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On Thu, Sep 15, 2011 at 08:42:30PM +0100, Simon Waters wrote: > > That suggests to me that the price mechanism is broken. > 1) There is a classic cartoon in The Economist, the only copy I could find is at http://cicerossongs.blogspot.com/2011/08/buysell-by-cell.html 2) I would agree with a thought made by both Benjamin Graham and Buffet that goes along the lines "In the short run, the market is a voting machine but in the long run it is a weighing machine." Otherwise phrased "if you can buy the same litre of milk one day for 50p and the next day for £2, why buy it for £2?" (or MS office vs LibreOffice or ...) > Time to switch the exchange to a more obviously auction like process? I > appreciate you can't remove the time element completely, but it seems to > me that a smart price mechanism would eliminate some of the daftness the > stock market sees in shares with low volumes of trade where the current > price mechanism falls apart because it doesn't emulate an auction well > in such circumstances. I suspect such a mechanism would eliminate much > of the profit to be made in short term transactions that the people who > runs such things currently rely on to make it so lucrative. This is in effect one of the arguments for small cap investing: you are buying a company because what you think the company will do. The problem is that buying the shares while difficult can be done: selling the shares can be much harder. One of the arguments for High Speed Trading conversely is that it makes it very easy to buy and sell at very low margins. -- Henry Photocopies or faxes of my signature are not binding. This email has been signed with an electronic signature in accordance with subsection 7(3) of the Electronic Communications Act 2000. Digital Key Signature: GPG RSA 0xFB447AA1 or 0x3184D537 Smime Fingerprint 98:24:AE:F7:D1:D6:E5:A0:F0:55:2F:40:42:5F:46:24:F9:52:f4:30 Fri Sep 16 07:48:04 BST 2011
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