10/20/2008

Is the stock market another casino

In many ways people may generalize the stock market as another casino where people place their bets and ended up win or lose. But the stock market is not meant to be that way. It has a different reason to exist. Investors buy stocks of good companies to grow with the company, earn dividends and benefit from the rising stock prices. Companies list in the stock market to raise funds for its own growth, business developments and expansion. And the stock market behaves according to some business rules and cycles. Well managed and profitable companies will see the values of their stocks going up and vice versa. Some investors will buy stocks to be kept as long term investments after careful research on the fundamentals and prospects of the companies. But when these principles are ignored or been made irrelevant, and when the prices of stocks no longer behave as they should but being manipulated with no respect to their fundamentals, something is seriously wrong. Yes, it is no longer a stock market but morphing into another kind of casinos. And this is exactly what is happening to our stock market. And this will lead to its demise in time to come. There is an urgent need to return the stock market to its fundamentals and to serve its original role as a market for the companies to raise funds. Failure to do this is criminal. The design of the stock market, the mechanism that determines its price movements, must be fair to all investors and the companies listing their stocks in the market. If the mechanism is unsound, unfair, then caveat emptor is not enough. Just like the minibonds, if the product is unsound, here to read if the mechanism is unsound, you cannot blame the investors or even the relationship managers. The problem is at the source. The designer of the product or the system must be held accountable when investors fell victims to unfair practices, exposed to undisclosed and unacceptable risks. As a financial centre, we need a sound stock market, not a casino. The stock market must function as a stock market.

6 comments:

Matilah_Singapura said...

Ordinarily the stock market is NOT a casino. However at the present time — where there is weakness being revealed and govts bailing out corporations and investors, the markets become excessively volatile because no one actually knows where it is going to go, or what is going on in the short term.

The "good gamblers" have long left the casino. The people who are left are the ones with an addiction to gambling — people who cannot control the urge to play games of chance with loads of money.

Solution: let them play. Let them win and lose, for it is their money :)

redbean said...

you are a sadist. many of the innocent investors are lambs being led to the slaughter without knowing why.

this is unacceptable.

Anonymous said...

A good gambler Never gamble in Casino, he knows the odd are against him.

I have never seen a Trader or a finicial consultant or fund manager to be a fat cat. why!

redbean said...

there were many in lehman, goldman, morgan etc. or there used to be many. now a few lesser.

Anonymous said...

I have never seen a Trader or a finicial consultant or fund manager to be a fat cat. why!


becos you were taking the buses while they were driving their porsches and ferraris.

Matilah_Singapura said...

Don't forget snorting cocaine.

The CNB should conduct random raids and drug tests on these "fat cats". I'm willing to bet that many of them are doing illegal drugs — with OPM (Other Peoples' Money).