Tuesday, March 31, 2009

What is a market?

Buyer Beware

A market is a place where people meet to exchange something. That is it.

Presumably, both parties have done a bit of research to come up with a value that the seller is willing to sell above and the buyer is willing to buy below.

For some reason, the financial markets are held up on a pedestal. I'm not sure why but I'm guessing it's because of the big numbers. I think financial markets are neat, but I don't see why they should be treated any differently than the market where I buy my food or clothing. Apparently, people misrepresent financial instruments to create a aura of value. Is this any different than a manufacturer advertising his or her wares to a potential customer? I don't think so. That is marketing and advertising. It is ultimately up to the buyer to make the decision to pay for the intrinsic value of the item purchased whether it is a toy train or a diesel train manufacturer.

So all of the rules that are in place to protect investors are worthless and degrades the presumption of risk inherent in an investment. Due diligence and caveat emptor come to mind, but I believe they are not practiced correctly because of reliance on government or regulation mandated information. Let's face it. Markets have been around since man has been around. People will always be looking for a greater fool. As long as there are people, there will be a fool. There's no sense in trying to protect a fool from his money because he will always lose it.

No comments: