Here’s what I don’t like about the stock market today. This is all based on stuff John Bogle has said. Basically, it’s that the emphasis isn’t on long term investing, based on intrinsic corporate values, but short term speculation based on momentary stock prices.
So most people into stocks aren’t necessarily into timing, but are primarily interested in how much a stock goes up. Which of course, makes sense. It’s just, the analysis they use isn’t based on the solid intrinsic worth of the company, it’s based on some random measures of why they think it will go up, which is inherently speculative. “Long term” means 12 months, qualifying for the long term capital gains rate. Not like Warren Buffett, for whom long term means forever. He buys low and never sells.
Anyway, yeah, the mindset of speculation vs. investing I think leads to more instability in the stock market. Don’t ask me what I mean by instability. I don’t know.
Anyway, I agree with what Bogle says – this mentality extends to CEOs as well. And directors. They’re less interested in building up long term value and more interested raising short term stock prices so they can cash out. Which sucks.
So he favors certain measures which I agree with. Like a 100% tax on capital gains on stocks sold within 6 months. 100% is extreme, but something huge like 50% will encourage investing, discourage speculating. And there should be a really long lockup period on options for executives. Stuff like that. Not that I know anything or anyone cares.