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The Long-Term Stock Exchange Is Worth a Shot

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Re: The Long-Term Stock Exchange Is Worth a Shot

#31

Post by SomeStupidPoint »

rocqua wrote: post #8
Retric wrote: post #5

Earlier quoted context omitted.

I would probably go for some middle ground such as if (year > 0) then shares * Square root (years). Just because someone has held a stock for 20 years does not necessarily mean they are currently interested in the long term. But, it probably points in that direction.

You might want an upper limit, so either logistic growth [1] or something like 1 - exp(-(T + T_0)) feels like it makes more sense. I especially like logistic growth for having slow growth at the start and end, only growing quickly in the middle. [1] https://www.khanacademy.org/science/biology/ecology/populati...

You don't need an upperbound as long as your function is sufficiently slow growing.

Example:

Log(years) doesn't have a bound, but is unlikely to cause problems over any reasonable time scale.

Re: The Long-Term Stock Exchange Is Worth a Shot

#32

Post by grandalf »

cujic9 wrote: post #25
grandalf wrote: post #20

There is a pervasive idea that longer term investments are somehow better (morally superior, more socially responsible) than short-term. This stems from the ancient prejudice toward financiers (usually jews) and the corresponding ancient prejudice against speculation. Let me debunk it: - Suppose an 18 year old and a 80 year old each buy a share of company XYZ's stock. Whatever their goals might otherwise be, the 80 y…

For a proper debunking, you need to address the fact that it's usually pretty easy to wring cash out of a business, but you can only do it once. That's why longer term investments are preferable. It puts the focus on building sustainable value for its owners rather than balance sheet gymnastics. Most of your argument here is in favor of liquidity, but that's not the issue in question. You're also mistaking the role o…

> For a proper debunking, you need to address the fact that it's usually pretty easy to wring cash out of a business, but you can only do it once.

I don't think that's the primary point, because the CEO should have an incentive to profit from multiplying the future value of that cash, not simply "wring it out" and get a short-term bonus. I meant to lump in "wringing" with all other perverse-incentives for management that a short-term incentive structure creates.

> That's why longer term investments are preferable.

In the same sense that it's better for an employee to receive a single paycheck for the entire year on day 1 of employment. That is not necessarily realistic. If investments were not reversible there would be a lot less of them, just as there would be fewer hires if the entire salary had to be paid on day 1.

> It puts the focus on building sustainable value for its owners rather than balance sheet gymnastics.

Building sustainable value? There are a lot of assumptions baked into that idea. One person's sustainable is another person's "safe" course of action and another person's definition of greed. Suppose someone is starting a restaurant and expects it to be profitable starting in year 10. Most people would consider that foolhardy. Is it? Not necessarily, it depends on how profitable it will be. Notably firms like McDonalds were profitable fairly rapidly but grew in scale significantly over time. Where did the tradeoff between sustainability and short-term greed occur? Arguably early investors were not greedy enough, since the firm had to resort to franchising to fundraise.

> You're also mistaking the role of stock exchanges, which are secondary markets.

I am not sure how the Long-Term Stock Exchange will work, but my point is that simply restricting the behavior of firms that join the exchange will not necessarily change the behavior of that firm's employees, except to the extent that investors/owners are able to create long-term incentives.

Re: The Long-Term Stock Exchange Is Worth a Shot

#33

Post by grondilu »

danmaz74 wrote: post #29
grondilu wrote: post #22

> Anyway here's a story about the Long-Term Stock Exchange, which is a new planned stock exchange backed by Silicon Valley venture capitalist types that will have "tenure voting," in which shareholders who hold their shares for a long time will get more votes. This has been discussed already on HN, and I believe it's a bad idea. All that would do would be to create two kinds of shares : the normal ones and those with…

If I got this correctly, when you sell your shares with high voting power, they lose their high voting power.

Then you'd just create an incentive to sell the share in dark markets. You'd officially still be the owner of the share, but in secret you would have sold your voting right by agreeing with someone to vote on command in exchange for money.

As is said in the 1981 movie "rollover", capitalism is like a force of nature : you can try to fight it, but in the end it always win[1]

And even if somehow you succeed, you would have created capital that can not be bought nor sold, or can only be bought and sold from and to a particular category of investors. You would have introduced a bit of communism in the system (in the sense that in communism, buying or selling capital is forbidden). I guess some people will be happy about that, but I won't.

1. https://youtu.be/m1aQ-XGWors?t=151

Re: The Long-Term Stock Exchange Is Worth a Shot

#34

Post by grandalf »

sah2ed wrote: post #28
grandalf wrote: post #20

There is a pervasive idea that longer term investments are somehow better (morally superior, more socially responsible) than short-term. This stems from the ancient prejudice toward financiers (usually jews) and the corresponding ancient prejudice against speculation. Let me debunk it: - Suppose an 18 year old and a 80 year old each buy a share of company XYZ's stock. Whatever their goals might otherwise be, the 80 y…

I think your example scenario would have benefited from some qualification as you paint the sentiment around the decision to put a stock up for sale in a somewhat negative light when in fact there can be several factors at play. > The person who sold the shares had deemed the stock a not-so-good investment compared to other options and wished to liquidate. That's one possible explanation for the decision to sell. The…

> you paint the sentiment around the decision to put a stock up for sale in a somewhat negative light

Only to the extent that all stocks, bonds, and investments (in a sense) compete against each other. Thus, selling means that the owner decided that one of the competitors was a better fit. Of course, as you point out, it could just be due to some unrelated cash flow issue.

Re: The Long-Term Stock Exchange Is Worth a Shot

#35

Post by Timothycquinn »

IMO, short term investing including stock options does nothing but move money from one group to another by creating artificial Flux. The stock market for the most part is a closed cycle in which a large group of investors, mostly the loosing ones, think that the stock market creates value and the ones who make the money from these ignorant "investors" are completely aware of and dependent on the loosing parties stupidity.

We should open gambling shops for those who want to day trade or deal in Stock options because that is all that they are doing.

The only stock market that promotes long term growth and profitability of businesses is one that awards long term investment.

Re: The Long-Term Stock Exchange Is Worth a Shot

#36

Post by walshemj »

teemwerk wrote: post #17

I am by no means stating it as a conclusion, but rather just as a discussion point, how does this differ from the mutual funds and etfs under a single umbrella, i.e. something like vanguard? Where the stated mission is sort of long term stewardship over the short term activist role. Now, how well that mission is fulfilled is another thing. The reason I note vanguard specifically is because of the current activist spa…

Isn't Vanguard just an index house is not the LSE's family trusts a better model which is what the Rosthchilds do with RIT Capital partners

Re: The Long-Term Stock Exchange Is Worth a Shot

#37

Post by walshemj »

eldavido wrote: post #23
teemwerk wrote: post #17

I am by no means stating it as a conclusion, but rather just as a discussion point, how does this differ from the mutual funds and etfs under a single umbrella, i.e. something like vanguard? Where the stated mission is sort of long term stewardship over the short term activist role. Now, how well that mission is fulfilled is another thing. The reason I note vanguard specifically is because of the current activist spa…

It's worth asking why we make the distinction between "activists" and big fund managers in the first place. Shouldn't all fund managers be doing what's best for their shareholders? You should check out John Bogle's "Clash of Cultures" (founder of Vanguard), he discusses this problem at length. In general I'm inclined to agree with you though. This thing has a lot of hype around it because it's backed by Eric Ries, th…

Multiple classes of shares with different voting rights are though

Re: The Long-Term Stock Exchange Is Worth a Shot

#38

Post by wyager »

Timothycquinn wrote: post #35

IMO, short term investing including stock options does nothing but move money from one group to another by creating artificial Flux. The stock market for the most part is a closed cycle in which a large group of investors, mostly the loosing ones, think that the stock market creates value and the ones who make the money from these ignorant "investors" are completely aware of and dependent on the loosing parties stupi…

The market isn’t a mechanism to let salarymen invest their retirement money in something. The market is a mechanism to plan and optimize all production and resource allocation across the entire world, all the time. This has to be fast.

If you think options (your example, not mine) are somehow inherently nothing more than gambling, it’s because you don’t understand how options work. Options are one of the least exotic and most straightforwardly useful securities.

Re: The Long-Term Stock Exchange Is Worth a Shot

#39

Post by kolbe »

Forget all the practical hurdles, tell me why this premise is even correct. Just because I've owned a share for a long time, that implies that I have more interest in the long term performance of the company going forward? Just because the word "long" is part of the description of a past action doesn't mean it's in any way correlated with an expected future action. And it's often negative. See: basketball games, retirement, and (gasp) stock vesting. You think a VC who's owned a company for 9.9 years and is reaching the end of its fund has more incentive to vote in the long term interest of the company than a pension who just bought?

Re: The Long-Term Stock Exchange Is Worth a Shot

#40

Post by walshemj »

grondilu wrote: post #22

> Anyway here's a story about the Long-Term Stock Exchange, which is a new planned stock exchange backed by Silicon Valley venture capitalist types that will have "tenure voting," in which shareholders who hold their shares for a long time will get more votes. This has been discussed already on HN, and I believe it's a bad idea. All that would do would be to create two kinds of shares : the normal ones and those with…

yes its like if your vote for elections counted for more if you/your family had been a citizen longer great for descendants of the mayflower etc sucks for more recent immigrants
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