<p>I’m not getting the capital gains argument. We already tax long term and short term differently.</p>
<p>A lot of the speculation that blew up recently was long term speculation.</p>
<p>So…you are in favor of long term speculation?</p>
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<p>So far you’re attacking and I’m defending so I’m defending. Well too.</p>
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<p>As I wrote, you have your topics and terms confused. It’s hard to argue
when your opponent is ill-equipped to do so and puts out disinformation.</p>
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<p>You didn’t demonstrate why anything that I do is immoral.</p>
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<p>Oh, that’s rich. You claimed that I should be working to increase
intellectual wealth and criticized me because you thought that I
wasn’t doing that only to find out that I am doing that.</p>
<p>It’s clear that you don’t like to play defense. What do you do? Are
you an intenational banker playing hypocrite? What have you
contributed to the knowledge wealth of the country? Where are all of
the donations of time to the wealth of the country?</p>
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<p>Pretty poor analysis here. Trends go up, down and sideways. We have the
ability to short markets too which provides a fundamental balance to
markets.</p>
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<p>This is merely an assertion and opinion. What is your definition of
wrong? We speculate merely by holding dollars as the value against
other currencies and commodties fluctuates all the time. Is that
wrong?</p>
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<p>Moral Hazard is an insurance term.</p>
<p>As I wrote before, my methods are not sophisticated. Certainly nowhere
near the sophistication of structured finance. I mostly just trade
common stocks and ETFs.</p>
<p>I don’t see where your term responsible comes into play. It’s
something you do. Doing it or not doing it doesn’t make you
responsible or irresponsible.</p>
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<p>Please try to pay attention. I said that it is harder to blow bubbles
with metals-based currencies. If you want to argue about something
that I’ve said, please be accurate about what I say.</p>
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<p>So glad to see that you admit that your writings are sophomoric.</p>
<p>Now what have you done to contribute to the knowledge wealth of this
country?</p>
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<p>Are you a fan of Earl Stanley Gardner?</p>
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<p>Yes, we do tax short term and long term capital gains differently, but not differently enough as I think is necessary to steer the investor with money to look at the longer term prospects of a company rather than the current quarter’s report that is due out tomorrow. It seems that all of the talking heads that “investors” listen to talk about news items with a rather short attention span (current quarter). It is much harder to get good research on a company’s product and maketing development strategies. Companies don’t spend many resources on the substance of their 10K reports like they used to 30 to 50 years ago. So when all you have is short term information, your investment focus is short term.</p>
<p>And yes, I agree that a lot of asset value unrelated to the bubbles (subprime paper, oil)was lost in the economic meltdown, but note that to the extent that the longer term prospects (5 years out) for the economy have improved, much of those unrelated assets (general stocks) have recovered most of those losses.</p>
<p>Long term speculation is an oxymoron, unless you mean investing in something that you do not understand the underlying fundamentals of and leaving it there. To me that is foolishness.</p>
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<p>Perhaps that’s your problem - you watch television.</p>
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<p>It is harder and that’s why we have technical analysis. It’s a simple
abstraction of insider knowledge and market expectations.</p>
<p>I do do a lot of fundamental analysis on the companies that I own and
several are in the tech area where I have an inside understanding of
the technologies that they are in. Same thing with energy companies,
and precious metals companies. I took enough courses in finance and
accounting to understand financial reports and I do actually read them
when they arrive. Reading mining reports isn’t the most fun thing to
do but it gives you an idea of the longer-term prospects of precious
metals companies. Going with energy trusts means that they pay out
most of their earnings on a regular basis so that management can steal
as much of the investor’s profits.</p>
<p>I promote technial analysis but I also promote fundamental analysis.
Many traders select stocks based on technical analysis and then do a
fundamentals screen. Other traders screen on fundamental analysis and
then use technical analysis for entry and exit points. There are many
pure technicians out there that do very, very well.</p>
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<p>Some of those companies are actually thriving in the current economy.
Imagine how well they would be doing if we weren’t in an economic downturn
that will take several more years to recover from in umemployment terms.</p>
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<p>You speculate when you drive to work. Life is speculation. Or maybe
you don’t carry insurance on your car.</p>
<p>“?Long term speculation is an oxymoron, unless you mean investing in something that you do not understand the underlying fundamentals of and leaving it there. To me that is foolishness.”</p>
<p>I think you can speculate long term…biotech companies…alternative energy…real estate development…some technology stocks…etc…</p>
<p>A little speculation is good. Leads to advances.</p>
<p>It’s ok to have some failures too. As long as society and the individual can afford the cost of failure.</p>
<p>Short term speculation is a mixed bag. The liquidity speculation adds is a positive. Cuts costs. And there is speculation and there is speculation…not all speculation is the same.
Speculation with leverage can lead to lots of problems. Speculating with other people’s money can lead to carelessness or too much aggressiveness.</p>
<p>And speculation can lead to a misallocation of resources. An example is the housing bubble…which was both long term and short term speculation.</p>
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<p>But that misallocation can ultimately be beneficial to society.</p>
<p>The internet bubble resulted in new and real technologies and new economies that we didn’t have before because so many were willing to take risks in new ideas. New ideas entail risk and, for the most part, creating incentives for taking risks frequently results in better, faster, cheaper, etc. though for only a fraction of the ideas. I’m sure that there were technological gains in homebuilding. That many plumbers, carpenters, roofers and painters were trained with useful (though now perhaps too plentiful) skills.</p>
<p>One thing that I really love is modern technical clothing fibers and that’s part of the consumer bubble that we’ve had for so long. I love fleece products (we need them in New England) where we take plastic soda bottles and turn them into premium clothing products. That too was from the consumer bubble.</p>
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<p>“But that misallocation can ultimately be beneficial to society.”</p>
<p>I guess that’s true…or the misallocation wasn’t really a misallocation. :)</p>
<p>BC,</p>
<p>You basically confuse the concepts of creating wealth and making markets. Making markets is about accelerating the flow of capital to its most efficient use. It, in and of itself does not create wealth, only accelerates the process of wealth creation. Lots of people get rich making markets, but they do not create true wealth in the long run.</p>
<p>In fact, when more money is made making markets than the underlying wealth creation by the assets being sold, it says that a bubble is being created. This is the moral hazard I speak to (there is more than 1 concept of a moral hazard). And while your day job may very well be contributing to the underlying wealth creation, I argue that the trading concepts you espouse (following the trend to identify worthy investments) falls into this moral hazard category I talk about where the focus is on making the market rather than on the underlying value of the investment.</p>
<p>I think if you spent more time analyzing the abstract idea I have presented instead of throwing out poorly formulated arguments not addressing the abstract underlying idea, we’d actually get someplace here. However, you seem to be more interested in nit picking my use of terms.</p>
<p>This seems to be below what I thought a BC education was about - most good Catholic institutions used to focus on the underlying morality of the activities of daily life. Perhaps I haven’t been clear on my focus on the underlying principles of ones actions and how they contribute to the overall economic environment.</p>
<p>You seem to be happy winning the trivia contest. Enjoy your victory.</p>
<p>Not necessarily “trophy wife” but perhaps a second wife.</p>
<p>~signed the second wife who is hardly a “trophy”</p>
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<p>Well, you have to throw a lot of money at a lot of ideas and there are going to be far more losers than winners. I guess the idea of misallocation depends on where you sit. New classes of jobs were created after the internet bubble as crazy ideas were refined to sustainable business models. In some cases, large numbers of jobs were created. New medical technologies were created. The way research is done and explained. If you lost your money, it might seem to be more of a misallocation.</p>
<p>I think that the benefits to the internet bubble are far greater than society saw back then but it’s in a lot of little ways that we now take for granted. I think that just the idea of robotic surgery making procedures that couldn’t be imagined 20 years ago is a wonder benefit of the 1990s technology revolution.</p>
<p>I agree with your sentiments. </p>
<p>The internet and cellular bubbles may be a long term positive for society.</p>
<p>I don’t think so with housing or the credit bubbles. I’m sure you can find pockets in society where the bubble helped. But overall…those two bubbles are big losers.</p>
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<p>This is a reach of an argument, if I’ve ever seen one.</p>
<p>If you are telling me that I can get a plumber to work on my water heater tonight because some moron bet too much money on an internet incubator, I need to go back to school and relearn economics.</p>
<p>There is nothing that I can think of as an advancement in plumbing that came as the result of mindless speculation on ill-conceived websites. In fact there haven’t been too many significant advancements in plumbing in the past 15 years outside of a (somewhat) working low flow toilet. And I know people in the plumbing fixture business - they didn’t use the best fluid dynamic software to develop the optimal trap shape.</p>
<p>Give me a break and save your wind.</p>
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<p>I understand both well. You apparently don’t read very well or you
read things into what I’ve written. </p>
<p>I understand the idea about creating real wealth. If you head over to
the science and engineering forums, you’ll see that I’m a frequent
contributor there. I’m not happy when a very sharp kid goes into IB or
finance instead of engineering though I may be happy for them
individually. We have kids coming into the engineering asking which
engineering discipline pays the most or which engineering school has
the highest salary surveys.</p>
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<p>No. Absolutely wrong.</p>
<p>Market makers can make money on the upside and the downside.</p>
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<p>Your argument is flawed because markets are made in both directions.</p>
<p>The focus for market makers is on making markets. That’s what they do.
If society doesn’t like it, then they could certainly turn to something
else.</p>
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<p>I reiterate: you don’t know what you’re talking about.</p>
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<p>Well, the shorthand for the School of Management while I was there was
$OM meaning the School of Money. BC has grown into a money machine,
a bit of a monster. Not as big a monster as the Ivies but they spent
money in a bunch of areas that I thought were excessive. We also had
the Priest coverup scandal and the meltdown of the Boston Archdiocese
as a backdrop. My son is taking a course in Western Civ right now and
remarked to me about the entanglements in politics and money of the
RCC.</p>
<p>At any rate I don’t see a moral issue with trading. At least the
trading that I do.</p>
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<p>I already understand that.</p>
<p>I’m generally clear in hundreds of posts that I’d prefer that people
go into areas that create true wealth. I’ve been consistent on that
for years. I also trade and perhaps I’ve been very lucky for the last
twenty years as you suggest and actually have no skill. Of course
any long-term trader would tell you that they’d rather be lucky than
skillful.</p>
<p>You just haven’t made the case for your position. You make assertions
with no support.</p>
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<p>You came in with guns blazing and complain that you don’t like being
attacked. What kind of a reaction were you expecting? If you wanted
a real discussion, you would have written in a way looking for a real
discussion; not a fight.</p>
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<p>Try to dispute it.</p>
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<p>Strawman. And I didn’t tie the plumber to the internet bubble but to
the housing bubbld. Please learn to read carefully.</p>
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<p>Another strawman. I spoke of the increase in supply of plumbers.</p>
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<p>Another strawman.</p>
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<p>You’re making yourself the fool with your sophomoric writing.</p>
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<p>That’s all that I was saying.</p>
<p>The benefits from the internet bubble and the cellular bubble may have been net positive to the economy. The housing bubble wasn’t. The net wealth shrinkage was $15 trillion in the housing bubble which is a monstrous number.</p>
<p>The internet bubble was a lot smaller and impacted only a few areas of the economy.</p>
<p>One benefit to homeowners does relate to plumbing though. The development of PHPbb, MySQL, Apache, etc. has made forums virtually free to run. The general public has access to professional plumbers and other homeowners via internet forums so that you can do some repairs with directions online, size a repair with experiences of others that have done the same repairs and get recommendations on products and service companies.</p>
<p>Well…I did say…</p>
<p>“I agree with your sentiments.”</p>
<p>I probably agree with some of what goaliedad said too. Too much money in society has been allocated to finance. I might disagree on some of the details of what this means and I don’t have this hatred of some speculation.</p>
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<p>Sorry, I forgot about that.</p>
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<p>Well, you’d seen my shoot the bankers post before.</p>
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<p>Maybe goalie got burned. The hatred is irrational.</p>
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<p>I did learn to read carefully. I am requoting YOUR quote connecting the internet bubble with plumbing advancement for your reading pleasure.</p>
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<p>Excuse me BC, but I did see internet bubble in that paragraph, but did NOT see the words “housing bubble”. So how exactly was I supposed to think that you really meant the advancement of plumbing was caused by the housing bubble?</p>
<p>I suggest that you read twice, write once, as you are making less and less sense with each post.</p>
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<p>No hatred here. Just a little befuddled over your lack of reading comprehension and your inability to see how your trading by the numbers activity fits in the larger financial picture of speculation as a route to wealth building.</p>
<p>I am asking you to contemplate, not arbitrate.</p>
<p>I will agree with you as to the role of bankers, though. IMHO, there has never been a bubble that hasn’t been helped along by unchecked leverage. Score that part of the problem on banking.</p>