But greed brought speculation. Nothing is more absurd than having huge fluctuations on the price of stock due to supply and demand for the specific stock. Fundamental analysis, the actual financial health of a company, should be what determines the value of its stock, but backed up by company assets, not just speculative price assesment.
Most people who have lost their live savings on the stock market will agree that it is absolutely ridiculous to lose a total investment just because institutional investors decide that a company is not worth keeping and create a stampede.
There should be a market for the private investor, for the hard working man who wants to see his or her savings grow, not based on stupid especulation, but on the actual performance of the companies they own. There should be a change in the way this market grows, making it mandatory to disburse at least a portion of profits among stockholders.
Although it is obvious that institutional investors bring big money into the table, it is also true that it is not THEIR money, but their investors money they are putting at risk.
There should be more education, more diligence on the part of the private investor.
Why does the government have to bail out Wall Street?
How about making transactions reversible? Sort of a roll-back the deal, if it comes to light that someone has manipulated the actual deal?
"The first rule of investing: buy low and sell high. If you haven't actually bought anything, get someone to lend it to you first, then sell it high and buy it back once the price has dropped. That's the first rule of short-selling — sell high, buy back low, and pocket the difference — and it's a trick that has been hastening market crashes for at least 400 years."
What happens when a large financial institution does this? Even worse, inside trading is one thing, but what if you're not inside, your'e outside and you have contact with a large institutional investor who tells you they are going to dump the stock?
The stock market is like going to Vegas with your life savings hoping to come out with a surplus. More often than not people lose. And don't get me wrong, there have been years where many investors have had increased their wealth, pension plan investments, mutual funds, the whole works. But life is not just a few years or a decade.
The stock market should net to zero, that is, after all transactions are accounted for, sales versus purchases, there should net a zero.
If that's the case, when you lose, someone gains. Usually those that gain consistently are the pros.
If you had the winning lottery numbers today, would you give that away? Exactly. That's why investing in the stock market is like playing lottery with someone who has the numbers already. They will let you play for a while, until they are ready to take your money.
Remember, nets to zero. When people have lost billions of dollars, someone else has made them.
So in my humble opinion the solution isn't to close down the stock market. Let it go for people who want to GAMBLE. They get a thrill as they would do on a roulette in Las Vegas.
But life savings, pensions, are just too darn prescious to gamble away. That's people's food on the table, school for their kids and grandkids, that's health, over all, that's dignity.
So create a securities market where stock that is negotiated there always pays dividents on their profit. Forbid institutional investors. Let people invest their money in what they believe can be the next great small business growing into a medium or large business. Share the profits.
We're in a credit crisis, banks are not lending money because they are still sore from the orgy of loans of the past two years.
Forget deregulation. That's what got us in trouble. Make rules, make them tight. Have strict oversight. Those who invest in that new market know the companies selling their stock there ARE monitored and held accountable. Is there risk? yes, there is. But not risk for a total loss. If we have the FDIC for banks, let's have something similar for this. Make those companies maintain liquidity, and never reach insolvency.
Then we have a real market, not a casino.
