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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum
GLD 386.01+1.6%Nov 12 4:00 PM EST
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To: energyplay who wrote (60080)1/19/2010 6:26:59 AM
From: elmatador1 Recommendation  Read Replies (1) of 217735
 
policy makers ought to be considering structural changes that would enhance the role of investors and diminish the role of speculators.
...
First, the folly of short-term speculation has replaced the wisdom of long-term investing as the star of capitalism. A rent-a-stock system has replaced the earlier own-a-stock system. In 2009, the average stock turnover appears to have exceeded 250% (changed hands two and a half times), compared to 78% a decade ago, and 21% barely 30 years ago.

Result: The momentary illusion of the price of a stock took center stage, replacing the enduring reality of the company's intrinsic value—the discounted value of its future cash flow. Our newly empowered agents ignored the famous warning of Benjamin Graham in "The Intelligent Investor" that "in the short run, the market is a voting machine; in the long run, it is a weighing machine."

Two, the financial sector became the driving force in the U.S. economy. During the past decade, revenues of stock exchange firms (excluding trading gains or losses) rose to an estimated $375 billion from $200 billion, and mutual fund fees and expenses rose to nearly $100 billion from $47 billion. The higher these intermediation costs, of course, the lower the returns to investors as a group. Alas, in this Alice-in-Wonderland world of the financial markets, the investor feeds at the bottom of the food chain.

online.wsj.com
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