Wednesday, July 29, 2009
The Anything We Do Is Good For Capitalism arguments
Paul Wilmott rightly dismisses the Anything We Do Is Good For Capitalism arguments by proponents of complex high-frequency algorithmic trading. Snake oil salesmen could muster the same approximate arguments -- that they're creating liquidity via transfer of money, that they're creating jobs (for snake catchers, chemical makers, bottle distributors etc.), that they're responding to market demand. At least snake oil salesmen can point to tangible products they produce. Goldman Sachs, hedge-fund managers and MIT grads can't. Wilmott:
Previous mini-rant here.
Paul Wilmott rightly dismisses the Anything We Do Is Good For Capitalism arguments by proponents of complex high-frequency algorithmic trading. Snake oil salesmen could muster the same approximate arguments -- that they're creating liquidity via transfer of money, that they're creating jobs (for snake catchers, chemical makers, bottle distributors etc.), that they're responding to market demand. At least snake oil salesmen can point to tangible products they produce. Goldman Sachs, hedge-fund managers and MIT grads can't. Wilmott:
Buying stocks used to be about long-term value, doing your research and finding the company that you thought had good prospects. Maybe it had a product that you liked the look of, or perhaps a solid management team. Increasingly such real value is becoming irrelevant. The contest is now between the machines — and they’re playing games with real businesses and real people.Buying stocks also used to rely more on old-fashioned human hunches. My own gut instinct is that Wall Street, once again, is playing us off against each other, using free-market rhetoric to disguise their gaming of the system.
Previous mini-rant here.
