that people act under incentives. So, you invent a guy in the sky who will punish them if they don't act a certain way. Now, this is still a form of totalitarianism, which is why I oppose religious control, but that's another story.
Or you could like him to Nostradamus: always right, just we don't know how.
Have you ever worked in financial markets? Taken one of the mandated exams? If you had, you'd have seen a raft of regulations that you needed to know about to get your accreditation. To claim that financial markets are laissez-faire is simply to ignore the facts.
Lehmans going down was an effect, not a cause!
That ought to be a function of regulation. To ensure competition isn't destroyed, certain things like NCCs and IP laws have to be arranged sensibly.