Democratic Underground Latest Greatest Lobby Journals Search Options Help Login
Google

Industry Group's Protection Of Investors Seen as Secondary

Printer-friendly format Printer-friendly format
Printer-friendly format Email this thread to a friend
Printer-friendly format Bookmark this thread
This topic is archived.
Home » Discuss » Latest Breaking News Donate to DU
 
NNN0LHI Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Sep-14-03 11:29 AM
Original message
Industry Group's Protection Of Investors Seen as Secondary
http://www.washingtonpost.com/wp-dyn/articles/A6773-200...

NEW YORK -- The New York Stock Exchange is the designated first line of defense for investors, charged by federal authorities with ensuring that its Wall Street members do not violate the rules of fair trading. But it was New York State Attorney General Eliot L. Spitzer who forced the issue of analysts' conflicts, long known within the Wall Street community, into the public with his probe.

It was only after the Spitzer investigation that an NYSE panel found former Salomon Smith Barney stock analyst Jack B. Grubman guilty of violating its rules for, among other things, misleading investors by writing rosy research reports on dubious companies. It banned him for life from the securities industry.

Investor groups and academics have long questioned whether an industry organization like the NYSE can aggressively police its members. Now the controversy over NYSE Chairman Dick Grasso's pay package, which included a $139.5 million deferred compensation payout this month, and his comments that he sees his job as two-thirds businessman and one-third regulator, has put the exchange's regulatory record under the microscope.

It has led to calls from some investor groups and even some members of the NYSE for Grasso's resignation. Critics have also suggested that it is time to rethink the exchange's regulatory role.

more

Printer Friendly | Permalink |  | Top
NashVegas Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Sep-14-03 11:40 AM
Response to Original message
1. Protecting Investors
Edited on Sun Sep-14-03 11:43 AM by Crisco
Marjorie Kelly makes a delightful argument in her book, The Divine Right of Capital.

According to Kelly, something like 99% of all stock purchases are for previously issued stock, the other 1% from freshly-issued stock for actual capital raising.

The 99% is not an investment in the company, it's an investment in the stock itself, used to prop up the previous stockholder's investment and the brokerage.

When you buy a used Explorer, you aren't investing in Ford, not one dime of the money you spend goes to Ford Motor company. It does not go to help Ford increase its factory output or profitability. And we don't expect the Explorer to inflate in value, we know it will deflate. All we ask is that it continue to run in such a manner that we aren't forced to invest an unreasonable additional amount to keep it running.

Unless you're buying newly issued stock, the market really is little more than a ponzi scheme. And it's the greatest ponzi scheme in the world.
Printer Friendly | Permalink |  | Top
 
NNN0LHI Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Sep-14-03 11:43 AM
Response to Reply #1
2. Wow. I never even thought about that before. Thanks for that info n/t
Printer Friendly | Permalink |  | Top
 
punpirate Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Sep-14-03 12:27 PM
Response to Reply #2
3. And, here's the other jab...
... in the solar plexus--even if the stock you're buying is a new issue, the moment you purchase it, its value is dependent upon the vagaries of the market. It doesn't retain any special value because it was a new issue for raising capital. Your purchase of that stock may temporarily improve its position, because by your purchase you are signalling to other investors that it's desired by someone. That's the best one can hope for. From that point on, you're at the mercy of what others think of the profitability of the stock.

Cheers.
Printer Friendly | Permalink |  | Top
 
pw Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Sep-14-03 01:15 PM
Response to Reply #3
4. You're fogetting about dividends
Owning shares entitles you to some of the payout.

The Ford Explorer example is also a little screwy, because knowing that the car can be resold at a reasonable price increases the price someone is willing to pay for it new, hence lading to more money for the maker. It's never so simple...
Printer Friendly | Permalink |  | Top
 
NashVegas Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Sep-14-03 02:03 PM
Response to Reply #4
5. Yes and No
Edited on Sun Sep-14-03 02:12 PM by Crisco
The dividend from the Explorer is that it provides transportation, a service with calcuable value (just ask a taxi driver).

OTOH, a high stock price means lower interest rates for corporations taking out loans, so that is a benefit. BUT .. that's money they could otherwise raise (one would suppose) by issuing new stock. Problem is, that devalues the stock already in circulation. Stock splits tend to happen when a corp is fully confident the initial deflation of value will be a short term thing.
Printer Friendly | Permalink |  | Top
 
DU AdBot (1000+ posts) Click to send private message to this author Click to view 
this author's profile Click to add 
this author to your buddy list Click to add 
this author to your Ignore list Thu Dec 18th 2014, 03:50 AM
Response to Original message
Advertisements [?]
 Top

Home » Discuss » Latest Breaking News Donate to DU

Powered by DCForum+ Version 1.1 Copyright 1997-2002 DCScripts.com
Software has been extensively modified by the DU administrators


Important Notices: By participating on this discussion board, visitors agree to abide by the rules outlined on our Rules page. Messages posted on the Democratic Underground Discussion Forums are the opinions of the individuals who post them, and do not necessarily represent the opinions of Democratic Underground, LLC.

Home  |  Discussion Forums  |  Journals |  Store  |  Donate

About DU  |  Contact Us  |  Privacy Policy

Got a message for Democratic Underground? Click here to send us a message.

© 2001 - 2011 Democratic Underground, LLC