Finance ? Short Term or Long term
I wanted to bring up a topic which I feel is the underlying, fundamental question when viewing the financial catastrophe. After watching the “Jon Stewart vs Jim Cramer Brawl” www.thedailyshow.com (which I thoroughly enjoyed) I really thought the emphasis should come down to “Should finance be regulated on a short term scope or a long term scope.”
As Jon said, for mom and pop investors, we are taught to invest for the long term and to be very risk averse, so when you hear of all the risky trading going on with retirement funds, it can make you distrust where you place your money. Now playing to Cramer’s side, and I will say he wasn’t given a chance to fully flesh out his side due to time constraints and his humbleness to be the financial scapegoat, but from my little experience of learning finance and working within the industry for a brief time, you are taught about Duty of Care and your goal, which is to maximize shareholders’ value. This value can be viewed not only as monetary but anything the stakeholder believes to be a positive gained aspect. For example, sustainability might be of prime concern to a stakeholder and therefore adding value could be contributing investments to environmental funds.
Adding and maximizing a shareholder’s value is all nice and vague but there is no scope of time in this goal. Some view any possible short-term gain should be taken if the opportunity is given ample due diligence. It really must be a balancing act between your long-term financial goal and the small opportunities that present themselves as short-term hurdles on your way to the long-term goal.
Additionally, I agree with Alan Greenspan in an interview not so long ago, that this is human nature and there will always be bubbles and bursts or a misuse of power by the “Commanding Heights”. The reason I agree with Alan Greenspan is simply do to the fact that humans do not view ‘Positive Probabilities’ the same as ‘Negative Probabilities’. I do not think this is wrong for humanity to do, in a sense that we must be optimistic to push boundaries and evolve, but just to know that this will create greater volatility. Out of volatility will come innovation and evolution at a faster pace, but is this socially stable and acceptable? This one argument I have briefly touched on above is what keeps the political and socio-economical pendulum swinging between ideologies. It is for this reason that I will have to draw upon the old saying, “Everything in Moderation”. There is no one right answer but a collective force facilitated by democracy.
Long story short; in my opinion, there are regulations that need to be enforced and not simply more regulation. There should be no witch hunt, no one was arguing these risky trading techniques and securities when everyone was gaining (including the government), so stop vilifying the finance industry when the ones who vilify are the ones responsible as well. I believe there is much more to build upon in terms of accountability these days and I believe Jim Cramer is at least trying to take some accountability.
