The following article from yesterday’s Wall Street Journal is a great follow up to my post from yesterday, Computers on Wall Street are Buying and Selling to Themselves!. Mark Cuban, who wrote software himself, may have a bit more knowledge on the matter than some D.C. prostitute regulator, so I am sure they have contacted him to get his thoughts on the matter. As I have said for years now, when the public loses all faith in their “leaders”(corporate and political), they lose faith in the system itself. No economy can ever dynamically grow and increase standards of living absent a belief in the rule of law. This is precisely why the U.S. will never be a strong, vibrant and upstanding society again until we take out our own trash, rather than pointing fingers abroad and blasting drones at civilians from 10,000 feet.
Key quotes from Mark Cuban on the computer dominated stock market:
I came to realize that the stock market no longer knew what business it was in. I wrote a blog that basically said that the markets for equities of all kinds had evolved to a platform for hackers.
As far as narrowing spreads, that’s absolutely true, but in absolute terms what does it translate into? For the individual investor it might save them a quarter a month. So what? Relative to the risk that’s the worst tradeoff in the history of tradeoffs
And the argument is horrible for another reason. If you’re an investor you shouldn’t care if the spread widened by a penny, nickel dime or quarter. If you’re anything but a trader the change is of no impact to whether or not the company will be successful and create returns for investors. In fact, that anyone even considers this a valid argument is a red flag that the exchanges are more interested in traders than investors.
Public companies need to figure out what business the exchanges are in. Is the market supposed to be a platform for companies to raise money for growth and to create liquidity and opportunity for shareholders as it has been in the past? Or is the stock market a laissez-faire platform that evolves however it evolves? The missing link in all the discussions is: What is the purpose of the stock market?
Full article here.