Casino

A New York Times op-ed column by Edward E. Kaufman Jr. and Carl M. Levin warns that if steps are not taken, “our stock markets will have become a casino.” It seems a bit late for that. While there may still be some predictability to the market in the long-term, in the short-term it is already a casino. Sophisticated investors hold all the power and can easily take outplay the amateurs. As far as I can see the short-term market is wholly disconnected from any underlying financial reality.

3 Comments »

  1. rdb said,

    May 9, 2011 @ 2:08 am

    Via Felix Salmon LRB: How to Make Money in Microseconds continues the theme.
    Tobin tax varients to increase friction seem politically infeasible.

  2. Simetrical said,

    May 9, 2011 @ 4:41 am

    But unlike in a casino, anyone can still make money on average by investing in some safe place like an index fund. That’s the useful side to the stock market, for the average person. The “average investor” never did much better on average than an index fund anyway; if he did any better in particular cases, it was by making higher-risk investments and getting lucky.

  3. Ian Lance Taylor said,

    May 10, 2011 @ 6:14 am

    rdb: Thanks for the link.

    Simetrical: Agreed, although if people start moving their money away from the stock market, index funds aren’t going to do well either. Mutual funds are continuing to see outflows.

    I suppose a properly diverse strategy would mean finding some place to put some of your money which is not Wall St. and is not your house. Not sure what that would be, though.

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