Have you noted that the stock market is quite volatile lately .. say the last year or 2 ?
Have you also invested in stocks and seen unusual price movement for no good reason ?
Have you owned stocks, that after a surge fell sharply, sold by you in disgust to prevent further loss, just to see it rise again days or minutes later to prices higher than your entry price ?
Have you also wondered, perhaps quite frequently recently: is this how I fund my retirement or my kids' education ?
The stock marked used to be a source for funding of new firms or their continued growth, with a platform that allowed investors to co-own firms and to get in and out with relative easy, at fair prices set by buyers and sellers !
Lately it has evolved into a casino mentality almost uncorrelated to real economic activity of the market or the specific company.
In my (humble) opinion, the
main reason for extreme stock market volatility of late is a) the many internet
and trading enabled devices like PCs, laptops and cell phones, b) the ability to make a quick buck ahead of others as a "high frequency trader"c) the
lack of transaction taxes and d) the lack of massive (close to 100%)
capital gain taxes to reduce incentives for short term trading! And the
main reason for c) and d) is the "tithing" of these profits with US
politicians, i.e. the dependence of the US electoral system on large donations.
Wall Street is the US politician's main street !
Some solutions though are at least started to be discussed:
Europe is now at least starting a discussion to
introduce a transaction tax. http://www.cnbc.com/id/44163841/Financial_Transaction_Tax_for_Europe
High frequency code is being looked at by the SEC, see article here: http://business.financialpost.com/2011/09/02/sec-takes-aim-at-high-frequency-traders/
Normally I am not a big fan of add'l government interference and add'l taxation, yet Canada should take a lead here in my opinion, and
introduce a 2% trading tax - like real estate in ON or BC - and a "greed" or "day trading" tax as follows: 90% tax on trades held
less than 1h, 80% tax on trades held less than a day and 75% for trades held less than one month - DEDUCTED AT
SOURCE!
This high frequency or day-trading benefits no one except a few
trading houses and is essentially theft from medium to long term
investors. The stock market needs to return to an investment vehicle..
and not a trading vehicle benefiting few at the expense of many!
Related post, by Texas Maverick billionaire owner Mark Cuban, comparing high frequency traders to hackers or thieves: http://blogmaverick.com/2011/08/08/what-business-is-wall-street-in-2/
What these two changes (transaction tax, high greed tax on short term profits) will do is re-establish is a foundation for stock market investing .. as opposed to merely trading ! It will allow people to get in and out of the market, it will allow companies access to funds for IPO's or growth, it will reduce intra-day or very short term stock market manipulation, it will create valuable government revenue and it will restore trust in the stock market as an investment platform that has been lost by me and millions of others !!
Will politicians go there ? We'll see ! I hope so !
Your thoughts on this ?
Have you also invested in stocks and seen unusual price movement for no good reason ?
Have you owned stocks, that after a surge fell sharply, sold by you in disgust to prevent further loss, just to see it rise again days or minutes later to prices higher than your entry price ?
Have you also wondered, perhaps quite frequently recently: is this how I fund my retirement or my kids' education ?
The stock marked used to be a source for funding of new firms or their continued growth, with a platform that allowed investors to co-own firms and to get in and out with relative easy, at fair prices set by buyers and sellers !
Lately it has evolved into a casino mentality almost uncorrelated to real economic activity of the market or the specific company.
In my (humble) opinion, the
main reason for extreme stock market volatility of late is a) the many internet
and trading enabled devices like PCs, laptops and cell phones, b) the ability to make a quick buck ahead of others as a "high frequency trader"c) the
lack of transaction taxes and d) the lack of massive (close to 100%)
capital gain taxes to reduce incentives for short term trading! And the
main reason for c) and d) is the "tithing" of these profits with US
politicians, i.e. the dependence of the US electoral system on large donations.
Wall Street is the US politician's main street !
Some solutions though are at least started to be discussed:
Europe is now at least starting a discussion to
introduce a transaction tax. http://www.cnbc.com/id/44163841/Financial_Transaction_Tax_for_Europe
High frequency code is being looked at by the SEC, see article here: http://business.financialpost.com/2011/09/02/sec-takes-aim-at-high-frequency-traders/
Normally I am not a big fan of add'l government interference and add'l taxation, yet Canada should take a lead here in my opinion, and
introduce a 2% trading tax - like real estate in ON or BC - and a "greed" or "day trading" tax as follows: 90% tax on trades held
less than 1h, 80% tax on trades held less than a day and 75% for trades held less than one month - DEDUCTED AT
SOURCE!
This high frequency or day-trading benefits no one except a few
trading houses and is essentially theft from medium to long term
investors. The stock market needs to return to an investment vehicle..
and not a trading vehicle benefiting few at the expense of many!
Related post, by Texas Maverick billionaire owner Mark Cuban, comparing high frequency traders to hackers or thieves: http://blogmaverick.com/2011/08/08/what-business-is-wall-street-in-2/
What these two changes (transaction tax, high greed tax on short term profits) will do is re-establish is a foundation for stock market investing .. as opposed to merely trading ! It will allow people to get in and out of the market, it will allow companies access to funds for IPO's or growth, it will reduce intra-day or very short term stock market manipulation, it will create valuable government revenue and it will restore trust in the stock market as an investment platform that has been lost by me and millions of others !!
Will politicians go there ? We'll see ! I hope so !
Your thoughts on this ?