[FoRK] Chart of the Day...

Jeff Bone jbone at place.org
Wed Jun 9 05:13:40 PDT 2010





On Jun 9, 2010, at 1:48, "J. Andrew Rogers"  
<andrew at ceruleansystems.com> wrote:

+1 to all of this.  Prima facie, most if not all similar pension and  
other benefit-in-perpetuity schemes are Ponzi schemes.

> I would think that there would be some cognitive dissonance  
> considering your oft-stated objection to "speculators"

A note about "speculators."

There's no such thing. Or rather, there's no meaningful difference  
between speculators and any other investor, on some level.

In practice, all these "speculators" that are so demonized of late are  
simply part of the market macrostructure.  They have always existed in  
financial markets --- we have called them market makers,  
"specialists," and other terms at various points in the past --- and  
are *essential* to the proper functioning of any financial market.   
They serve two primary and deeply interrelated functions: to absorb  
short-term risk / provide liquidity as they act as temporal  
intermediaries between buyers and sellers acting at different points  
in time and with differing time horizons, and in doing so to provide  
"price discovery."

In non- or partially-financial markets, they have their analogues:  
they are the wholesalers, warehousers, and transporters of physical  
goods.

By all sensible empirical measures, the markets these days are far  
healthier than they have ever been.  Those who state otherwise  
generally are those traditional market participants who have seen  
their business models eroded as market efficiencies have increased.   
The predictable result: attempts to use other means to perpetuate  
obsolete business models built on artificial inefficiencies.

For the "retail" investor the results of market structure changes over  
the last two decades have been uniformly positive: far lower costs,  
more price continuity, and vastly increased liquidity.  Even  
volatility, much blamed on these "evil speculators," is really more a  
function of increased "natural" interest coupled with more widely- 
distributed (and hence, better-mitigated) risk due to increased market  
monotonicity. In itself it is not a bad thing.

Generally speaking, those who bemoan "speculators" either don't have a  
clue about how financial markets actually work... OR they are waging a  
disingenuous memetic battle to preserve their own self-interests at  
the cost of an overall healthier marketplace.

$0.02,


jb 


More information about the FoRK mailing list