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The Long-Term Stock Exchange Comes to Life

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Re: The Long-Term Stock Exchange Comes to Life

#131

Post by ianai »

phkahler wrote: post #50
whack wrote: post #16

"Tenured shareholder voting power, meaning that a shareholder’s votes would be proportionately weighted by the length of time the shares have been held" I wonder if we're going to see the rise of holding companies just to get around this rule. "Our holding company owns shares in XYZ, and will never sell those shares ever. Instead of buying/selling XYZ directly, you can instead buy/sell shares in our holding company.…

Your concern is only the tip of the iceberg. Any set of rules will be gamed. The only way I can think of (and it can probably be gamed) that would really put the long term into the executives mind is to have most of their compensation based on the value of the company a few years after they're done. But given the existence of options and shorting stocks and any number of ways to mitigate risk or make money that don't…

What’s stopping long term investing being based on bonds? Ie the company sells bonds today for a $x pay out 10 years from now. Maybe it’s secured by a t-bill. Maybe the investor pays the cost for a 10 year tbill plus some. The company agrees to pay out some operational profit from the 10 th year or the return on the tbill. (Back of envelop logic here, ymwv) Maybe make it more of a pool/fractional banking type arrangement. A clearing house company sells bonds of a company backed by some portion of tbills (10 year bonds for 10 year tbills, etc). At the end of the period either people are paid out the tbills (only if the company went belly up) or a percent of their operating profit from that period.

Re: The Long-Term Stock Exchange Comes to Life

#132

Post by WalterBright »

danharaj wrote: post #118
WalterBright wrote: post #106

Earlier quoted context omitted.

By the way, if you know of specific companies that are sacrificing long term for short term stock prices, you can make a ton of money by shorting their stock.

That's not necessarily true.

I've done well investing on the presumption that companies are long term focused. I.e. I'm a buy and hold and hold and hold investor. The longest I've held a stock (Boeing) is 37 years. You can check how well it's done for yourself over that time period, and Boeing was constantly charged with destroying the long term in favor of short term results.

It's inconceivable that Boeing was not long term focused with those results.

Re: The Long-Term Stock Exchange Comes to Life

#133

Post by vadimberman »

An incredibly important initiative, although I'm wondering how it will catch up.

The current public trading framework has so many issues, it defeats the original purpose.

* amazing number of parasite intermediaries that create absolutely no value. Someone sells a day after they bought, how did it contribute to the economy or the company that tries to create the value?

* opacity required to keep the system "fair", and used to avoid responsibility

* populist decisions harmful in long-term because the management will be long gone after the effects emerge

and much more.

Re: The Long-Term Stock Exchange Comes to Life

#134

Post by vadimberman »

hago1234 wrote: post #129

The "blind" focus on quarterly reports is real. It had me wonder what the opposite would be... Imagine we forged a formula for 1000+ year projects. They would require more money periodically and the availability of new funds would have a strong influance on the value of previous cash injections. One could buy the "failing" project cheap then simply do the new cash injection yourself OR in case of success one could ob…

> What could we build that would take 1000 years?

A great what-if. While not exactly the same, I think you could look at the publicly funded projects like the Euro-projects, NASA, or the Soviet space program that still yield results.

Now imagine the big public companies doing the same.

Re: The Long-Term Stock Exchange Comes to Life

#135

Post by WalterBright »

sytelus wrote: post #126
WalterBright wrote: post #93

"short-term pressures were driving their decision-making, often at the sacrifice of the long-term potential of the business." This is a popular opinion, but I find it difficult to believe. It relies on the notion that stockholders are fools and unable to recognize when a company destroys its long term prospects for short term gain. The trouble is, once the short term gain is there, who are the short termers going to…

This is not popular opinion, it's exactly the truth. There is enormous pressure on CEOs to meet analyst expectations of growth each quater and not meeting them would immediately mean punishment in terms of sell out. This usually translates to continuously cutting costs and eliminating investments on long term bets. Most boards are heavily populated with representatives of investors and fund managers. They make sure t…

> This is not popular opinion, it's exactly the truth.

Then which stocks are you sure are doing this, and are you shorting them?

> There had been a decade when no one was interested in Amazon stock

This is simply not true. AMZN has been a solid performer since its IPO. I should know, I'm a happy AMZN long term investor.

> that will result in stock pop so they can cash out

That implies they must find a lot of suckers to sell to. Stock prices are usually driven by analysts who spend their days analyzing companies to predict future performance. Good luck fooling them all.

Re: The Long-Term Stock Exchange Comes to Life

#136

Post by WalterBright »

vadimberman wrote: post #130
WalterBright wrote: post #93

"short-term pressures were driving their decision-making, often at the sacrifice of the long-term potential of the business." This is a popular opinion, but I find it difficult to believe. It relies on the notion that stockholders are fools and unable to recognize when a company destroys its long term prospects for short term gain. The trouble is, once the short term gain is there, who are the short termers going to…

> This is a popular opinion, but I find it difficult to believe. It relies on the notion that stockholders are fools and unable to recognize when a company destroys its long term prospects for short term gain. Not necessarily "fools". "Not experts" and "easy to influence" would be like it. Very much the trouble with the modern democracy: incompetents elect those who scream the loudest and say what they want to hear.…

> I experienced the short-term thinking firsthand

I have too. The company stock tanked and the company disappeared. There's a word for short term companies - "bankrupt". Investors as group are simply not that stupid.

Re: The Long-Term Stock Exchange Comes to Life

#137

Post by tbak »

hago1234 wrote: post #129

The "blind" focus on quarterly reports is real. It had me wonder what the opposite would be... Imagine we forged a formula for 1000+ year projects. They would require more money periodically and the availability of new funds would have a strong influance on the value of previous cash injections. One could buy the "failing" project cheap then simply do the new cash injection yourself OR in case of success one could ob…

You might be interested in the wonderful book series "The Three-Body Problem" by Liu Cixin. It explores (among countless other things) how huge expensive projects that last multiple generations could be implemented.

Re: The Long-Term Stock Exchange Comes to Life

#138

Post by sytelus »

TLDR;

Currently, an investor who owns one share for a month, or even a day, has the same voting power as someone who has owned a share for years. Mr. Ries wants what he calls “tourists” — short-term shareholders — to have less voting power than long-term shareholders, whom he calls “citizens of the republic.” Over time, shareholders of companies on the LTSE would gain more votes based on their length of ownership.

Mr. Ries also takes aim at compensation plans. He wants companies that list on his exchange to have stock vesting programs of at least five years and recommends 10 years, even for executives who leave the company.

This is from: https://www.nytimes.com/2017/09/18/business/dealbook/ipo-cha...

Re: The Long-Term Stock Exchange Comes to Life

#139

Post by thaumasiotes »

yalogin wrote: post #11

So if I understands correctly it’s intended to be a place where one can only go long on shares? Why would some company list here? Why would investors use it? That post was 2 paragraphs long and explains nothing.

> it’s intended to be a place where one can only go long on shares? Why would some company list here?

The obvious theory would be "they think they're a scam, and they don't want other people to realize that".

Re: The Long-Term Stock Exchange Comes to Life

#140

Post by WalterBright »

rsync wrote: post #94
crazygringo wrote: post #82

> The LTSE is designed to remove the short-term pressures that plague today’s public markets and reorient companies and investors around long-term thinking. While it's certainly a popular belief... from my understanding it's not at all proven , or even obvious, that stock markets encourage short-term thinking over long-term. Indeed, theory would suggest the contrary: the value of a stock is the discounted entire futu…

"Anecdotes are easy to find on both sides. But ask yourself which is more likely -- that investors are dumb and managers are smart and investors should just trust managers to do the right thing? Or that investors are smart and need to hold managers accountable because it's the investors' own money at stake, while managers are smart too but always want a longer leash to do their own thing regardless of whether it's go…

If that is true, why do S&P500 index values continue to rise, decade after decade?
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