The Long-Term Stock Exchange Opens for Business
blog.ltse.com
blog.ltse.com
- The idea of a stock exchange that allows companies and investors to focus on 5, 10, 25 year horizons sounds great!
- However companies on normal stock exchanges now already try to do this, but it’s hard because of quarterly earnings, pressure for quarterly growth, etc
- How is LTSE different? Seems like: Companies and investors “promise” to have a longer term focus via planning
- seems like that wouldn’t be enough and the same financial pressures would result in the same focus
- We were expecting something like: “investors must hold positions for 10 years”, or, “earnings only reported every 2 years”, etc etc. but there’s nothing like that.
- So, what is the big idea, the teeth, the new rule, that makes long term focus enforceable?
But this already exists. It's just the regular stock exchange.
It's also worth noting that a majority of the capital in the market is already focused on very long term horizons. Most of it is sitting in boring mutual funds, who's investors are looking towards retirement as their horizon.
If you're looking for a market that is so focused on long term horizons that they don't even care whether you have enough revenue to remain solvent, and won't have enough revenue to remain solvent at any time in the foreseeable future, then that market already exists too. You can call it Private Equity, or Venture Capital, and HN often likes to discuss how it's trying to reinvent the 2000s tech bubble. It's also led to some incredible scams, and isn't really something you want consumer investors betting their retirements on.
> something like: “investors must hold positions for 10 years”, or, “earnings only reported every 2 years”
These wouldn't be good rules even if you were focused exclusively on long term results. Your longterm outlook can change from one day to the next.
Where did you get this idea? I don't see anyone saying it. Consider what might happen if you freeze the ability for people to borrow money. The stock market allows capital to move around more freely.
I notice this is your first comment in a year and a half. Welcome back.
I don't think "promise" is the word. The fact the exchange says it's focused on long term, would incline companies that wanted to focus on long term to list themselves there. Likewise, it would incline customers to list themselves there. But what incentive is there for short term traders?
Right now, on the normal exchanges, you have both types. And the loudest voices in the room are the short term types. They're the ones paying the closest attention, attending the shareholder meetings, etc. The long term holders are far less engaged.
What does this have for those short term traders? Nothing. There's no reason to pile into this when all the incentives of the companies listing, and existing holders, are aligned to long term. If you're looking short term, why would you want this, knowing all the other players will be aligned to take hits in the short term, if it pays off long term?
Not saying that this will be successful, but I can see it working because of that. Not because it's more attractive to long term holders, but because it's less attractive to short term.
That said, agreed that some ways to enforce it would be nice. But those have some noticeable downsides too (i.e., if a company makes decisions you don't agree with, but you're locked into a hold position...).
That said, as was mentioned elsewhere, it sounds like voting power is tied to how long you've held, as well as number of shares. So that certainly helps silent the churn and burn voices.
Are they? In what way?
The only difference from a normal exchange appears to be that companies are "required to publish a series of policies". Why wouldn't that incentivize saying "the right things" in those policies but then otherwise behaving exactly the same as companies listed on a normal exchange?
it sounds like voting power is tied to how long you've held
This is not actually a requirement for companies listed on the LTSE, but even if every company implemented it, in practice surely shareholder voting power has negligible influence on company management compared to share price incentives?
I am a business that wishes to focus on the short term; why would I list there?
I am a customer that wishes to focus on the short term; why would I buy there?
It's not a requirement. It likely doesn't need to be a requirement. The point is, investors and companies both have options; why would they pick the one that is misaligned with them, even if it's just in intention? Starting out there's no reason to (no critical mass to make it worth investing in), and if it picks up traction there'd be no reason to either, because now the incumbent companies, and their stockholders, are already aligned to long term thinking due to their being the only ones inclined to invest initially.
Although probably not popular I would suggest that long term stocks needs to incorporate features that actively block certain trading patterns: limit price changes, limit buy/ sell frequency, & disallow shorting.
I have been heavily involved in the gamification of the stock market and the above are used to maximise immediate returns to day traders and auto-trading machines. By fixing a price for the day, then there is less incentive to 'rush' to get to the price. Also, limit how quickly someone can buy and then sell a trade, rather than milliseconds (or smaller). I would strongly urge disallowing the buying of a stock by the same person, if they'd sold in the previous week. Shorting is never a long-term game and should be banned, as it never does the company any favours.
But what I see on this LTSE is nothing of what would actually constitute long term ownership of stocks. What I actually see with this LTSE.com is the opposite of value for a stock, as it is only driving increased gamification of the metrics mentioned above.
That is, if I were an automated machine trader, I would add LTSE and their slow price changes and compare them to NYSE and make zillions.
I don't see how this encourages any kind of long term investment, nor stability for a stock.
i feel like "more votes the longer you hold the stock" is also a mistake - it should be, your votes are higher weighted if you agree to a longer lockup. 10 year lockup, lots of votes. no lockup, very little...
Why would you completely disallow shorting ?
I'd think that in such a framework, shorting would just need to become a longer term bet. So one could offer something like 2,5,10 year LEAPs, but restrict their trading to a window of 1 week per year (e.g. one can trade derivatives as much as one wants, but only during week X, which is the week when all derivatives expire, and all derivatives are long term).
Also for options, one would need to always require traders to be covered with the actual stock.
Or are there people who'll loan out their stocks for 10 years, trusting the borrower has enough cash not to go bankrupt in 10 years no matter what happens?
I had selling a call option in mind.
The short seller has an account with a brokerage, the broker is ultimately on the hook for making sure that any borrowed short interest is returned. This is why brokers have margin requirements.
Shorting is essentially borrowing the control of stock to some other party. That's it. It doesn't have to be done on the market, it can be done in a private, confidential contract where I oblige myself to sell my stock when directed to do so by yourself, provided adequate warranties exist that you will cover the price difference when I want to purchase it back.
For this ceding of control, I get paid. The market only "sees" regular buying and selling of stock.
Regarding length of ownership: so I make a fund which owns an LTSE-listed stock for a longer term, and people trade my fund instead.
Ultimately, neither of those things is much use, nor even necessary. A much stronger driver for long-termism would be to derive the dividend from the last 3 years of profits; since prices are estimates of future value and future dividend, the actual value of those would be smoothed; if any action can only make a small difference to the dividend, there is much less focus on quarterly results.
A formula or at least limits on dividends (no windfalls) would reduce the interest to activist investors who might see a pot of cash and seek to liberate it.
Limiting trading frequency, limiting order types, and disallowing shorting would create even better opportunities for automated trading than what LTSE would provide.
> Shorting is never a long-term game and should be banned, as it never does the company any favours.
The economy benefits when market prices more accurately reflect relative value between assets. Hampering the ability of the market to lower a price that is too high never does the economy any favors. More specifically, it harms investors who buy the overpriced stock and it harms other companies raising capital who merit a higher relative price.
That's a very bad idea.
> Shorting is never a long-term game and should be banned, as it never does the company any favours.
The purpose of shorting isn't to help the company.
If shorting wasn't allowed, Wirecard would've gone on for much longer. Short sellers are an important part of the market.
No, here are my 5 reasons or examples why shorting is good.
_1) Shorts can be beneficial to the company:_
Tesla made a killing from being one of the most shorted stocks. As the stock price rows, it experienced frequent short squeezes as the $TSLAQ short positions holders experienced forced liquidation. Their capital became transferred from the shorts to the longs further boosting the positions of the long investors. $NKLA, $BYND, and $PTON as well.
_2) Shorts Beneficial to long investors:_
Long investors sometimes receive interest payments from short sellers. Heavily shorted stocks become Hard to Borrow (HTB) due to high short interest. HTB stocks cost money to short as represented by an annual interest payment. Robinhood traders with large blocks of HTB stock receive interest payments. IBKR traders using the stock yield enhancement program also receive interest payments. Furthermore, investors of popular Vanguard Index Funds such as VOO and VTI outperform the benchmark by a tiny amount. This is because Vanguard lends out a small portion of the heavily shorted stocks in it's index for interest payments. Then it takes those interest payments and reinvests it back into the ETF further boosting the price.
_3) Shorts allow smart investors to profit regardless of the type of market:_
Hedge funds will short overvalued stocks and long undervalued stocks so that regardless of the market direction, the hedge fund will still make a profit. This stance can reduce portfolio volatility and performance rollercoaster long-only investing can be.
Despite all of these positives for short selling, it would be interesting to see an exchange that bans short selling just for the sake of differentiation. It could never be a popular exchange due to the lack of traded options but the differentiation might be enough to allow it to succeed.
the LTSE in its current form is a Minimal Viable Product.
It is maximally compatible with existing exchanges in order to encourage trading, listing and adoption from day 1. Eric picked the governance angle to start with, but it's probably not the final vision. He believes it is high leverage; reasonable people might disagree.
but it is perfectly explainable to have v1 of the LTSE be a little disappointing, given that this is the same guy that coined the MVP.
"We shape our buildings; thereafter they shape us." -- Winston Churchill
Though I barely understand such things, I'm very excited by your LTSE and Katsuyama's Investors Exchange (IEX).
Listening to your interviews about LTSE, my takeaway is that your goal is to allow companies to be judged on their own merits, instead of someone else's.
So one side effect may be to help migrate private equity funded companies back into the light. Terrific, right?
I hope others see that our markets are designed. They are human artifacts. They are not natural laws to be accepted as-is. That we can shape and nurture markets as we see fit. That the rules matter.
You and Katsuyama identified opportunities for improvement and engineered solutions. You're meta-geeks. Like programmers who make programming languages, so that others might benefit.
Happy hunting.
I fixed the marketing for you Eric. It's less abstract now. Almost like your startup speech at Skirball. https://victorcaballero.com/twiistup-7-agenda/
The "shovel guy": https://en.wikipedia.org/wiki/Samuel_Brannan
> Brannan's wife divorced him and he was forced to liquidate much of his real estate to pay her one-half of their assets. He died poor and in relative obscurity
I just don't see the benefit to the standard government marriage scheme. Domestic partner benefits have basically the same upside and very little downside these days. From a legal perspective marriage is almost entirely about property/money. There are plenty of people who have a loving and marriage-like relationship without getting the state's permission (piece of paper).
“Markets” are not the same thing as “the market”. Markets are human artifacts; the market is an emergent behavior. It’s governed by laws beyond our control as surely as the behavior of materials are governed by thermodynamics.
If the behavior of your markets fails to match the reality of the market, the best you can hope for is to only introduce a small amount of inefficiency. Of course, utopians who ignore the real nature of the market usually find themselves lethally encumbered by deadweight loss.
> your goal is to allow companies to be judged on their own merits, instead of someone else's.
What is this supposed to mean? Why would a company’s subjective evaluation of themselves be a better basis for market valuation than the evaluation of the people who actually buy and sell interest in that company?
Human institutions; the prevailing ways that capital moves; legal institutions; customary behaviors, mores, etc, all have a profound impact on not just markets but also The Market (tm). The edifices we create are important.
If "the market" is a 2d array of 1 and 0 that emerges from a cellular automata, then "markets" are the rules for that automata. The human artifact defines the rules and incentives that cause the emergent behavior seen by aggregating all market participants.
There is no Platonic ideal "markets" independent of the human structures where they operate any more than you can define how fast a pendulum swings without specifying its length.
> There is no Platonic ideal "markets" independent of the human structures
You need to understand that there absolutely is a single "the market" and it's not platonic at all. It refers to the sum behavior of all human economic interaction, which is absolutely a physical reality.
It's funny you make this comparison. Because so many of these supposed laws about "the market" violate an effective equivalent to the second law of thermodynamics for information systems: P=/=NP. The claims often made about the transcendent nature of the laws governing "the market" violate the computational properties of reality as we understand it [1]. If "the market" behaved as so many claim then we would have proof of P=NP.
Evolution is also an emergent behavior, of biochemical systems. But we also understand how it functions as an algorithm. So much so we now use it to aid in the design the wing shapes of our planes, the design of new high efficiency radios, and to find new algorithms.
The entire universe is governed by laws beyond our control. That doesn't prevent us from understanding them and bending them to our will. As we have done with ropes and levers, atoms and proteins, so too can we understand and engineer markets.
As it happens markets are likely in a similar class of algorithm as evolution: efficient approximations of NP problems. This is why people use markets as the basis of things like prediction markets, scheduling algorithms, and bin packing.
"The market" is a claim to the "god is in the gaps" no different than intelligent design is. It even does the whole song and dance of elevating an approximation algorithm to some unknowable divine will. An approximation algorithm we already understand and use in engineering everyday.
[1] Make no mistake, bits of information are physically connected to reality, a non-trivial NP algorithm running on human timescales would boil the oceans. See: https://en.wikipedia.org/wiki/Landauer%27s_principle
But I also think you are misunderstanding the argument I was replying to in the first place, because a lot of the claims about "the market" are about the second order allocation of resources that markets cause and not (just) the clearing of them. For example market clearing is how we arrive at the price given the buy and sell orders, but the original goal was the efficient allocation of resources. For which markets are obviously not a perfect solution (it's relatively easy to create order books which end up with unfulfilled orders despite money/weight being available to argue for that allocation), even if they are a good approximate solution (via market clearing). The claims about "the market" are market fundamentalism, that the market is the ideal allocation structure, that we can't find a better or even equivalent solution, because that's just how good markets are. That was what I was rejecting. Not market clearing.
It's more usual to accept a weaker claim: that markets are the most efficient approximation to the perfect algorithm for price discovery, that is, they are the best way we know of to approximate perfect pricing given the constraint of time.
Insisting that no better approach is possible is a strong claim; you'll find it in the wild, but it's always dicey to make confident predictions about the future of human ingenuity.
But at the same time, there's no reason to waste much breath on technology which doesn't exist: markets are what we have, and they're what we should use, with the burden of proof firmly on the inventor of anything new to demonstrate that it has greater efficiency.
This claim is just as problematic. You may view it as weaker, but algorithmicly speaking it's the same nonsense. Algorithms in similar complexity classes are usually translatable to each other, which is to say they can be framed in terms of each other. You appear to be claiming that markets are the most efficient variant of an algorithmic class. Which is, again, nonsense. It might have some very nice qualities compared to other algorithms within it's class, but to claim it's the most efficient is, again, problematic.
A claim like that would require proof, not just the absence of contradicting evidence.
> Insisting that no better approach is possible is a strong claim; you'll find it in the wild
Ok, but I do believe the poster I was originally disagreeing with is arguing that:
> the market is an emergent behavior. It’s governed by laws beyond our control as surely as the behavior of materials are governed by thermodynamics.
> If the behavior of your markets fails to match the reality of the market, the best you can hope for is to only introduce a small amount of inefficiency. Of course, utopians who ignore the real nature of the market usually find themselves lethally encumbered by deadweight loss
This appears to be a strong claim that nothing can be more efficient than "the market" without introducing inefficiency or "lethal[.]" dead-weight loss.
> markets are what we have, and they're what we should use, with the burden of proof firmly on the inventor of anything new to demonstrate that it has greater efficiency.
This is a fallacious argument against my point.
To begin with, a new algorithm in the same class as markets is likely to have the same or similar efficiency. And it will be the other properties of it that are more interesting.
But the real issue is that the double standard people argue with the efficient market hypothesis (and especially the economic calculation problem) is problematic because it misunderstands computation. You simultaneously claim (in this post) to have the best approximation due to a lack of contradicting evidence, but then also want alternatives to provide proof of beating that physically impossible standard.
My main response though is: just because markets are the best thing we have does not mean we should accept absurd claims about them. Just because solar energy is effectively unlimited, does not make it a perpetual motion machine.
It's an existential claim, not a mathematical claim.
The claim is simply that markets are more efficient than other mechanisms, proposed or extant, which actually exist in the real world.
Clearly to quantify this claim requires some real mathematical analysis, but that's quite beyond my talents or interest. I'm just here to point out that the weakened claim is "markets are the best we've got", not anything theoretical nor abstract.
And I'd suggest reading my reply to the absurd thermodynamics bit before assuming too much about my thoughts on it!
I mean. My issue is multi-fold. I have an issue with market fundamentalists who treat it like a religion. But I also have an issue with economists who use methods of analysis that aren't empirical.
> It's an existential claim, not a mathematical claim.
This isn't just an issue of philosophy and mathematics in the abstract. Computation is a physical phenomena. The claim of efficiency being made here, even in the weaker version, is not congruent with reality.
It's an existential claim that would be no different than chemists shouting "this chemical reaction will continue forever" (a violation of the second law of thermodynamics).
> I'm just here to point out that the weakened claim is "markets are the best we've got", not anything theoretical nor abstract.
The weaker claim is no different than doctors who once believed in the four humors. It's not technically an incorrect categorization of reality given current knowledge in the field. But it's a piece of general economics knowledge that has no backing in reality, nor is falsifiable, nor provides predictive use.
And every time an economist spouts that sort of nonsense I can't help but remember their field must be primarily pesduo-science. I don't know how they expect me to take them seriously when they are still yelling about four humors and perpetual chemical interactions.
Because existential claims like this one are incongruent with reality. I don't know many times I can emphasize this point, the claim, even the weakest version I have seen, is not physically possible, hence it would require extraordinary evidence. It would upset the entire field of computation if it were true. It stands in opposition to modern pillars of computational reality, no different than claiming one had a perpetual motion machine would physics. Humanity would be like gods if it were true. You can continue to claim it all you want, but it's as misguided as claiming the earth is flat.
Wouldn't a "unified theory" of economics (a deterministic one at that) effectively rule out free will? After all, what is "the market" if not the aggregate behaviour of all human actors in it? And if you accept free will, doesn't that conversely create a problem where the best you can do when predicting markets is correlation, not causality?
This is not true. For example, the second law is only a statistical claim - the larger the system, the more likely it holds. But the second law is not a law against entropy ever going the other way. It's entirely possible, but not likely that another universe pops out of a quantum fluctuation at any moment. See the concept of a Boltzmann Brain for where physicists think this leads.
And P != NP is not a law at all - it's a guess, since no one knows if it's true. Complexity classes certainly changed with the introduction of quantum computer, allowing (very) few problems with known exponential classical Turing time to be done in polynomial quantum Turing time. It is also known that if closed timelike loops are allowed in computation then P=NP, but it's not known if we can engineer such physical items.
>The claims often made about the transcendent nature of the laws governing "the market" violate the computational properties of reality as we understand it
As evidence of the falsity of the above claims, TQFTs routinely compute NP hard problems, which is why for some time Friedman has tried to leverage them to solve NP hard computational problems.
Here's [1] but one paper showing this to be true. "Non-Abelian topological quantum field theories exhibit the mathematical features necessary to support a model capable of solving all ⧣P problems, a computationally intractable class, in polynomial time. "
Roughly, TQFTs perform certain "computations" on knots in polynomial time that are known to be NP hard in classical or current quantum computing models.
[2] is another nice take in Annals of Mathematics, the most prestigious journal in math.
Thus reality routinely solves NP hard problems. Thus your claims are not true.
[1] https://www.pnas.org/content/95/1/98 [2] https://annals.math.princeton.edu/wp-content/uploads/annals-...
Eric Ries gives some pretty good examples. One is to effectively decouple HFT trading from long term value investing:
https://www.acquired.fm/episodes/season-5-episode-10-the-lea...
"Markets" are real things. I can walk to them, or navigate to their website, or call them up.
You are claiming that there is an invisible, metaphysical "the market", which exists in the Platonic world of forms, that governs the behavior of these genuine markets.
This is like reading "The Gods of the Copybook Headings", and founding a religion which worships and offers sacrifice to those gods!
This "the market" you refer to is an abstraction of the behavior of real markets. It can give us all sorts of guidance as to what will happen when various rules are applied, or not, to these real markets; but comparing these broad heuristic rules to thermodynamics has me suspecting you don't understand either thermodynamics nor macroeconomics.
Every market has rules. Invariably, you are not allowed to stab a vendor and take their stuff. Sometimes there are things you can't sell; sometimes only Dutch auction is allowed, and so on ad infinitum.
This is simply a market with different rules from those governing other stock markets. We're all free to speculate on the consequences those different rules will have; perhaps they will summon literal Gods of the Copybook Headings, which will return upon us with actual terror and slaughter.
The safe bet is that prediction and reality will be divergent. This is economics, not thermodynamics, after all.
The connection with religion goes deeper that it seems.
Mission, vision / visionary, iconic (product), (job) creator, charismatic, angel (investors).
All these words had a purely religious meaning 200 years ago.
This is not just natural evolution of the language. Other fields don't have this amount of religious words at all.
To echo what my sibling commenter said, those consequences are what the grandparent comment is referring to as the emergent market - because it's not possible to control or accurately predict the behavior of every single actor.
It was a rebuttal to a statement saying we don't need to consider markets as pure forces of nature, because how we set them up can affect the outcome. I think everyone in this conversation agrees that it's both true that the design of a market affects how people act in it, as well as it being impossible to predict or control perfectly. The question is to what extent it actually is possible.
> This "the market" you refer to is an abstraction of the behavior of real markets
The market isn't an abstraction at all - it's a handle for the emergent behavior of the sum total of all economic activity.
Eric, I worked at the world's first carbon market over a decade ago (Chicago Climate Exchange) and a group of us are at the early stages of designing some new exchanges focused on fixing market failures across several sectors.
I've been following your work for a long time, and I am excited to see LTSE finally launch.
I am concerned about the ability for people to create secondary markets the undermine the intention of the LTSE. How do you resolve this?
So long as a company adheres to those principles, it doesn't matter if an individual investor can obtain their shares via ShortTermScumbags.com or the like. Having investors who are along for the long haul is a nice-to-have, not a must-have, since the goal is long-term focused companies which will naturally, via its principles, eschew reacting to short-term trends in share price.
Good governance means, in part, shifting the power structures of the corporation to make it easier to do the good and harder to do the bad kinds of activism.
From the name, I expected that it would require holding an investment for a minimum period. But I see no evidence of that elsewhere on the site. I do see listing requirements that supposedly require companies to have a long term focus. But then elsewhere I see that all securities in the S&P 500 and the RUSSEL 2000 index will be included.
So I’m very confused? What even is this thing? Did I miss a concise explanation somewhere?
There is no minimum holding period, but there is an incentive to hold.
A bit of a tangent: Since there is a premium in voting rights (GOOG vs GOOGL), I'm curious to see how this new voting structure might result in strange behavior by traders and investors. For example, will people use single stock futures to hedge while retaining their voting rights? Will special purpose vehicles for holding shares be created?
This seems problematic. The longer you hold your stock the more voting rights and hence value it accrues. But if you sell the shares all the accrued value is lost. So it surely leads to proxy voting, where former owners still are registered as owners of their former shares, but vote them for whoever they secretly sold the shares to.
Let’s say I have a billion dollars worth of Tesla stock that I’ve owned for a decade, giving me twice as much votes as normal. You want to increase your voting power, and are willing to pay $1.5B for my shares to do so.
We sign a loan agreement. You loan me $1.5B at a high interest rate, secured by my shares and my agreement to vote them as per your instructions. If you demand repayment I can pay off the loan in full simply by surrendering my shares to you, and all interest is forgiven. If I want to repay the loan, I have to pay the full balance, all interest and a prepayment penalty in cash, no stock accepted.
You don’t want me to repay the loan so the shares can retain their ownership premium, and so I can’t without paying a massive penalty + interest. You can never require me to repay the $1.5B, I can simply surrender the shares, so I can spend it immediately any way I want.
So we can keep this “loan“ going for decades more, or until you want to sell these shares. Presumably you will sign a similar “loan” agreement with your buyer to maintain the voting power the share accumulated.
And if the benefits are significant, I would bet this creates a whole tertiary layer of brokers, bankers and lawyers enabling these kind of transactions with standardized loan agreements and clearing houses.
Also, would this apply only to securities actually listed on LTSE or also, somehow, to non-LTSE listed securities bought on LTSE (which apparently is the only thing possible to do so far(.
>Also, would this apply only to securities actually listed on LTSE or also, somehow, to non-LTSE listed securities bought on LTSE (which apparently is the only thing possible to do so far(.
Their rulebook disallows unfair dilution of other classes of shares.
[0] https://www.sec.gov/rules/other/2019/34-85828.pdf
>the Council of Institutional Investors (“CII”) advised that it could not support LTSE’s Form 1 application for two reasons. First, CII stated that the corporate governance requirements in LTSE’s Form 1 application (specifically, its “Voting Rights Policy”176) would “permit newly public companies to have multi-class structures with unequal voting rights in conflict with [CII’s] membership approved policies supporting a one share, one vote structure” with “no sunsets on such structures.”177 Second, CII stated that LTSE’s Form 1 application “does not include any information about LTSE’s reported plans to update its application to include time-phased voting rights as a core element of its proposed corporate governance listing standards.”178 In addition, CII set forth its concerns about time-phased voting rights, including disproportionate empowerment of long-term stakeholders and challenges in tracking ownership of those with super-voting rights.
>The issues raised in the CII Letter do not provide a basis for the Commission to reject LTSE’s Form 1 application. Commission rules do not mandate that the rules of a national securities exchange must provide for a “one share, one vote” requirement for listed issuers.
[1] https://qz.com/1901336/eric-ries-long-term-stock-exchange-ai...
> No. The exchange’s rules do not take a position on enhanced voting rights for shareholders. Our software affiliate, LTSE Services, has designed a tool to facilitate enhanced voting, should a company choose on its own to implement that.
Besides the complications this would raise that you mentioned, I also wonder how companies would even track tenure of ownership, since many (most?) shares of stock are not directly held and so the company may not even know who the nominal shareholder is or when transfers take place.
edit links: - https://captable.io - https://startuprunway.io - https://hiringplan.io - https://fast409a.io - https://startupdisclosure.io - https://notegenie.io
it feels like the third page in the godaddy checkout flow where it's like 'maybe you need our wordpress, email, and VPS hosting in order to launch your website'
also feels like a data grab. traditional exchanges don't collect this stuff, and the SEC doesn't collect most of it.
I was a bit disappointed with the pitch; sure Carta is useful but I had hoped LTSE was a place to do some really revolutionary stuff. It seems like that aspect of the company is a ways off and from my limited understanding, it doesn’t seem like today’s announcement makes it tangibly different than NYSE.
I’m neither a banker nor a major investor so I’m really curious to understand how they see this as a paradigm shift. For now it looks like a stock exchange started by someone I really admire but not much else.
You can do 2) through your existing broker, so long as they are a member of the LTSE, which they likely already are. You can check their membership status here: https://brokercheck.finra.org/
Scroll down to page 9, you'll see they are a member of The Long-Term Stock Exchange
100 milliseconds is practically an eternity
The goal seems laudable but this feels like a mess to me if it is actually "open for business". Neither of my two big bank brokers support it and even if they did, I again have no idea what I would be investing in.
To me, the wildest thing is that in order to find out of I could even invest, I had to find out via a bad UX of reading a hacker news comment, going to a different website, being confused by that website's UX, having to read more comments, clicking into a tiny link that leads to a long PDF and scrolling to a specific page, and then repeating for all my broker options. Why not just list the major people who serve LTSE on your website clearly along with the tickers/companies?
Do you prevent day-trading or something similar?
I know that doesn’t sound super sexy but we believe this is a high-leverage point for reforms
We will have more to say on reforms that relate to reading in the future, but we don’t limit the ability of “tourists” to trade in and out of stocks as normal.
Yes, we believe in the role of long-term shareholders in corporate governance
How will you handle companies that eventually go against the required guidelines?
Could a company become permanently unlisted? And how would that affect any shareholders of the company who purchased through LTSE?
Shareholders would have their ownership protected in that scenario (as they still own common shares), same as any other company who was delisted from an exchange
I've heard many a company say one thing and act another. How will this be different? Will delisting be the repercussion of short termism?
Can you provide any specific examples of standards that could be enforced, and how?
How can investors be sure this company really would be delisted, even if it’s the company that makes LTSE the most money?
You imply rather than state directly that you fear our regulatory decisions would be influenced by our commercial interests, so just to address that part, we have an extensive set of checks and balances in our own corporate structure that double-buffer these decisions.
Just to be clear, I don’t doubt you personally in any way, it’s more that I think it’s an enormously difficult problem to get a group of people to take action on something when they will receive a lot of money by NOT taking that action.
More specifically: companies are already supposed to take the wishes of long-term shareholders into account, and boards are supposed to enforce this, yet in practice this doesn’t happen much because, well, incentives dictate otherwise.
Can you share some of the checks and balances that would stop the exchange itself acting in its controllers own short-term self-interest?
My insight from watching Eric give a talk about the exchange:
https://longnow.org/seminars/02020/feb/24/long-term-stock-ex...
Digging a bit more, on the investor side, there are value investors who look for solid, if unspectacular businesses at a price point and buy and hold over long periods of time.
On the company side, there are exceptional founder run businesses like Amazon, FB etc. that don't care very much what things look like in the short term (Bezos claims he's willing to be misunderstood for long periods of time for example).
That's not really an answer to the question - so how do you define long-term, and how do you take reports? Are they still quarterly reports? Or are the reports longer-term? How do companies prove they're long-term to interact with your platform?
You haven't really talked about the concrete definitions or parameters around 'long-term' in this thread. Please do, it would be nice.
Companies prove their long term by adopting policies responsible to our long-term principles. The way this works is spelled out in a lot of detail both on our website and in our regulatory filings. Here's more of a layman's overview: https://longtermstockexchange.com/static/principals_for_lt_s...
What does the perverse scenario look like for you?
Edit; The only one I can think of, when it comes to rewarding employees is what if a company uses contractors (or gig workers if you use those words), and therefore not defined as employees?
I'd like to see a market for solely worker-owned cooperatives, in which stock dissolves over a fixed time-period, 5 years(restaurant)-500 years(asteroid mining). "Dissolve" being essentially buybacks that occur, bending based on performance. Then again, I'd like to see capital dissolving, normalizing, over 100 years, giving capital the property of entropy, redistributing it all, but very slowly over the span of a bit more than a human lifetime. This capital would be more valuable than any world currency.
As the age-old principle goes: could you please name three?
Examples would help us understand the idea more thoroughly.
I noticed there doesn't appear to be tangible answers to this anywhere (including in the reply you got to your comment). Curious to pitch a supposed long-term stock exchange without anything meaningful to lure listings to it other than vapor statements.
I'd bet it's because they can't set any strict upfront requirements. They won't be able to get the listings they need if they do it, the interest won't be there. So most of what they're going to try to do is espouse the mission goals, hoping over time they can gradually implement those controls.
Further, although many VC's are indeed herd animals as you seem to suggest, there are a few bold ones who genuinely hunt for new and radical ideas and would be willing to back a first-time founder - if you're willing to do the work.
https://longtermstockexchange.com/listings https://www.sec.gov/rules/sro/ltse.htm https://longtermstockexchange.com/static/principals_for_lt_s... https://www.sec.gov/rules/sro/ltse/2019/34-86327.pdf https://www.sec.gov/rules/other/2018/long-term-stock-exchang...
If multiples aren't higher, why would a company list on your exchange versus on the public market?
The thing missing from this article is: What does this actually mean? When will companies start listing? Who will start listing? How do companies list? What are you offering? etc.
lmk when this materializes I guess.
How can this process of continually tricking the next investor possibly work out quarter after quarter? Wouldn't the stock market have tanked long ago if this was, in fact, underlying the bulk of the market valuations?
The reality must be, as soon as investors realize a company is short-term only, they dump and run from its stock, because they will be unable to trick someone else into buying it at the high price.
Some years ago, I knew the CEO of a company who said he did the financials "according to what Wall Street short term investors wanted". The stock promptly tanked as investors actually do not invest that way, and certainly don't want to invest in companies that eat their seed corn.
Take a look at the companies with the biggest market caps in the world - who thinks they are driven by short-term thinking? I don't. The investors obviously don't. And the rewards of long-term thinking are off the charts.
I imagine that if the next investor was someone like a retirement fund this could work out pretty well, since they have a steady flow of money being paid in. I don't know to what extent that actually happens.
Unless I suppose you think those who trade companies and those who run companies aren’t intertwined. I do v think there’s some evidence of short term bias. E.g., taking on debt to fund dividends to give the illusion everything is fine
Arbitrage is like pouring water into the bathtub. The water will slosh around, eventually finding its lowest energy level, until the next pouring event. Arbitrage is the pull of gravity mixed with friction.
> taking on debt to fund dividends to give the illusion everything is fine
I know that some companies do this. I find it strange they imagine they can fool investors doing this, because they aren't fooling anyone. See the CEO anecdote I posted upthread.
>they aren't fooling anyone
I disagree on this. Maybe they don’t fool sophisticated investors that make up 80% of market money but I’ve met plenty of small investors who are duped by this very type of thing.
I think there may be some survivorship bias in your thought process. As an example, Enron displayed some massive short-term bias when it had a market cap more than 10x that of Apple. Sure, the market eventually corrected (and wiped out a lot of investors along with it), but pointing to current thriving large cap stocks as evidence of the market only rewarding long term thinking disregards this. In theory, Enron should have never been priced so high had it not had a short term bias to inflate numbers
But consider the S&P 500. It has its ups and downs, but with an upward bias that has lasted since, well, long before I was born. If the market in general consists of Enrons defrauding their investors, or companies self-destructing by taking only a short term view, how can this upward bias be explained?
If you really believe the market consists of short-term thinking, you can make a fortune shorting those over-valued stocks. Can't say I wish you success doing that, as I am long.
I get the impression you think I’m claiming the market is always short-term biased. As with Enron, I think the market can be biased in the short term while still being accurate long term when those biases are realized and corrected for. As I think Buffet said, in the short term it’s a voting machine but in the long term it’s a weighing machine.
The problem is if you get caught confusing the two. Just ask anyone who planned on retiring around 2008. The difficulty is knowing when you’re being “irrationally exuberant” or not. We humans are awfully good at fooling ourselves.
Same with the S&P. It’s easy to claim it goes up in hindsight... unless you’re needing to cash out on those sideways decades. It’s not claiming a long position that’s hard, it’s timing it correctly to avoid those sideways and down periods that’s difficult.
- The company’s impact on the environment and its community - The company’s approach to diversity and inclusion - The company’s approach to investing in its employees
It’s not meant to be an exhaustive list
Modern executives have incredible pressure to hit quarterly numbers and the ones that provide value in the long term are the ones that can effectively ignore this pressure.
Short term pressure also forces firms to play accounting games like taking big goodwill impairment losses in a down quarter, so they don't need to perform a writeoff in subsequent quarters.
Also, as a side note, it would be interesting if you had an LTSE index fund!
For reference, whenever Uber/Lyft "open for business" in a new city, they don't just flip the switch to enable the app in an area. They work towards gaining a critical mass of drivers to ensure reasonable quality service levels, incentivize drivers to stay online as rides trickle in etc.
Or is this the "Lean Startup" approach to get a feel for the reception of the idea though I'd imagine that was done before you got started on building the product :)
Overall, I am very excited for what you're building and will watch out for more substantive updates! It is super cool that your team is working on challenging the status quo in an unconventional manner.
You can call your broker right now and ask them to direct your orders to a specific exchange, including "L" on the SIP.
I think GP's point is that you're saying "we're open for business", but the LTSE isn't offering people who buy stocks any added value yet.
It's clearly not zero, so somebody sees some benefit in it. So I don't see the issue with saying that we are "open for business"
Multiple people have mentioned a similar thing. I have had a similar experience.
While it may be technically accurate that the “LTSE is open for business”
My expectation and others also seem to have had a similar expectation after reading the announcement was:
We can now purchase shares in companies that are listed on the LTSE. Having tried to get more info on companies listed on the LTSE, we are finding none.
“Open for business” is never defined.
It says
“Today, after months of booting up, I am thrilled to report that the Long-Term Stock Exchange has opened for business with a mission to support companies and investors who share a long-term vision.”
There are a few potential options:
1. oversight , without the realisation that people will assume the LTSE has shares listed on it which can be traded
2. Deliberately designed to lead people to think the LTSE has shares listed on it in order to test. Lean startup and all that.
On a other note long range planning and thinking is difficult, due to discounting and uncertainty. A massive impact can be had if more people could think Though multiple causal generations down.
Maybe it's people used to stock exchanges treating companies as the product, instead of as their customers? If so, you seem to be demonstrating the problem LTSE is trying to solve.
https://www.investopedia.com/articles/basics/04/092404.asp
Anyway, maybe a good question for someone familar with the technical details - why is there so much volume already flowing through LTSE? Is it just arbitrarily included in some standard broker software application such that it doesn't make a difference to them? Since apparently there is already nearly as much volume traded on LTSE as there is through Nasdaq.
I believe Interactive Brokers, in particular, extends this privilege to all of their retail customers. But I don't have first-hand knowledge of this, just what I've heard.
EDIT: Wait a minute. No individual stocks are listed yet on LTSE https://news.ycombinator.com/item?id=24421925 so what am I supposed to ask them to do?
When I want to buy a share, the first thing the brokerage asks me is the stock's symbol. Without any listings, what am I supposed to tell them?
Others allow their clients to direct orders using a specific trading strategy. If you have a family office it's very likely this is part of the strategy.
However, ordinary retail investors are sometimes locked out of this system. I don't know Etrade's policy in particular, so I can't say for sure what you would have to do.
So if you want to trade any US exchange-listed symbol, your broker can do that on LTSE (assuming they are a member)
Or maybe the point is: there's no point in buying shares with LTSE today, even though you technically can do so, and instead I should wait until there are individual listings and buy those?
(And even then, I don't need to use LTSE, I can just buy their shares on NASDAQ with Etrade like I always do…?)
What is it about the venue that makes it special? It seems that once an investor thinks a company has some desired characteristic, all they'd care about is where to get the shares as cheaply as possible.
Much like as an investor you'd think twice before purchasing an OTCBB share today, or perhaps 30 years ago pay more attention to the difference in listing requirements between Nasdaq and NYSE, I think that's what's intended here
The solution is simple, allow shareholders to propose board slates. That guts the power of insiders to control the company, but the SEC has never had cajones to make it happen.
First IT? Wait, how is the exchange running?
I generally want to dedicate my efforts to long term betterment of humanity, rather than “we make the world better by making a mobile app for dog walkers” sort of thing, so this position is attractive to me. However, this “full stack” position mentions only JavaScript and Rails as required experience.
Is your entire stack Rails and JavaScript? That turns me off entirely (and makes me unqualified).
What are the specific features/differences between LTSE and other markets?
Will companies listed on LTSE be listed exclusively there, or also on other markets?
We support (and encourage) dual-listing, so that a company can still benefit from our protections while accessing liquidity at the open/close from a legacy exchange.
Does LTSE have any plans to help speed the path to IPO and let more unaccredited investors participate in early growth and success?
But in the long run, it's important that the broad public be allowed to participate in growth investments, and I think the public markets could once again be the best place to enable that to happen. Frankly, I think it's immoral that at a time in history when we are pushing more and more of the responsibility for people's retirement onto individual savers, we have also made it illegal for them to make most growth investments. If we don't correct this imbalance, I fear the backlash to tech will only worse and intensify.
Tech didn't cause this problem but we will bear the brunt of the backlash if people feel left behind.
Do you expect that any firms will transfer? Or do you expect a new ecosystem to develop side by side, over time?
I can't predict the future. I know there are existing public companies for whom this would be a great fit. Can they overcome the inertia and bureaucracy that tends to set in once you go public enough to make a farsighted bet like this? Or will it be up to the next generation of corporate leaders to act with boldness? Time will tell.
So, as things stand, the status quo is strongly reinforced, and being extremely toxic is strikingly rewarded. In the event that this never changes, there's not a lot of place for a Long-Term Stock Exchange or anything like it. That holds even while the status quo, being 'extractive', begins to do serious damage to all the stuff we like and care about. So long as the rules favor toxicity and are written by those who stand to gain by it, this proposal is a joke.
But we are also postulating that there is reason to believe such 'extractive' behavior has consequences: call 'em externalities. There's plenty of history on how business can continue that way, even to the point of open warfare, murder of strikers etc. so we know there's motivation to cling to 'extractive'. But history also tells us there's a limit, and societies can turn against this sort of thing in whatever form it shows itself.
(side note: I spent part of yesterday trying to help Amazon not be toxic. I got an LED light being sold as a light therapy tool, $40 or so price but might only be a few bucks worth of LEDs, and I did not order it. Someone's using my name and address, with their own email and credit card, so they can review things as me. It was very tough to get the situation understood by Amazon. Yet, the product reviews had already been frozen for suspicion of fraudulent reviewing, and the product was fulfilled by Amazon and was literally #1 in its category. This is a form of toxicity that leads to Amazon's brand being garbage because you can't trust a thing they say.)
In the event that government changes its approach and begins to deal more harshly with the abuses of big business, which is far from unthinkable, this Long-Term Stock Exchange and seeking to comply with it might be a useful form of virtue signaling by companies that are trying to avoid being targeted as bad actors. And the requirements of the LTSE could track the legal requirements by government as they develop, making the exchange a 'safe haven' and public show of good faith.
The contrast with what you have to do to please current stock exchanges and those who follow them, could not be more striking. It's become very obvious that shows of BAD faith (by certain political standards) are required by the existing investor audience, which seems correct in believing that right now companies are held to no consequence other than beating other companies in making money by any means, full stop.
If that IS stopped, the meta-market (market of money holders seeking markets) would be hot to find a place to invest that was more safe from unwanted consequence.
If you want to encourage long-term investing, "all you need to do" is change investment taxation.
Equities held for less than a minute? 100% tax. A year? 20%, like the US today. Five or ten years? Zero.
Boom, HFT gone, and a sudden rise in long-term investing.
But the devil's in the details, in this case the length and shape of the curve.
Excited and hopeful that LTSE might make that type of thinking engrained in all businesses!! Just might take building a stock market to get there :P (which is an incredible feat)
My understanding of this is quite limited at the moment but I'm curious to learn how and why companies would benefit from signing up for the LTSE and what effect it will have in practice. There are requirements such as a "Long-term Strategy Policy" but it seems like pretty much a leap of faith / honor system for the company to upload the principles.
Where does this pressure come from? The board? Can't you appoint a board that is long-term friendly? Institutional investors? Wouldn't the same investors interested in the LTSE also be interested in you on the traditional market if long-term is part of your DNA? Shareholders? Shareholders agree to all sorts of craziness if they like your company (see voting structure of Palantir, Facebook, etc.)
Maybe others can elaborate on what problem is being solved here.
If PayPal et al. had retained profits in the business for a long term goal, a substantial number of innovate companies couldn't have formed.
The more nuanced problem is likely that short-term and long-term shareholders' goals are mutually exclusive. That is, there is a rarely a strategy that's optimal for both.
Coupled with the fact that some businesses (apps!) favor short-term strategies, while others (biotech!) favor long-term strategies.
I'm not sure that's a benefit if they then destroy those businesses too.
If capital is tied up in a failing business that's pursuing a "long term strategy," then it's not freed for new businesses.
SpaceX and Tesla (to name two HN faves) probably wouldn't exist had PayPal retained more of its capital.
Wait -- the bond market won't lend to you cause they don't trust your ability to generate that return for the next 20 years? Go to the junk bond market -- they'll lend to you. In fact here's an idea go to the junk bonk market, and borrow money to take your company private -- out of the hands of those grubby short term shareholders.
I mostly agree that it's better than other system that we've tried in the past (although I'd argue that the more highly regulated capitalism with higher taxation levels of the 60s-80s was slightly better than our current (post-90s) deregulated system).
But I'm a bit more ambitious than you. I don't think we should rest on our laurels and accept the known shortcomings. I think we can do better, and I think we should actively look at doing so.
I feel like maximising shareholder value is a mediocre solution to the problem introduced by the creation of a non-owner managerial class. I'm not entirely sure what the best solution to the problem is, but I'm convinced that we need a better one than the one we have.
This isn’t how the LTSE works but it would be awesome if there was an exchange that required every company to pay a fixed percentage of their cash flows every year after X years. Combined this with a minimum holding period, and I dare people to bid $300+ for Tesla stock :)
Why should they be on a separate exchange?
What I'm suggesting is an exchange where the dividend is a fixed % of their cashflows. Let's say it's 1%. If their cashflow is 1 billion, then 1% of it goes to their shareholders. If it doubles the next year, then 1% of that 2 billion goes to the shareholders.
Combine this with a minimum holding period (ie 1 year), and you've basically now made the stock price equate to its fundamentals. ie how much cashflow it's generating in the future. If investors think it'll go up, they'll bid the price up. not because they want to sell it to a greater fool.
wouldn't this be roughly the same as bond markets?
The development of modern financial capitalism is important and fascinating. These structures that we take for granted -- tradeable claims on assets, separation of ownership and management, perpetual life corporations, etc. -- all came about to solve particular problems.
Personally I don't foresee the LTSE succeeding, but I'm happy to see people try to innovate.
Manias, Panics, and Crashes: A History of Financial Crises, Seventh Edition https://www.amazon.com/dp/B017J5HBMS/ref=cm_sw_r_cp_api_r.pw...
Devil Take the Hindmost: A History of Financial Speculation https://www.amazon.com/dp/0452281806/ref=cm_sw_r_cp_api_i_.a...
A History of Interest Rates, Fourth Edition (Wiley Finance) https://www.amazon.com/dp/0471732834/ref=cm_sw_r_cp_api_i_-c...
A Splendid Exchange: How Trade Shaped the World https://www.amazon.com/dp/0802144160/ref=cm_sw_r_cp_api_i_Hg...
I would probably invest in a "Vanguard Long-Term Growth Fund," and I would assume that companies that got themselves on such a fund would want to stay there.
Perhaps the LTSE includes new rules for things such as how often stocks can be traded, but this isn't evident from that blog post, or the first one referenced in the post.
The price of the share has to be adjusted at the dividend ex date to reflect the drop of value induced by the dividend payout. If not every holder of the share class benefited from it, then this is obviously unfair.
Now if you are talking about different share classes, then they would have to either be issued to current shareholders (e.g as rights issuance, in which case every shareholder could have them, long term or not), or publicly traded (same thing basically, everyone could have them, long term or not), or privately traded. In that last case, I would not really say this is "for long term investors", it's more a matter of private equity / politics / governance. Don't expect to enter that kind of deal unless you are a _big_ institutional investor.
General discussion of the concept in France. http://jpkoning.blogspot.com/2016/09/the-french-shareholder-...
> Despite ensuing controversy in the French legislature over the fairness of elevating one class of shareholder above the rest, the ability to provide prime de fidélité was enshrined in French law in 1994, with several limits.
So indeed they provide you with a different share class. What is amazing though is that they have what look like an automated process to convert your shares from public to registered (private with fidelity bonus).
Reselling these shares is not really explained in the page though. They seem to imply that your broker will swap them for regular shares that you can then sell on the market.
It's extremely difficult/rare to find investors who will just sit back and trust the CEO run the company as they see fit, particularly in a world where "unicorns" are going from zero to $billions in a few years. It happens occasionally, but only in the case of extreme outlier companies where the company is already a rocketship and thus the CEO/has already proven themselves - e.g., Apple/Jobs-post-mid-2000s, Facebook/Zuckerberg.
Whilst plenty of companies could reach huge scale over a longer period of time, it can be difficult for investors/outsiders (and indeed the management themselves) to know whether their company really is a slow-building long-term winner vs a zombie.
Perhaps what the LTSE is doing is attracting investors who are willing to be patient over a slow/long-term build, but to also work with the companies to ensure they really are on a path to long-term success and not in zombie mode.
People say companies pursue short-term gains but in reality they just mean they pursue things they disagree with. And herein lies the dirty secret: professional investors aren't short-sighted, they just don't value the things you do because (shocker) the average Joe doesn't really understand how to create shareholder value.
Survivorship bias?
> the whole premise here is that investor behavior prevents [survivorship] bias
WTF? How the heck is some "investor behavior" supposed to prevent you (or I, or anybody) from succumbing to a common human mistake made when analyzing data and discussing it here in the comments-section?
> You can't take the whole argument and then cast massive, glaring contradictions to the core premise as merely bias.
Back up: You're using a straw-man argument, a false version created out of black-and-white absolutes, rather than trends and high probabilities.
___________
Consider this fictional conversation:
A: "Playing the lottery is a sucker's game, you're almost guaranteed to go bankrupt."
B: "But look! These people bought a lot of tickets and won! They're multi-millionaires now!"
A: "That's survivorship bias. You're not considering the huge numbers of not-so-notable people who lost money instead."
B: "No it's a massive glaring contradiction to your core premise! You can't brush it off as bias!"
Both companies you mentioned have had particular conditions that allowed them to be long-term focused. For Amazon it was that they achieved huge growth and cash flow from very early in their history and so Bezos has been able to call the shots. For Tesla it was that Musk was already rich and could spend several years investing his own money before needing outside investment. (And by the way, just look at the crap Musk has to deal with from a major segment of the investor community as he seeks to pursue a bold long term vision; and he’s one of the greatest force-of-personality founders ever).
These conditions don’t apply to unproven founders relying wholly on outside investment, working on opportunities that may not yield rapid growth and cash flow in the short/medium-term.
In my very limited experience, it is the _company_ which must accept all sorts of craziness from the shareholders rather than the other way around. Which is also how it stands officially...
> Institutional investors? Wouldn't the same investors interested in the LTSE also be interested in you on the traditional market if long-term is part of your DNA?
Not clear at all that they would, if individual officers expect to have to justify short-term-losses.
If you really do believe it is investors driving short term outlooks, a different exchange wont make a difference to how many investors buy the stock.
Imposing strong controls on corporate management is one of the most important thing that shareholders can do. This might take the form of independent boards, which aren't handpicked by the CEO. Or the removal of poison pills (which raises the threat of a hostile takeover for underperforming companies). But most important of all is the existence of transparent, consistent, regularly evaluated metrics. That means quarterly earnings targets.
Like any job, CEOs need consistent feedback to keep their incentive aligned with those who employ them (shareholders). Management has shown time and time again, that when monitoring is weakened, they go off the reservation and destroy shareholder value. The good thing about earnings is that it's they're easy-to-measure, hard-to-fake tangible proof of continuing performance. In contrast stories about "long-term value" or intangible promises of future rewards are usually BS used to justify extravagant empire building while the CEO uses the company's balance sheet as his personal piggy bank.
Lest anyone think that evil Wall Street shareholders are hobbling visionary CEOs, observe the rare cases when management does prove its credibility. Prime example is Amazon, which time and time again has scarified short-term earnings for long-term development. And nobody could possibly claim that it's punished by Wall Street for this. The difference is that unlike 99% of CEOs, Bezos has conclusively proven his ability and alignment with Amazon shareholders.
Before he had the track record of long term development (only born from long term efforts) he knew how to speak Wall Street and had a track record on Wall Street.
Most CEO’s will never be capitalized like him for long term empire building so it’s hard to say there couldn’t be more Amazon sized successes out there if Capital was more accessible for longer term visions.
It seems like a fact-based analogy. 'A group have been restrained to "territory", but a member has broken that restraint'. There doesn't seem inherently to be a judgement as to the restraint or the rogue being right/wrong.
I'd be interested in why you felt the usage was beyond the pale sufficiently that it needed to be reined in? The concept of territorial reservations doesn't appear to me to denigrate any group particularly; maybe I'm wrong in that?
"The issue with 'off the reservation' and similar phrases is that these things are said without any thought. They become a part of the common vernacular. Freely they move from mind to mind, mouth to mouth. Maybe the meaning of these sorts of phrases never should have been the issue. Maybe living lives without thinking about what we say and do is of greater concern."
https://www.npr.org/sections/codeswitch/2014/06/29/326690947...
But we should educate them on why the phrase is one that should be avoided.
> “Opening the kimono” implies a coyness and sensuality that conjures up images of submissive Asian women reluctantly willing to show you their most vulnerable side. I understand why someone would use it just from the shock value alone. It took the wind out of me when I read it.
https://medium.com/@brunchandbudget/opening-the-kimono-on-op...
If they are said without any thought or connotation then is there really any slight against whatever group is the origin of the phrase?
He could have just has easily said "off in left field" which is arguably a slight against leftists and commies but has so long been a colloquialism that it has lost that connotation.
But yeah, "off in left field" is a baseball thing; no one is harmed or offended by that— even if you do apply it to politics or use it in a political context, as the WP article briefly mentions, politics are something you choose, not your cultural identity, so it really isn't the same thing at all: https://en.wikipedia.org/wiki/Out_of_left_field
Another interesting case is the phrase "balls to the wall" which has a harmless origin with aeronautics, but is spicy enough on account of an obvious alternative interpretation that it isn't used in polite company.
Off in left field is a baseball analogy and has nothing to do with people left of center politically.
The phrase has the trappings of genocide baked in, and people who have learned of the history of their ancestors are going to be reminded of that whenever they hear it. Even if you are not thinking of any of that, the term is primarily used to indicate someone doing something odd/crazy/wrong, which is fundamentally implying that any indigenous person who has done so is odd/crazy/wrong.
I think most people understand that its use in everyday vernacular is not usually intended to be racially charged, but that doesn't mean that people shouldn't be educated on the phrase and try to avoid using it. There are lots of ways to express ideas, and it's probably fine if we don't use the ones that are fundamentally tied to racist connotations, especially when indigenous people in many countries (US, Canada, Australia, among others) still suffer from systemic policies and actions that leave them disadvantaged to this day. (Casinos on reservations are a band-aid and do not solve the fundamental problems, for example. In America only 200ish of nearly 600 tribes run casinos on their land, and of those 200ish, less than half pay out per capita, and only a handful make significant money from their casinos - the payout is less than 10k/yr per person for the vast majority - less than the federal minimum wage assuming a 40 hour workweek)
Cliff notes: Just because you don't see one doesn't mean it isn't there and that the people that have lived their lives impacted by it will not see one and be reminded of the genocide their ancestors faced and the results of ongoing systemic racism today. It's a bad phrase. We should try not to use it.
Frankly having people like yourself chime in at every juncture to tell other people they are perpetuating racism is cheapening the actual historical impact of these events. If you care about the people you claim to defend then do something to help them.
Please keep in mind the GP/GGP comment to this was folded for being offtopic.
That's an interesting take, and not one that I think you will find in common with experts on the subject.
>If you care about the people you claim to defend then do something to help them.
I donate my time, money, and other resources to a variety of causes related to helping disadvantaged groups. I might largely be wasting my time in attempting to educate people on the internet, but it doesn't mean that I do not do anything else.
Why do you believe that uttering phrases that are fundamentally rooted and reinforce prejudice is not harmful? It's a phrase that is quite strictly Othering in nature. Not only can it be hurtful to those that have lived with the repercussions, but it also helps reinforce the Othering mindset in those who did not.
Many of these "experts" typically use outrage to justify their continued employment. Most of them come off as genuinely deranged to most of the people I know, so this isn't just a me thing.
>I might largely be wasting my time in attempting to educate people on the internet
You're not educating people so much as finding chances to belittle them.
>Why do you believe that uttering phrases that are fundamentally rooted and reinforce prejudice is not harmful?
You're trying to tell someone they are racist while not holding any racist opinion but for saying magic words. This is nonsensical. If black people call each other "the n word" then a word and its historical meaning and modern meanings are not necessarily linked to each other.
More empowering is, likely, accepting that a word or phrase may have had some racist element to it but removing the power of that racism (such as with black people calling each other the n word) as opposed to making it forbidden.
I have explicitly stated in multiple places that I do not believe people are racist or have any sort of malicious intent, and are likely unaware of the connotations. You can see multiple posts in this thread where I have stated this. I would, however, say that in an ideal world we all strive to be anti-racist, rather than just not racist.
>More empowering is, likely, accepting that a word or phrase may have had some racist element to it but removing the power of that racism (such as with black people calling each other the n word) as opposed to making it forbidden.
For the disenfranchised groups, sure. For everyone else? Not so much.
I am trying to assume the most charitable possible interpretation from this post, but I'm struggling to do so and respond to it. Most of what it says is arguing against positions that I have not held at any point, and is putting words in my mouth. I apologize, but I do not believe I can engage further in a productive manner here.
You're mincing words. If the people are above reproach then what they are doing is probably also above reproach. What you are saying is effectively "I'm not saying they or their actions are racist, but they actually are."
>For the disenfranchised groups, sure. For everyone else? Not so much.
This doesn't make any sense. The disenfranchised groups need to be empowered; everyone else doesn't need to be, they are already empowered (by your own logic). So if this works for the disenfranchised groups that should be enough.
>I am trying to assume the most charitable possible interpretation from this post, but I'm struggling to do so and respond to it.
I'm trying to point out your position isn't really consistent. If you want to help people then you shouldn't be trying to drag other people down. The points I am making are meant to show that, regardless of what you say, what you are doing "works" by trying to ascribe racism to people that are not exhibiting racism.
In some specific cases language use guides thought, but more commonly language is dictated by people's goals and the existing nature of reality. Language did not cause the world to exist.
Median doesn't seem like the right metric. If you measured VC by median outcome I'm sure it looks like they always fail.
As an investor, I care more about the total (sum of average) returns of mergers, not the median. Just like in venture capital (where the median investment is clearly negative), the total return matters and is driven by the large returns on success.
I'd still be happy to invest in Berkshire Hathaway in 1955 even if you told me that their median merger over the next 60 years would be value destroying (so long as the average would turn out the way it has).
See page 111 of this survey paper: https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.15.2.103
I found these two URLs helpful in understanding how LTSE sees its role:
> Q. Would companies that list on the Long-Term Stock Exchange report quarterly earnings?
> A. Yes. By law, U.S. public companies are required to report earnings at least quarterly. The difference is that the listing standards of the Long-Term Stock Exchange are designed to change the narrative for success, so that the quarterly results are viewed in context as part of a long-term narrative.
https://longtermstockexchange.com/listings/principles/
> Long-term focused companies should consider a broader group of stakeholders and the critical role they play in one another’s success.
The focus seems to be less on constraints on traders and trading, and more on policies that companies listed on the exchange must fulfill. So the LTSE doesn't have to be the exclusive venue for trading and a company can be dual-listed on LTSE and another exchange — the mere fact that the company is listed on the LTSE gives you a crucial piece of information.
Having worked in Equities most my life I love the idea you are putting forward here. We really need to stopthinking in terms of "next quarter" and structure our markets for the longer term.
Question for you : What are your thoughts on corporate buybacks on your exchange?
I think if companies are sincere in their desire to use buybacks only for good purposes, they should commit to report “EPS net of buybacks”
Buybacks were illegal because it falsely showed demand in the market. False demand is a key point in modern market manipulation and fraud cases.
Given that reality dissolved 30 years ago, of course we are all familiar with the arguments "It’s anti-dilutive and can be in the interest of shareholders"
Yes, your observation is also true. But lets not pretend companies were really trying to choose between dividends and buybacks, most don't do dividends and ultimately never return capital to shareholders, which is the point of stock: to act as a conduit in sharing earnings.
I’m not pretending. And most companies eventually are designed to return capital to shareholders - otherwise why would anyone buy them?
I wish you the best of luck in attracting new listings; it's a fascinating idea.
If it's the latter, I don't see why a company would opt to be traded on your exchange if they get literally nothing in return other than good boy points.
I also don't understand why this is a problem you are tackling at the exchange level if you aren't changing how the exchange works.
Our exchange works differently than the legacy players, so I don't really understand your last point.
Are there any incentive systems in place to ensure that companies being traded on your exchange don't take part in these destructive practices, or is it simply that they agreed to your policies?
What are the incentives and how do you hold a company to a long term orientation. A company is free to choose and change its vision/strategy as time goes by. Do they get delisted if they move away from this orientation. How do you measure such an intangible and act on it?
If that's the case, then what does your exchange add? I think we are in agreement about these principles, but I don't understand how your exchange is encouraging them.
Better than just encouraging people to agree to these practices is if you could set up a competitive landscape where they are more directly rewarded than in the current paradigm. That is primarily how I see an alternative exchange contributing to this cause.
>Our exchange works differently than the legacy players, so I don't really understand your last point.
This is the central contention. I don't understand how you are different from legacy players. What is the actual concrete difference in how you operate as an exchange that differs from your competitors? Furthermore, how do you expect that to lead to less short-term rent seeking?
The listing application (and attendant legal docs) is here: https://longtermstockexchange.com/listings/documents/
But I'm not sure why you would want to encourage margining when you are against volatility? The capital for the margin loan has to come from somewhere too.
So instead of person A putting up 5$ and borrowing 95$ to own 100$ in stock, and person B lending those 95$; it might be better for volatility for person A to own 5$ in stock and B to own 95$ in stock?
I am not sure.
For full disclosure: my investment strategy involves margining.
(Btw, I do think that 5% equity on houses is bad. It's mostly a function of land prices going up so much.)
Looks to me LTSE is trying to create a forcing function, primarily through governance, for companies to think and act long-term.
There's plenty of companies that take the long view and whose investors have been rewarded for it ... Amazon, Netflix, Tesla, etc. ... its not like the existing stock exchanges and investors have stopped them from running a loss and investing in the long term.
I feel this is a solution that isn't aimed at the right part of the "stack". Reform is needed in the way the professional management of large public funds and pension funds are evaluated and compensated ... but you won't solve that with a new stock exchange.
But why do those changes need to be coupled to the exchange a company assigns as its primary listing venue?
Stock exchanges have the obligation to set standards for the behavior of managers and investors. It’s this dual-stakeholder role that uniquely allows our reforms to take hold.
Believe me, I looked long and hard for an easier way to get this done
What does this mean? What quantitive measures are you using to qualify long term incentives and behaviours?
No offence but you don't seem to have an answer to this question.
For example is RDSA long term? They have been around for ever and people will need cars and oils for the forseable future at least 10 years is this long term? What happens when the oil runs out / global warming / move to electric cars is it still long term and how long will that term end?
I need qualitative facts and figures before investing.
I buy stocks that provide value to people in a way thats scaleable and I have fixed time periods for when I expect investments to return like 5 years or 10 years.
When some one can't talk about the value their service provides and use loose terms like "long term" how long is long? This is an easy pass for me.
Also this may be of some interest:
https://longtermstockexchange.com/static/principals_for_lt_s...
It’s not impossible to express complex incentive design or push readers in the right direction to understand this. What is the essence of what is quantitatively or contractually different about LTSE?
As someone who writes these docs for a living, don't be afraid to read the legal stuff. It's just text.
Or the white paper: https://longtermstockexchange.com/static/principals_for_lt_s...
Or the rules themselves: https://www.sec.gov/rules/sro/ltse/2019/34-86327.pdf
""Long-term focused companies should measure success in years and decades and prioritize long-term decision-making""
So, maybe the short answer is that? And the longer answer is 28 pages laying out details.
The idea is good, in my opinion, and will develop over time to become more concrete, most likely.
If you had to hold a stock for a long amount of time before selling it, you would find it very hard to buy or sell stock.
It turns out that is one of the most important things to do in modern, capital intensive, economies.
It also means people can invest for shorter periods and that means more capital is available for investment. This has a double bonus where it reduces the risk of investments again making more capital available...
Imagine if you're a would be investor. You're money is available now to invest. So you want the market to be open to let you buy. Otherwise that cash is just sat there waiting. Similarly, you want to invest all your money. But if you know you won't be able to get it back for X period of time then you can't can you? You might not even know how long you can invest for: I might reasonable expect not to need some cash till Christmas time but if I lose my job tomorrow I want it now please!
So a market where you can buy and sell rapidly makes you more able and more likely to invest. That's good for you as you can use spare cash productively and make a profit while still being safe if you suddenly have a change in circumstances. It's also it's good for the company you're investing in as they can raise capital quickly and there is more capital available. And all of this means more growth and lower costs and that means more tax money for social services and more jobs for other workers etc.
The analysis for the people receiving the investment is similar but a bit more complex because the company doesn't just get investment, it also get's information: a rising share price tells you you should expand, high prices in general indicate a great time to start new businesses, a competitor whose share price falls while your one rises has issues and might be open to a merger\takeover etc.
Compare football (ie soccer) trading windows. Player performance within a match might be like daily performance of a company.
I am a long term investor. Long term investors like me still need to buy or sell stock occasionally, even if only to live out their retirement eventually.
There's no good reason to assume that for every long term who wants to buy or sell on a particular date, there will be another long term investor on the other side of the deal.
So a special kind of short term investor, called a market maker, jumps in. Market makers typically hold a small amount of inventory and offer to buy or sell stock.
Market makers allow your grandma to sell stock any day of the week without worrying too much about timing.
See https://en.wikipedia.org/wiki/Market_maker
There are other kinds of short term holders of shares. But market makers are probably the most obviously useful to long term investors.
> Operating principles: In an earlier SEC filing, LTSE said that its corporate governance rules might include: increased voting rights for shareholders who hold company stock for long periods of time, restrictions on offering short-term incentives to executives, disclosure of impact of any stock buybacks, and requiring companies to have a board-level long-term product and strategy committee.
Presumably that could mean requirements on board memberships, dividend levels, types of employment perhaps? I find it a bit hard to see what stipulations they would have that aren't just good governance.
I think in practice this means that no one will use this exchange...
I think most of the approaches you mentioned wouldn't hold up for a large stock exchange because some off-platform trading site would spring up to fill the gaps. For example, you have a minimum holding period, but off-platform you can "sell" your shares at the current market price, then transfer them for free once the holding period ends. Or something.
I think you have to change the way the shares themselves work somehow (or how dividends work, etc). I'm not sure, seems like a hard problem.
Based on the “long term”, I’m guessing the core concept is no quarterly reporting, so companies can focus on long term initiatives.
However, how do they explain Amazon, who reinvested what would be their profits for over a decade, to continue expanding their business and build the massive Walmart juggernaut? All Bezos had to do was describe the strategy to the market, expand quarterly sales, and many investors were patient over the years.
However, an exception to the rule is not the rule.
How are they defining long-term thinking? Is Walmart thinking long-term? Is Uber?
If you aren’t implementing any exchange-level mechanisms, why does this need to be an exchange at all?
At the end of the day, it's fundamentally a blank check for management to misbehave -- to misspend money, pursue pet projects rather than real business goals, and have nobody to tell them no.
There is nothing inherently short-term about the stock market -- this is a myth that keeps getting repeated but has zero substance. Short-term changes in supply and demand add changes to prices, but it's not like anything's 10x off of the value a company is expected to produce -- the net present value of future cash flows.
But if you prevent people from selling, then you're preventing the market from holding a company accountable when its management messes up.
Is it even possible to hold management accountable for anything at all? Personally, I think executive compensation is the real culprit.
I've tried to think of ways to put a cap on compensation but I can't think of any way especially since the management of one company is on the board of another and they are all in it together. Also something I didn't know until recently: board members get paid! How is that not the dumbest thing in the world, I will never know... Personally, I think board members in public companies should get ZERO compensation, no travel allowance, no perks. They own stock, don't they? but I digress.
Is there a way to cap executive compensation to a multiplier of the lowest salary paid by the company? like 10x or 50x something? Like if the lowest pay is USD 15 per hour or USD 15 * 2000 = USD 30k then the highest executive compensation (including stock grants, bonuses etc) may not exceed USD 30k * 50 = USD 1.5M which isn't too bad.
Is it possible to codify something like this?
The comp for the highest level of management essentially comes out of the same pool of money as the returns to shareholders. If shareholders want to pay the CEO lots of money, let them. It's their money.
Especially, C-level executive's pay doesn't really come out of the same pot of money as low level employees' pay. The pay for cashiers at Walmart is more dependent on what Target or McDonald's pay their cashiers than on how much money the CEOs make.
Thanks to outsourcing jobs to third parties capping exec pay at some multiple of lowest employee pay doesn't make much sense. Many companies don't directly employ their security guards for example, but pay a third party company.
As for board members: they should be compensated however much they can negotiate for.
If I were to own a company, I would have opinions on how much the board members should be compensated. But who am I to tell other people how much to pay for services?
And I don't think all board members necessarily own significant amount of shares. See also https://en.wikipedia.org/wiki/Independent_director
In any case, I don't really understand how capping compensation would help hold management to account? I can see an argument for how management should mostly be paid in eg stock, so that their incentives are aligned properly. But I don't think that's what you wanted to get at?
Of course, it's the way things work now. And it has nothing to do with compensation.
Employees are held accountable by management, and are fired when underperforming.
Management is held accountable by the board -- and is similarly fired when underperforming. CEO's are let go all the time.
And the board is held accountable to shareholders -- as owners change or demand new policies, board composition changes accordingly.
Of course if the CEO/founder owns more than 50% of voting shares then the board is more advisory than anything else, but that's the exception -- and it's simply what you get from being the owner.
I fail to see how this will have any meaningful effect on "long term vision", if they still allow your stock price to be dumped at the first sign of trouble, or allow people to bet against your company when some irrelevant bad news hits, or no one else sees value when you decide to deepen your spend on R&D for some long term plan. If people freak out, or think they can profit off of your lack of current obvious value, the you are still going to have short term fluctuations that you will feel pressured to address.
The problem with short term thinking isn't from companies or company leadership, they are reacting to the natural short term fluctuations in their value because of the short term thinking of investors. Shareholders are not gonna understand your vision every time you decide to engage in a long term strategic shift in priorities, so they will react when they find out, and that reaction can swiftly damage a company's value. If shareholders can still trade over short-terms, then you will still have large scale short-term fluctuations that CEOs will be forced to address, as more and more potential buyers will be influenced by the low price of a stock caused by other skittish short-term thinking investors.
The problem is with investors in stocks, not with the companies unwillingness to think long term. To make such an exchange work, you have to have clever trading rules in place to force longer term thinking.
That would at least be an attempt. Though to be honest, (other people doing the) shorting is actually very good for the long term shareholder.
> The problem with short term thinking isn't from companies or company leadership, they are reacting to the natural short term fluctuations in their value because of the short term thinking of investors.
It's not that investors are short-termist. Far from it. See eg how shareholders react to Amazon or Tesla.
The problem is the principle-agent conflict: shareholders in general have a very hard time monitoring management. It is neigh impossible to tell a manager with a grand vision that will pay off in 20 years from a manager who burns capital on harebrained schemes for 20 years. Especially impossible to tell before those 20 years are up.
That's why investors are so keen on early and hard to fake signals. Returning cold hard cash to investors is one of those signals.
I'm also not sure "hold for 6 months" is particularly useful. A lot of people are already investing on that timeline today and it hasn't solved the problem. Also, there are enough investors on aggregate that there would still be a lot of buy/sell activity every day even with that model.
Something that might be kind of interesting is if there were a short trading window every ~5 years or something. Then nobody is trading at all for years, the company can focus completely on the long-term vision and only have to check in and worry about the public perception of the work for a short period of time every few years.
The rules I suggested aren't necessarily good rules, just random examples. That is, to me the most powerful driver for short term thinking isn't managerial in nature, it's investor in nature. That is, it's the short term fluctuations in market value as investor reactions to events or goals that have nothing to do with the company's bottom line or long term goals, etc. But if essentially random forces are affecting the value of your company, there will exist pressure on management to respond to that pressure. So to me the real fix is some set of rules constraining investor behavior with regards to how the stock is traded, not some nebulous honor-code among CEOs. I am not sure what the rules should be, I just picked random rules out of my butt. But I think there should be some trading constraints: if you truly want to incentivize long term vision, you have to remove the short term pressures.
Like your suggestion for a trading window every 5 years. I have no idea how well that would work, but it seems reasonable, and is the sort of thing I expected for the site, but they seem not to have anything like that in mind. Which to me means that have entirely missed the mark.
I'm sorry, but this doesn't seem to be clear at all to me.
Take the subset of investors that don't trade daily, or monthly, or, even yearly. There you have your long-term thinkers. And it's a large subset, make no mistake.
Also, LTSE? That's suspiciously close to LSE. I'm not being a detractor here, just asking the obvious.
Update: I found the Sign In/Sign Up URL: https://account.ltse.com/
Above only partly in jest. Modern crowdfunding-style stock platforms offers this to anybody, and while most startups fail, there are exceptions. The long term commitment required is a different experience.
Edit: For example if I wanted to invest in a business through LTSE today, is cboe how I would do so? What would my order flow look like?
to find out if your preferred broker or market maker is a member of LTSE, you can ask FINRA: https://brokercheck.finra.org/
Edit: Also, he didn't quite answer my question. I asked how one would find out what companies are listed, not for a list of what's currently up.
I might assume that they'll eventually be on their website but I've now asked twice and gotten answers about "preferred brokers" and "market makers" (I honestly don't know what that is) and another saying that this stock exchange has no stock to exchange. Again, I am not savvy in this area but it seems reasonable that "how would I view what's available?" wouldn't be to difficult of a question. If the answer is "those listings aren't 'For you' as a non-professional investor" then I'd be happy being informed.
It's correct that you can't just walk up to NASDAQ and make a trade, but I can find some information about what companies are listed there easily on their website. As far as I can tell, "open for business" kind of looks like "We've finished our copy about our ideals and goals and put it on a webpage" in this case.
I could be wrong or just totally missing the point but I still don't know what is listed or how to engage with it. Is it normal not to provide that information as a stock exchange?
Isn't every investment ultimately measured against a 30 year U.S. Treasury bond? Will the LTSE incentivize longer term investments?
Or put another way ... Adam Smith > Milton Friedman
I cannot wait to see where this goes and the mechanics LTSE puts in place to help reward long term thinking and long term holders
Why is the default that companies are "punished" for long-term thinking?
I'd bet that there are far more cases of long-term investors "punished" in the public markets by short-term thinking executives than vice versa.
Corporate governance is eff'd, and does promote short-term shenanigans, but technology that enables shareholder governance is the solution. Not just avoiding the price discovery process.
Well I woke up this morning and got myself a beer!
Source : https://markets.cboe.com/us/equities/market_statistics/venue...
I'm hoping that you'll offer an index fund to make it for passive investors (and dollar cost averaging) to put more money in this exchange, with less effort, and push the wall street incentives toward longer term.
I’m imagining some strict trading frequency limits. Like an inventor can only trade a specific stock once a year. Do I have the right idea?
So in order to solve this problem we have to start with corporate governance. Remember, though, that shares of stock are not actually commodities. They are contracts and the rights and responsibilities of stockholding emanate from the corporate charter. So as we are able to encode protections and requirements there, they will follow the stock wherever it trades.
Through this mechanism, much reform is possible both today and in the future.
And congrats Eric on getting to this point, I know it's been a long road!
Which was harder - building a stock exchange, or getting someone to read a whole book?
With the benefit of hindsight, which of the following would you say is the biggest predictor of growth in equities prices: everything else, greater buying, less selling, brand, liquidity, or previous prices?
In all seriousness, there’s no comparison. A regulated national securities exchange is one of the harder kinds of startups you can attempt.
I’m pretty sure that over the long run equity prices are a mirror of the fundamental value creation that companies do by serving customers. The problem is that this can become distorted “longer than you can stay liquid” as the old saying goes
Looking at TSLA, AMZN, FB... I'm skeptical about this premise.
or here: https://longtermstockexchange.com/static/principals_for_lt_s...
or here: https://www.sec.gov/rules/sro/ltse/2019/34-86327.pdf
I can't say "I'm starting a food truck which will sell popsicles that don't melt even in the face of great heat. Sure the suppliers have to put in a little extra work to make sure they don't melt, but you as a buyer will benefit" - that doesn't really work unless there is a path for those popsicles to be created and offered for sale in a way that makes sense for the supplier.
Publicly traded companies in the USA already re-invest quite a large chunk of their profits for future growth, where companies in other countries would tend to pay out larger dividends.
Thanks
This is a financial product available on the CAC40 index which pays off if the index value stays within a certain range.
Tax wealth for all I care. But don't tax transactions.
(Btw taxing transactions would actually make financial speculation more profitable. Because bid/ask spreads would become wider and prices more volatile.)
Minimum holds are very different from trade taxes. (The latter is stupid for a variety of reasons.) Minimum holds would make market making more profitable.
Market makers are good for widows and orphans. You don't want your grandma to have to be careful with the day of the week or time of the day when she sells her stocks.
And if so, when can I buy in?
(But I guess you could subscribe to our newsletter in the meantime... https://ltse.com at the bottom of the page)
Big brain: Link your blog explaining your site, main site is unaffected by DDOS
Galaxy brain: Link your blog explaining your site hosted by a 3rd party. No DDOS.
Nice work, everyone.
I was expecting some kind of exchange designed for lower volatility. There have been exchanges proposed where prices only change once a minute, or something like that, to stop high frequency trading. But this isn't one of them. Warren Buffett has proposed that any capital gain over a period less than a year be taxed at 100%, to force a buy and hold strategy. Not seeing any of that here.
Well yes, anyone with ample liquidity would love this. Anyone needing short-term liquidity would be price indifferent between their acquisition price and the market price. Liquidity providers would make bank.
In terms of the principles, we advocate for principle-based listing standards which are indeed binding and enforceable. The details are enumerated in our public filings with the SEC and on our website.
1. Can we do a direct stock listing?
2. How much equity needs to be offered?
3. Is there a minimum valuation that needs to be met to be listed?
4. What are the fees to be listed?
What are the current examples of company that exists now that fit that ideal long-term vision?
It would be better if they gave more details on it.
That said, there were many many many MVPs that you don’t see that informed the direction we are at now.
In some way our private company tools are also an MVP of sorts: https://ltse.com/tools/
( Or plans for this)
We focus instead on finding ways to differentiate the experiences of the “tourist” speculators from the “citizen” long-term investors
Can you expand on this?
I’ve answered about MVPs elsewhere in this thread but a big part of what made this possible is our superior cost structure due to being a software-native company
Validation I’ll have to answer a little later, once we make a little more progress
And shouldn't we celebrate the march of technology? In the grand scheme of things, trading is relatively boring. Let the computer do it.
You put your orders in, they all get queued up and then the queue gets executed randomly.
That would force the traders to think in different terms, closer to the real value of the asset.
Sorry, if that sounded harsh. I am not familiar with the business nuances around exchanges and so the question.
when investors will buy anything that whiffs of growth and executives can raise debt for cheap and raise secondaries easily no one on either side is exactly clamoring for a "long term" focused exchange right now.
There are some investors and companies that tune out the noise and try to make lasting change, making a dent in the universe, that kind of thing. I think they could use financial infrastructure to support their ambitions. Seems pretty simple to me
we live in a market when there’s a dozen SPACs listed every week and a company like Nikola that doesn’t even have a functioning product has a valuation of $20B. liquidity and support from central bankers have naturally made investors more patient and willing to ignore short term road bumps.
- What is required for Direct Market Access? A relationship with a member of LTSE who offers DMA.
- Will the realtime data feed be public? Yes, LTSE's market data can be accessed via the SIP's (Securities Information Processor) under the "L" quote.
- What is the fee schedule? Free/Free (Add/Remove)
[1] https://en.wikipedia.org/wiki/Arizona_Stock_Exchange [2] http://reports-archive.adm.cs.cmu.edu/anon/2012/CMU-CS-12-12... [3] https://medium.com/bollinger-investment-group/constant-funct...
Does the LTSE structure support companies oriented towards developing rapid climate solutions that will pay off in the longer term, but not at the rate of typical venture investments? If this isn't a focus, why not?