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> taking speculative positions It's hard to define what a speculative position is. Incentivizing buying and holding would just be intentionally make markets il

by MiroF 6y ago

> taking speculative positions It's hard to define what a speculative position is. Incentivizing buying and holding would just be intentionally make markets illiquid, which a. let's bigger players take larger profits more easily and b. leads to inefficient pricing

morpheos137 6y ago
There is no reason why efficient pricing of all assets is socially desirable. Efficient pricing may have a cost. Housing is a relatively illiquid market on a local basis. The way to make it more liquid would be to have people buy and sell houses more frequently. Sure we might have a finer grained understanding of what a given house is "really" worth at any given moment but what good is there in that information? Likewise what social good (as opposed to good for the individual speculator) is there in shares of companies changing hands easily and frequently? Liquidity has a cost. The cost of liquidity is instability (volatility) and short termism. Fractional ownership of a company should be a long term undertaking. Not a speculative position. Otherwise how can good corporate governance be incentivized if owners can jump ship at a moment's notice with essentially no cost? How can debacles like Boeing engineering failures be avoided when all that matters is quarterly appearances?
- deleted 6y ago
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- morpheos137 6y ago
  As a thought experiment ask yourself why should it be easier to buy or sell fractional ownership of a company than a house or a car? Does that not incentivize not taking responsibility for the long term prospects of a company or understanding its business? What is the proper role of owners? What is the purpose of public trading? Is liquidity and efficiency an end unto its own?
- MiroF 6y ago
  Respectfully, I don't really feel like engaging with this conversation because it seems like we don't have the same basic starting points. > The cost of liquidity is instability (volatility) Just research it. Liquidity doesn't cause volatility, it's the opposite effect: illiquid markets lead the real underlying price to be largely different than the market price, leading to massive jumps.

by MiroF 6y ago

morpheos137 6y ago

There is no reason why efficient pricing of all assets is socially desirable. Efficient pricing may have a cost. Housing is a relatively illiquid market on a local basis. The way to make it more liquid would be to have people buy and sell houses more frequently. Sure we might have a finer grained understanding of what a given house is "really" worth at any given moment but what good is there in that information? Likewise what social good (as opposed to good for the individual speculator) is there in shares of companies changing hands easily and frequently? Liquidity has a cost. The cost of liquidity is instability (volatility) and short termism. Fractional ownership of a company should be a long term undertaking. Not a speculative position. Otherwise how can good corporate governance be incentivized if owners can jump ship at a moment's notice with essentially no cost? How can debacles like Boeing engineering failures be avoided when all that matters is quarterly appearances?

deleted 6y ago
[deleted]
morpheos137 6y ago
As a thought experiment ask yourself why should it be easier to buy or sell fractional ownership of a company than a house or a car? Does that not incentivize not taking responsibility for the long term prospects of a company or understanding its business? What is the proper role of owners? What is the purpose of public trading? Is liquidity and efficiency an end unto its own?
MiroF 6y ago
Respectfully, I don't really feel like engaging with this conversation because it seems like we don't have the same basic starting points. > The cost of liquidity is instability (volatility) Just research it. Liquidity doesn't cause volatility, it's the opposite effect: illiquid markets lead the real underlying price to be largely different than the market price, leading to massive jumps.