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The Long-Term Stock Exchange Opens for Business

blog.ltse.com

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Re: The Long-Term Stock Exchange Opens for Business

#541

Post by unityByFreedom »

r3un1 wrote: post #509
unityByFreedom wrote: post #464

Earlier quoted context omitted.

If you want long term focus, invest in an index. No single company can weather every storm. Sometimes they need short term focus to survive in the long term.

I think the idea is that a lot of the perceived instability in the economy is _caused_ or at least much amplified by the nature of stock markets. Changing how one thinks about stocks and what the ideal of a "healthy" company looks like might alleviate some of these problems.

> a lot of the perceived instability in the economy is _caused_ or at least much amplified by the nature of stock markets.

Where did you get this idea? I don't see anyone saying it. Consider what might happen if you freeze the ability for people to borrow money. The stock market allows capital to move around more freely.

I notice this is your first comment in a year and a half. Welcome back.

Re: The Long-Term Stock Exchange Opens for Business

#542

Post by amomo »

fluffything wrote: post #492
cmroanirgo wrote: post #478

Earlier quoted context omitted.

I used to be part of the system that built machines that auto traded on arbitrage opportunities due to millsec/nanosec differences in reported prices in different exchanges. Although probably not popular I would suggest that long term stocks needs to incorporate features that actively block certain trading patterns: limit price changes, limit buy/ sell frequency, & disallow shorting. I have been heavily involved in t…

> & disallow shorting. Why would you completely disallow shorting ? I'd think that in such a framework, shorting would just need to become a longer term bet. So one could offer something like 2,5,10 year LEAPs, but restrict their trading to a window of 1 week per year (e.g. one can trade derivatives as much as one wants, but only during week X, which is the week when all derivatives expire, and all derivatives are lo…

Betting is contrary to investing but anyway, going along on your argument : Betting on a company failure on long term is called "Insurance". Insurance companies bet that your house will burn for example. Do you think it's viable on long term for individuals (a.k.a, lambda people) to bet ( "invest" ) this way ?

Re: The Long-Term Stock Exchange Opens for Business

#543

Post by etripe »

SolarNet wrote: post #457
samatman wrote: post #417

Earlier quoted context omitted.

> This claim is just as problematic. You may view it as weaker, but algorithmicly speaking it's the same nonsense. It's an existential claim, not a mathematical claim. The claim is simply that markets are more efficient than other mechanisms, proposed or extant, which actually exist in the real world. Clearly to quantify this claim requires some real mathematical analysis, but that's quite beyond my talents or intere…

> And I'd suggest reading my reply to the absurd thermodynamics bit before assuming too much about my thoughts on it! I mean. My issue is multi-fold. I have an issue with market fundamentalists who treat it like a religion. But I also have an issue with economists who use methods of analysis that aren't empirical. > It's an existential claim, not a mathematical claim. This isn't just an issue of philosophy and mathem…

There is one prime difference between computation and economics - and for that matter, material and social sciences. Computation doesn't study humans.

Wouldn't a "unified theory" of economics (a deterministic one at that) effectively rule out free will? After all, what is "the market" if not the aggregate behaviour of all human actors in it? And if you accept free will, doesn't that conversely create a problem where the best you can do when predicting markets is correlation, not causality?

Re: The Long-Term Stock Exchange Opens for Business

#544

Post by bumby »

WalterBright wrote: post #540
bumby wrote: post #534

Earlier quoted context omitted.

I was tracking, I just don’t think the two points are completely uncoupled. If individual companies and by extension the market are long-term focused, there shouldn’t be that much incentive for trading now vs trading 1 sec from now. Unless I suppose you think those who trade companies and those who run companies aren’t intertwined. I do v think there’s some evidence of short term bias. E.g., taking on debt to fund di…

1 second trades are more an arbitrage thing, not a short-term vs long-term thing. I don't believe quarterly results have any particular influence over high frequency trading, other than in the minutes after the earnings are announced. Arbitrage is like pouring water into the bathtub. The water will slosh around, eventually finding its lowest energy level, until the next pouring event. Arbitrage is the pull of gravity…

I concede my point on HFT, you make good points about it being more about arbitrage.

>they aren't fooling anyone

I disagree on this. Maybe they don’t fool sophisticated investors that make up 80% of market money but I’ve met plenty of small investors who are duped by this very type of thing.

Re: The Long-Term Stock Exchange Opens for Business

#545

Post by bumby »

WalterBright wrote: post #540
bumby wrote: post #534

Earlier quoted context omitted.

I was tracking, I just don’t think the two points are completely uncoupled. If individual companies and by extension the market are long-term focused, there shouldn’t be that much incentive for trading now vs trading 1 sec from now. Unless I suppose you think those who trade companies and those who run companies aren’t intertwined. I do v think there’s some evidence of short term bias. E.g., taking on debt to fund di…

1 second trades are more an arbitrage thing, not a short-term vs long-term thing. I don't believe quarterly results have any particular influence over high frequency trading, other than in the minutes after the earnings are announced. Arbitrage is like pouring water into the bathtub. The water will slosh around, eventually finding its lowest energy level, until the next pouring event. Arbitrage is the pull of gravity…

>See the CEO anecdote I posted upthread.

I think there may be some survivorship bias in your thought process. As an example, Enron displayed some massive short-term bias when it had a market cap more than 10x that of Apple. Sure, the market eventually corrected (and wiped out a lot of investors along with it), but pointing to current thriving large cap stocks as evidence of the market only rewarding long term thinking disregards this. In theory, Enron should have never been priced so high had it not had a short term bias to inflate numbers

Re: The Long-Term Stock Exchange Opens for Business

#546

Post by maest »

cmroanirgo wrote: post #478
bricemo wrote: post #452

Let me try to summarize everyone’s same question: - The idea of a stock exchange that allows companies and investors to focus on 5, 10, 25 year horizons sounds great! - However companies on normal stock exchanges now already try to do this, but it’s hard because of quarterly earnings, pressure for quarterly growth, etc - How is LTSE different? Seems like: Companies and investors “promise” to have a longer term focus…

I used to be part of the system that built machines that auto traded on arbitrage opportunities due to millsec/nanosec differences in reported prices in different exchanges. Although probably not popular I would suggest that long term stocks needs to incorporate features that actively block certain trading patterns: limit price changes, limit buy/ sell frequency, & disallow shorting. I have been heavily involved in t…

> & disallow shorting.

That's a very bad idea.

> Shorting is never a long-term game and should be banned, as it never does the company any favours.

The purpose of shorting isn't to help the company.

If shorting wasn't allowed, Wirecard would've gone on for much longer. Short sellers are an important part of the market.

Re: The Long-Term Stock Exchange Opens for Business

#547

Post by nine_k »

vlovich123 wrote: post #514
yholio wrote: post #499

Earlier quoted context omitted.

Not only it's a bad idea to ban shorting, but it's almost impossible to do outside regulatory action by the SEC and even then. Shorting is essentially borrowing the control of stock to some other party. That's it. It doesn't have to be done on the market, it can be done in a private, confidential contract where I oblige myself to sell my stock when directed to do so by yourself, provided adequate warranties exist tha…

Ignoring the SEC for a moment, I don’t follow your reasoning. Why couldn’t buying shares require you to sign a contract that you’re not going to engage in various activities such as shorting? That would preempt any private arrangement you attempt to make. You of course could make an illicit secret agreement but you’d still be breaking and invalidating the contract you bought your shares under exposing yourself to var…

How would you detect that, though?

Re: The Long-Term Stock Exchange Opens for Business

#548

Post by r00fus »

maest wrote: post #546
cmroanirgo wrote: post #478

Earlier quoted context omitted.

I used to be part of the system that built machines that auto traded on arbitrage opportunities due to millsec/nanosec differences in reported prices in different exchanges. Although probably not popular I would suggest that long term stocks needs to incorporate features that actively block certain trading patterns: limit price changes, limit buy/ sell frequency, & disallow shorting. I have been heavily involved in t…

> & disallow shorting. That's a very bad idea. > Shorting is never a long-term game and should be banned, as it never does the company any favours. The purpose of shorting isn't to help the company. If shorting wasn't allowed, Wirecard would've gone on for much longer. Short sellers are an important part of the market.

Are naked shorts still allowed? Maybe prevent those.

Re: The Long-Term Stock Exchange Opens for Business

#549

Post by r00fus »

valuearb wrote: post #533
read_if_gay_ wrote: post #502

Earlier quoted context omitted.

I might be naive, but are you not going to get caught doing this? Because if you're secretly selling enough shares that your voting rights will have an actual impact, it seems like that'll be a fair amount of money you'd also need to transfer secretly, which is not that easy.

No, controls would be trivial to evade. Let’s say I have a billion dollars worth of Tesla stock that I’ve owned for a decade, giving me twice as much votes as normal. You want to increase your voting power, and are willing to pay $1.5B for my shares to do so. We sign a loan agreement. You loan me $1.5B at a high interest rate, secured by my shares and my agreement to vote them as per your instructions. If you demand…

I was with you until the end - how does transferability function with this kind of loan arrangement?

Re: The Long-Term Stock Exchange Opens for Business

#550

Post by valuearb »

r00fus wrote: post #549
valuearb wrote: post #533

Earlier quoted context omitted.

No, controls would be trivial to evade. Let’s say I have a billion dollars worth of Tesla stock that I’ve owned for a decade, giving me twice as much votes as normal. You want to increase your voting power, and are willing to pay $1.5B for my shares to do so. We sign a loan agreement. You loan me $1.5B at a high interest rate, secured by my shares and my agreement to vote them as per your instructions. If you demand…

I was with you until the end - how does transferability function with this kind of loan arrangement?

On its face it’s clearly harder, just because now you need three parties to sign a new loan agreement. It could be made much easier if the loan is assignable under same terms, especially if parts of the loan are assignable for proportionate parts of the shares.

And if the benefits are significant, I would bet this creates a whole tertiary layer of brokers, bankers and lawyers enabling these kind of transactions with standardized loan agreements and clearing houses.

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