4 ms·

Genuine question, what good does the ability to buy and sell stock on the short term do for humanity ? Does it have any specific vertue appart from allowing one

Genuine question, what good does the ability to buy and sell stock on the short term do for humanity ? Does it have any specific vertue appart from allowing one to make make money by betting correctly ? Why are not all sales required to be long term ?

danimal88 6y ago
Not a strong conviction from me but I can see a case for liquidity when you can sell quickly.
- BiteCode_dev 6y ago
  I'm not talking about the times it take for selling as much as the absence of delay between buying and selling.
  - eru 6y ago
    See https://en.wikipedia.org/wiki/Market_maker https://en.wikipedia.org/wiki/Market_maker
  - smabie 6y ago
    Factors, the world, the firm trading, etc all change daily. Also market makers provide liquidity through buying and selling quickly. If you had to hold a stock for a long amount of time before selling it, you would find it very hard to buy or sell stock.
janhenr 6y ago
The fact that stocks can be bought and sold quickly has a use, namely that the price should signal how the market values this asset.
- BiteCode_dev 6y ago
  But what good does it do to have such a instant information on speculative value outside of the world of making money with it ?
  - janhenr 6y ago
    I think we can both agree that there is a lot of value in knowing the "actual value" (as opposed to speculative value) of things in our society. Knowing the actual value of things is impossible for multiple reasons it (it changes very fast and is just intrinsically very hard). However, given a big incentive (making money) we can let the market estimate the value of goods for our society. This speculative valuation is far from perfect, but it is the closest we can get to the actual valiation of goods/institutions.
LatteLazy 6y ago
It prevents capital being mis-allocated. It turns out that is one of the most important things to do in modern, capital intensive, economies. It also means people can invest for shorter periods and that means more capital is available for investment. This has a double bonus where it reduces the risk of investments again making more capital available...
- BiteCode_dev 6y ago
  I don't have the background to understand your answer, can you make it simpler with some examples ?
  - LatteLazy 6y ago
    No worries, it's all quite counterintuitive :) Imagine if you're a would be investor. You're money is available now to invest. So you want the market to be open to let you buy. Otherwise that cash is just sat there waiting. Similarly, you want to invest all your money. But if you know you won't be able to get it back for X period of time then you can't can you? You might not even know how long you can invest for: I might reasonable expect not to need some cash till Christmas time but if I lose my job tomorrow I want it now please! So a market where you can buy and sell rapidly makes you more able and more likely to invest. That's good for you as you can use spare cash productively and make a profit while still being safe if you suddenly have a change in circumstances. It's also it's good for the company you're investing in as they can raise capital quickly and there is more capital available. And all of this means more growth and lower costs and that means more tax money for social services and more jobs for other workers etc. The analysis for the people receiving the investment is similar but a bit more complex because the company doesn't just get investment, it also get's information: a rising share price tells you you should expand, high prices in general indicate a great time to start new businesses, a competitor whose share price falls while your one rises has issues and might be open to a merger\takeover etc.
- pbhjpbhj 6y ago
  It seems just to soak away capital to third parties and not prevent misallocation any more than longer-term trading would? Compare football (ie soccer) trading windows. Player performance within a match might be like daily performance of a company.
deleted 6y ago
[deleted]
eru 6y ago
Every buy is a sale, and every sale is a buy. I am a long term investor. Long term investors like me still need to buy or sell stock occasionally, even if only to live out their retirement eventually. There's no good reason to assume that for every long term who wants to buy or sell on a particular date, there will be another long term investor on the other side of the deal. So a special kind of short term investor, called a market maker, jumps in. Market makers typically hold a small amount of inventory and offer to buy or sell stock. Market makers allow your grandma to sell stock any day of the week without worrying too much about timing. See https://en.wikipedia.org/wiki/Market_maker https://en.wikipedia.org/wiki/Market_maker There are other kinds of short term holders of shares. But market makers are probably the most obviously useful to long term investors.
erfgh 6y ago
If there was no short term market then long term buyers and sellers would have a harder time buying and selling and it would cost them significantly more.

danimal88 6y ago

Not a strong conviction from me but I can see a case for liquidity when you can sell quickly.

BiteCode_dev 6y ago
I'm not talking about the times it take for selling as much as the absence of delay between buying and selling.
- eru 6y ago
  See https://en.wikipedia.org/wiki/Market_maker https://en.wikipedia.org/wiki/Market_maker
- smabie 6y ago
  Factors, the world, the firm trading, etc all change daily. Also market makers provide liquidity through buying and selling quickly. If you had to hold a stock for a long amount of time before selling it, you would find it very hard to buy or sell stock.

janhenr 6y ago

The fact that stocks can be bought and sold quickly has a use, namely that the price should signal how the market values this asset.

BiteCode_dev 6y ago
But what good does it do to have such a instant information on speculative value outside of the world of making money with it ?
- janhenr 6y ago
  I think we can both agree that there is a lot of value in knowing the "actual value" (as opposed to speculative value) of things in our society. Knowing the actual value of things is impossible for multiple reasons it (it changes very fast and is just intrinsically very hard). However, given a big incentive (making money) we can let the market estimate the value of goods for our society. This speculative valuation is far from perfect, but it is the closest we can get to the actual valiation of goods/institutions.

LatteLazy 6y ago

It prevents capital being mis-allocated. It turns out that is one of the most important things to do in modern, capital intensive, economies. It also means people can invest for shorter periods and that means more capital is available for investment. This has a double bonus where it reduces the risk of investments again making more capital available...

BiteCode_dev 6y ago
I don't have the background to understand your answer, can you make it simpler with some examples ?
- LatteLazy 6y ago
  No worries, it's all quite counterintuitive :) Imagine if you're a would be investor. You're money is available now to invest. So you want the market to be open to let you buy. Otherwise that cash is just sat there waiting. Similarly, you want to invest all your money. But if you know you won't be able to get it back for X period of time then you can't can you? You might not even know how long you can invest for: I might reasonable expect not to need some cash till Christmas time but if I lose my job tomorrow I want it now please! So a market where you can buy and sell rapidly makes you more able and more likely to invest. That's good for you as you can use spare cash productively and make a profit while still being safe if you suddenly have a change in circumstances. It's also it's good for the company you're investing in as they can raise capital quickly and there is more capital available. And all of this means more growth and lower costs and that means more tax money for social services and more jobs for other workers etc. The analysis for the people receiving the investment is similar but a bit more complex because the company doesn't just get investment, it also get's information: a rising share price tells you you should expand, high prices in general indicate a great time to start new businesses, a competitor whose share price falls while your one rises has issues and might be open to a merger\takeover etc.
pbhjpbhj 6y ago
It seems just to soak away capital to third parties and not prevent misallocation any more than longer-term trading would? Compare football (ie soccer) trading windows. Player performance within a match might be like daily performance of a company.

deleted 6y ago

[deleted]

eru 6y ago

Every buy is a sale, and every sale is a buy. I am a long term investor. Long term investors like me still need to buy or sell stock occasionally, even if only to live out their retirement eventually. There's no good reason to assume that for every long term who wants to buy or sell on a particular date, there will be another long term investor on the other side of the deal. So a special kind of short term investor, called a market maker, jumps in. Market makers typically hold a small amount of inventory and offer to buy or sell stock. Market makers allow your grandma to sell stock any day of the week without worrying too much about timing. See https://en.wikipedia.org/wiki/Market_maker https://en.wikipedia.org/wiki/Market_maker There are other kinds of short term holders of shares. But market makers are probably the most obviously useful to long term investors.

erfgh 6y ago

If there was no short term market then long term buyers and sellers would have a harder time buying and selling and it would cost them significantly more.