The stock market, city dealings et al do we need it??

[HarryW]

Whilst I'm blue when it comes to most things in life I really struggle with 'the city', stock markets and the likes and the fickle nature and impact it has on all ours lives. I have looked hard for the real benefits of the current system which seems to be driven effectively by gambling for the benefit of those involved with the side affect the rest of us may benefit at some point, by which time the dealers would have retired to run a vineyard in France at 35 'having had a hard life'.

If you take Northern Rock, yes it failed and the Government are picking up the tab, but how many in the city have lost their own money or job on it, not many I would proffer. How many have made a killing on it with HMG effectively paying them, probably more than lost. I fail to see why simple prudent and conservative banking at agreed rates is not available to all businesses, if your business doesn't qualify for money then your business is not up to it and shouldn't be there in the first instance. The trading of shares a massive multiples of a companies profit/earnings is just plain daft and straight forward gambling too.

Can someone tell me the real value of the city and stock trading to the country. It seems to me that some companies make things, some sell things, some companies provide services but the trading of their shares and the providing of capital seems to be more important and profitable; read takes bigger slice of the pie and just add to the overhead.

I realise this process is engrained in our way of life, but if you were to start from scratch how would you satisfy the need provide the capital and services for industry and retailers to function. Surely everything would then flow from there. Discuss




Link to an article that along with NR got me on my soap box http://news.bbc.co.uk/1/hi/magazine/7230237.stm

[g4ry13]

You've opened a can of worms here. I'll keep it short - one advantage is it's a way companies at the early stage of their life can raise finance.

[Andrew[MG]]

I have been thinking about this a lot recently and only last night finished the book "Liar's Poker"; it gives some interesting insights. There are a lot of plus points and a lot of negative points.

If you have a business that the bank does not understand and you want to raise capital then stock/bond markets are needed. It's all about matching up the risk that investors are willing to take on with how risky the company is. If we just had banks then the economy would grow a lot slower and we wouldn't get anywhere near as many scientific advancements.

On the other side of the coin; the markets are a bit of a farce, with people making hundreds of millions in profits for not achieving much. I'm sure some computers should take over now and keep the profits in the pension funds!!

[grumbledoak]

Why do you think a bank loan is any different? If a young business needs cash to grow, it can either get it from a bank (a collection of many peoples money) and pay interest, or by issuing shares to many people directly and paying dividends. At this basic level they are pretty much equivalent.

All of the speculation that goes on around it is people taking bigger risks for bigger rewards. You aren't forced to join in, though your pension company may well choose to do so.

[NoelWatson]

Andrew[MG] said:

I'm sure some computers should take over now and keep the profits in the pension funds!!

Agreed

[HarryW]

Not happy about moving this to business forum who ever deigned to move it, I doubt many people have that in their preferences. Can you please move it back to P&P as its more open to those not necessarily interested in business but like a good chunter in P&P.
Ta

[limpsfield]

HarryW said:

I realise this process is engrained in our way of life, but if you were to start from scratch how would you satisfy the need provide the capital and services for industry and retailers to function.

you would set up some sort of forum - let's call it a market - where those who needed money could meet those with money. The investors could then buy into the company and own something - stock.

So you would satisfy that need by having some sort of market for stock. hmmm...

It is how it is because it's the most efficient way of doing it. Historically stocks with divis re-invested etc have outperformed other asset classes. But that's boring. Cos what makes the news is the Crock and Shock Gen and three hundred point drops in one day. But all of that is a tiny miniscule part of it.

And it is a major part of the British economy - London is one of the major world financial centres. etc etc.

ANd without it I would have to get a proper job which just wouldn't be on.

[HarryW]

limpsfield said:

.........

ANd without it I would have to get a proper job which just wouldn't be on.

You must take comfort that can't be long before you get that vineyard and forget all the hustle and bustle of city life .

I fully understand the reasoning for the markets in a free economy, but it actually benefits a very small percentage of people and as seen recently at the expense of the whole country.
Seriously though, the direction the markets have gone whereas packaging and repackaging of money/debts and with every pass someone else adding/taking their percentage is nothing short of self serving. With the final affect HMG is left holding the baby whilst all those up stream have taken their percentage, job done i.e. they have made money and lined their pockets.

When you say a lot of money goes through the city, how much of it actually filters down into the UK economy. How much of it is benefiting our pension funds. Do those that deal with these markets ever loose personally (and I mean on a scale that a normal person can relate to, not the bonus was only 5 figures and not 6 this year).

Look at endowments, the public lost, those selling and trading made a good living out of it while it lasted.

Is there an alternative, I suppose I'm looking for stability and the ability to look forward to being able to afford to retire and not work until the grave which is the direction we are heading as a nation.

[Ordinary Bloke]

It is, quite simply, gambling. It seems very strange to me that my pension (supposedly the most sacred financial transaction I'll ever make) has been managed by gamblers.

A colleague of mine has offered to put it all on horses, he always goes to Cheltenham and knows a thing or two about these things. Thinking about it, maybe that's not such a bad idea?

Someobody (may've been on PH) pointed out that now Computers and Robot's are replacing people, when it comes to hard work, we need to 'invent' things for people to do to keep them busy. I think professional gambling is one of the invented things.

Ironically, I just found out they don't manage everything for you, but instead you need to pay attention and make decisions to ensure your future happiness. Fund managers never get a negative salary, and they seem to get paid off to leave when they fail...

[limpsfield]

HarryW said:

Seriously though, the direction the markets have gone whereas packaging and repackaging of money/debts and with every pass someone else adding/taking their percentage is nothing short of self serving. With the final affect HMG is left holding the baby whilst all those up stream have taken their percentage, job done i.e. they have made money and lined their pockets.

I think you are right when it comes to things like Northern Rock but that's only a small part of it as I mentioned above.The packaging and repackaging is correct - but surely this happens in any other business to an extent e.g. trainers get made in China, Nike buys them, Nike supplies wholesaler, wholesaler supplies your local shop who supplies you. And mark ups a long the way.

HarryW said:

When you say a lot of money goes through the city, how much of it actually filters down into the UK economy.

That is a fair point - billions flow through the system and are just maybe switching from one investment to another and not touching the country's economy, but we are a major financial centre and it provides jobs for many. And they are not all Hooray's with braces and little places in the country. Although I am obviously - rah.

HarryW said:

How much of it is benefiting our pension funds. Do those that deal with these markets ever loose personally (and I mean on a scale that a normal person can relate to, not the bonus was only 5 figures and not 6 this year).

I would agree looking from the outside (I have never been a bank trader) - if you are managing money for a bank/fund it can be seen by some as a one way bet. Take a massive risk - if it all goes worng you are out on your ear and pop up someone else - if it all goes right then trebles all around. But I don't think this is the attitude of many. Also, most traders as far as I know are not on six figure salaries with a brace of Lambos. Lots of execution only ones don't earn fortuns and I am sure like a lot of jobs it can get monotonous.

HarryW said:

Is there an alternative, I suppose I'm looking for stability and the ability to look forward to being able to afford to retire and not work until the grave which is the direction we are heading as a nation.

I don't know but despite some resentment to the markets etc it is a very efficient place of doing what it's doing - northern rock and that sort of crap aside. Northern Rock was bad management and the govt should never have got involved in my view - governement have no place in amrkets and they should stick to what they do best. As soon as they figure that out.

Edited by limpsfield on Friday 8th February 22:23

[Big Al.]

HarryW said:

Not happy about moving this to business forum who ever deigned to move it, I doubt many people have that in their preferences. Can you please move it back to P&P as its more open to those not necessarily interested in business but like a good chunter in P&P.
Ta

Harry, you still want it moved back or are you getting the desired feedback?

[HarryW]

Big Al. said:

HarryW said:

Not happy about moving this to business forum who ever deigned to move it, I doubt many people have that in their preferences. Can you please move it back to P&P as its more open to those not necessarily interested in business but like a good chunter in P&P.
Ta

Harry, you still want it moved back or are you getting the desired feedback?

I think its best thanks for asking Al.
Even I don't have the business forum as one of my preferences. The subject is not a serious business issue or question which I assume this forum is set up for, even though I've had some interesting replies.

[Big Al.]

Sorted.

[jeff m]

I'll add my two penneth.

If you have a company that suddenly begins to grow/expand one of the problems is cash flow.
To maintain that growth you need to increase your stock (wholesaler) or raw materials if you are a manufacturer. Also you will probably need some extra staff. All these extra expenses will arrive before you see the benifits of your increased sales, creating a cash flow shortage. To add a loan payment to this would only make ones cash flow worse. So to offer people a peice of the action for cash now is very convenient.
You are of course giving up a portion of ownership of your business.

[HarryW]

limpsfield said:

.

..

HarryW said:

Is there an alternative, I suppose I'm looking for stability and the ability to look forward to being able to afford to retire and not work until the grave which is the direction we are heading as a nation.

I don't know but despite some resentment to the markets etc it is a very efficient place of doing what it's doing - northern rock and that sort of crap aside. Northern Rock was bad management and the govt should never have got involved in my view - governement have no place in amrkets and they should stick to what they do best. As soon as they figure that out.

Have to agree with you on NR and the Government. NR had a bad, and for their sector a different, business model. The Government should have kept out.
The FSA should have identified its inherent problems long ago, as some astute analysts did, it just wasn't right.
It has been badge as a 'run on a bank' not seen for xxx years. I would proffer NR is less of a bank than most and could have been let go. With the Governments spin machine it could have sold as a rouge bank outside of normally banking practices and thus folded as lots of companies do each year. Instead we (the tax payer) will all be paying or this for the rest of our lives .

[HarryW]

jeff m said:

I'll add my two penneth.

If you have a company that suddenly begins to grow/expand one of the problems is cash flow.
To maintain that growth you need to increase your stock (wholesaler) or raw materials if you are a manufacturer. Also you will probably need some extra staff. All these extra expenses will arrive before you see the benifits of your increased sales, creating a cash flow shortage. To add a loan payment to this would only make ones cash flow worse. So to offer people a peice of the action for cash now is very convenient.
You are of course giving up a portion of ownership of your business.

You could be said to have a 'share' in the business .

I suppose its the amount and size of the industry that supports that function which is where some of the problems lie. Every hand that is involved in it takes a cut, to an extent most benefit goes to those taking a cut, which offers no value to the share holder or the original business, just additional and unnecessary overhead.
As already said/alluded to with computing now days why isn't it more efficient/automated, perhaps then those efficiency savings could go to benefit the share holders (pension funds) rather than those handling the deals thus just increasing their profit.

[limpsfield]

HarryW said:

As already said/alluded to with computing now days why isn't it more efficient/automated,

If the City was run by computers, who would pay the table dancers wages?

Won't someone please think of the lapdancers.

[HarryW]

limpsfield said:

HarryW said:

As already said/alluded to with computing now days why isn't it more efficient/automated,

If the City was run by computers, who would pay the table dancers wages?

Won't someone please think of the lapdancers.

The IT bods looking after the automated system why

[limpsfield]

HarryW said:

limpsfield said:

HarryW said:

As already said/alluded to with computing now days why isn't it more efficient/automated,

If the City was run by computers, who would pay the table dancers wages?

Won't someone please think of the lapdancers.

The IT bods looking after the automated system why

ther's a niche. ".jpg spearmint rhino" Just for the spods.

[Plotloss]

A huge number of trades are automated by computers but you'll never eliminate traders completely.