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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Kerry Phineas who wrote (65745)	8/3/1999 9:47:00 PM
From: Bill F.	Respond to of 132070

kerry-excellent points.i agree wholeheartedly.

To: Kerry Phineas who wrote (65745)	8/3/1999 10:05:00 PM
From: George Acton	Read Replies (3) \| Respond to of 132070

The evils you are ascribing to "day trading" are features of greatly shortened time horizons in all financial matters, which lead to the "greater fools" mechanism of share price inflation. They do not apply to day trading in the sense of beginning and ending the day flat. This may contribute to intraday volatility, of course, and if price increases occur mostly intraday, day traders will hold most of the gains. I have spent some time on a channel where people traded one stock (DELL, before the dilution of splits took away playable intraday inefficiencies), and it was a major decision for the participants whether to hold some overnight for a gap at the opening. During that period, everyone who held DELL on random entry and exit had gains, but daytraders held a negligible fraction of the stock and had no effect on the price. To the extent that they made money it was by exploiting market inefficiencies, just like it says in the sidebar on arbitrage in my old copy of Samuelson. So I think your analysis tends to lump several forms of questionable financial behavior and project it onto a small group of people. I can't resist noting that some of the scorn for day trading is socially invidious. But the damage done to the economy by market inefficiencies of day trading is miniscule in comparison with that caused by the socially upscale management of Long Term Capital, or the white-shoe bankers who have to be bailed out of an imbecilic round of loans about once a decade. The main reason stock prices are this high is the last bolus of liquidity the Fed injected into the system last fall in order to save Meriweather and his bankers. --George Acton