Here's a recent article from Maclean's of Canada entitled "'Wall Street is for Suckers'." It lays out a litany of reasons why, in the words of the article's author, "something is very wrong with Wall Street" -- including the allegation that "the stock market has become very disconnected from its primary function of uniting growing businesses with large numbers of long-term investors."
Many of the examples cited in the article are phenomena that we have discussed previously in this blog, including the issue of Facebook's private capital raise, and the tendency towards owning stocks for shorter and shorter periods of time (tying the results more to market moves than to longer-term business success or failure).
It also touches on the fact that a much larger percentage of the public is now participating in the stock market in one way or another, a subject we discussed in "Invest like Mr. Howell."
The article centers around the assertion of entrepreneur and businessman Mark Cuban that "Wall Street is for suckers." We find that quotation somewhat ironic, since Mr. Cuban's wealth is directly a result of his decision to own shares in businesses that he built, and then to sell those shares through the capital markets collectively referred to as "Wall Street."
And, while we agree that all of the changes that the article discusses are important for investors to be aware of, we disagree with the conclusion that things are somehow "broken" now, or that Wall Street was somehow more virtuous in the mythical past.
We point out that Thomas Rowe Price, Jr. wrote in 1973 (in a paper to which we have referred several times in the past) that in the 1930s, after ten years in the investment business, he had an epiphany that led him to forsake the kind of short-term market-based speculating that dominated Wall Street even then, and instead to seek out long-term ownership of successful business enterprises that could grow and prosper "over a long period of years."
We would argue that this is still a valid recipe for success, and that the fact that few investors on Wall Street are following it today creates more of an opportunity for those who do, just as it did in Mr. Price's day.
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Many of the examples cited in the article are phenomena that we have discussed previously in this blog, including the issue of Facebook's private capital raise, and the tendency towards owning stocks for shorter and shorter periods of time (tying the results more to market moves than to longer-term business success or failure).
It also touches on the fact that a much larger percentage of the public is now participating in the stock market in one way or another, a subject we discussed in "Invest like Mr. Howell."
The article centers around the assertion of entrepreneur and businessman Mark Cuban that "Wall Street is for suckers." We find that quotation somewhat ironic, since Mr. Cuban's wealth is directly a result of his decision to own shares in businesses that he built, and then to sell those shares through the capital markets collectively referred to as "Wall Street."
And, while we agree that all of the changes that the article discusses are important for investors to be aware of, we disagree with the conclusion that things are somehow "broken" now, or that Wall Street was somehow more virtuous in the mythical past.
We point out that Thomas Rowe Price, Jr. wrote in 1973 (in a paper to which we have referred several times in the past) that in the 1930s, after ten years in the investment business, he had an epiphany that led him to forsake the kind of short-term market-based speculating that dominated Wall Street even then, and instead to seek out long-term ownership of successful business enterprises that could grow and prosper "over a long period of years."
We would argue that this is still a valid recipe for success, and that the fact that few investors on Wall Street are following it today creates more of an opportunity for those who do, just as it did in Mr. Price's day.
Subscribe (no cost) to receive new posts from the Taylor Frigon Advisor via email -- click here.