A Brave New (Broken) World

I said it the other day, and I'll say it again.

The markets are broken.

It's not that they're not functioning on a daily basis, pricing risk and assets and performing their price discovery duties. They are doing that - or at least trying to.

Those are the little, daily things that markets do, and there are things there that are broken. (I'll get to those things another time.) Think of these little, daily things as the "hows" or the "mechanics" of buying and selling.

Now think of the big things as the "whys" or the "psychology of investing."

Those are the things that are broken.

Until they are fixed, or "things" change drastically, we are in for some really wild swings in the months, quarters, and years ahead.

I'm going to point out all of these big things to you, over time. But right now, I'm going to focus on just two.

No More Buy-and-Hold Believers

First, there are two types of players in markets: investors and traders.

It used to be that investors dwarfed traders - by a huge margin.

But that's all changed.

There aren't that many truly long-term investors any more. It's too dangerous to be an investor in the traditional sense. That's why most investors, at least those that call themselves investors, are really all traders now.

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3 Responses

  1. jj | November 9, 2011

    That's why there are so many losers today.They keep thinking they can find some formula to figure out the short term market moves and profit.If that worked they could make so much money,so fast that these traders would be the richest people in the world.In fact the richest are the long term business growers and investors.People like Bill Gates,who spent decades growing Microsoft or Steve Jobs with Apple.Or Buffet with multi decades holdings of great companies.Those who think they will get rich quick, trying to figure out the short term, will get poor quick.

    Reply
  2. DaveR | November 9, 2011

    Mr. Gilani, is (and was) Warren Buffet an investor or a trader? He looks more like an investor than a trader to me. And it appears to me that he is still investing which I define for the purpose of my comments as buying the stock (and perhaps warrants, too) of a company with the intent to hold them for several years.

    Reply
  3. Mike | November 9, 2011

    Shocking ,you mean to say that chaps who were born filthy rich will no longer be able to throw their inheritance at "blue chips" and spend there days sailing and skiing? , whats that? they may have to be involved with trading ,how awful ,, and compete with Asians!! really its just too much
    Oh well guess I'll just have to stay with my dull old "change comes in waves learn to surf" principle

    Reply


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