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Josh Brown: 10 Insane Things People On Wall Street Believe
FYI: To outsiders, Wall Street is a manic, dangerous and ridiculous republic unto itself – a sort of bizarro world where nothing adds up and common sense is virtually inapplicable.
Folks have been beating up on Wall Street for a long time.. The question is what and how exactly does Wall Street contribute to our economy. This cartoon provides a common answer:
Output is identical to input! Attacking the need for Wall Street is not new. It has been practiced almost for the Street's entire existence. A short, humorous challenge was nicely summarized in the book " Where are the Customers Yachts?". Here is a Link to an article that lifted a few quotes from that insightful book:
Yes, Wall Street has many shortcomings, but it must provide a useful function. It serves and thrives independent of its many scandals. It recovers rapidly from these scandals which speak to its necessity, and also the need for regulation. All coins have two sides.
I would argue that the bond market serves a more useful broad societal function than the stock market currently as companies can use debt to grow their businesses. While companies can issue new stock to grow, the percentage of actual IPOs and secondary offerings relative to the transaction volume on Wall Street is incredibly small. John Bogle often runs these numbers, but there is evidence that much of what Wall Street does on a daily basis in the stock market--I think it's about 99% of transactional volume--is simply trade paper without adding any new equity to companies' balance sheets for them to grow their businesses and hire new employees. That is speculation as opposed to investing, Bogle would argue. So instead of creating new shares of GM or Microsoft, Wall Street merely trades existing shares. That speculation, Bogle again would argue, actually is often deleterious to investors' returns, as it just creates transaction costs as opposed to buy and hold investing. So what does that contribute to society? Liquidity for a handful of rich speculators? There is of course plenty of bond speculation too, but at least there is also significant issuance as well. Then again, much bond issuance today is to buy back stock, which again doesn't add to the economy. And if there's too much bond issuance companies can become overleveraged. So maybe bonds don't contribute much either.
@MJG noted: "Yes, Wall Street has many shortcomings, but it must provide a useful function. It serves and thrives independent of its many scandals. It recovers rapidly from these scandals which speak to its necessity, and also the need for regulation. All coins have two sides. I do believe the big kids in the money world find their favorable coin to have been struck on a single sided planchet. Ha..........a common legal phrasing by whomever or entity upon being fined by the S.E.C; Without admitting or denying any wrongdoing.
Hand slaps of money fines and no jail time. Jeez, the small folks are still being thrown in jail for tiny crimes or implied crimes. Forfeiture of assets by private citizens before being found guilty. Hell, aside from techniques; little has changed with the "money changers" over a few thousand years.
This link doesn't include mortgage related fines, etc.; and is related to other deeds ($12 billion in fines from 2009).
I haven't been asleep to the circumstance that I consider most of our investments to be mingled among the big money of the world; among many big money pimps and that this small personal sum of the global values of money is nothing less than investing "whore" money.
Comments
Folks have been beating up on Wall Street for a long time.. The question is what and how exactly does Wall Street contribute to our economy. This cartoon provides a common answer:
http://www.newyorker.com/wp-content/uploads/2010/11/101129_r20264_p886-872.jpg
Output is identical to input! Attacking the need for Wall Street is not new. It has been practiced almost for the Street's entire existence. A short, humorous challenge was nicely summarized in the book " Where are the Customers Yachts?". Here is a Link to an article that lifted a few quotes from that insightful book:
http://awealthofcommonsense.com/2015/02/10-great-lines-customers-yachts/
Yes, Wall Street has many shortcomings, but it must provide a useful function. It serves and thrives independent of its many scandals. It recovers rapidly from these scandals which speak to its necessity, and also the need for regulation. All coins have two sides.
Best Wishes
I do believe the big kids in the money world find their favorable coin to have been struck on a single sided planchet.
Ha..........a common legal phrasing by whomever or entity upon being fined by the S.E.C;
Without admitting or denying any wrongdoing.
Hand slaps of money fines and no jail time. Jeez, the small folks are still being thrown in jail for tiny crimes or implied crimes. Forfeiture of assets by private citizens before being found guilty. Hell, aside from techniques; little has changed with the "money changers" over a few thousand years.
This link doesn't include mortgage related fines, etc.; and is related to other deeds ($12 billion in fines from 2009).
http://www.gao.gov/assets/680/675987.pdf
This link is for other "fine" goodies for the past 8 years.
https://www.google.com/#q=s.e.c.+fines+paid+by+financial+institutions+for+the+past+8+years
I haven't been asleep to the circumstance that I consider most of our investments to be mingled among the big money of the world; among many big money pimps and that this small personal sum of the global values of money is nothing less than investing "whore" money.
Regards,
Catch