Short term traders should be taxed at 90%

[Bushman]

Re: Short-term trading strategy discussion

All you gain by purchasing a share is the proportionate right to the assets of the company and, depending on the security, the free cash flow of that entity (paid as a dividend). You will also be able to receive some tax benefit from that security if it pays franked dividends.

I should add that traders make a profit in the short-term as the market uses a process of discovery' to price these future cash flows. What is that famous quote? 'In the short-term the market is a voting system, in the long-term it is a discounting system'.

 

[Sir Osisofliver]

Re: Short-term trading strategy discussion

How so?

The only way a company has access to new 'cash', or capital as it is more commonly called, is by one of:
- raising funds in equity/debt markets;
- 'recycling' capital by selling its underlying assets; or
- reinvesting cash profits made into the business rather than paying out a dividend (i.e. DRP).

Buying or selling a share on the secondary market is cash flow neutral to the underlying entity. Your only argument could be that by buying, you are supporting the underlying share price which will allow the company to raise equity funds at a higher WVAP.

All you gain by purchasing a share is the proportionate right to the assets of the company and, depending on the security, the free cash flow of that entity (paid as a dividend). You will also be able to receive some tax benefit from that security if it pays franked dividends.

You've said it yourself.. raising funds in equity/debt markets.

There are plenty of companies that use as security the "strength" in value of their shares. Babcock and Brown spring to mind here. One of the banking covenants revealed in the dying days of BNB was a clause in relation to BNB's share price, which would result in a call from the banking consortium to "discuss" their banking arrangements. From my tired and imperfect memory I think the figure was about $7.50, a small number in comparison to the +$30 they traded at their highs, not small enough when the GFC came along.

Indirectly therefore the stability and strength of the share price relates to the amount that the company can borrow against in debt markets. Stability and strength comes from long-term holders and large institutions holding and continuing to hold.

When we evil short-term traders and *gasp* shorters of the stock affect the share prices we undermine the supposed "strength" of the share price. (Or at least that was the gist of the argument when they banned short selling).

Cheers

Sir O

 

[basilio]

Pretty courageous suggestion by Spiderbrain to tax short term profits at 90%..

However.. I can see a point. In theory I thought stock markets were about initially financing companies and then seeing the value of these companies rise and fall as they became more or less successful at actually producing a product.

The reality ? I suspect that the main game these days is manipulating and trading shares particularly in smaller caps to make a profit. The question of whether there is any reality in the company is often overlooked if one can trade and make a buck on the daily ups and downs.

On the bigger scene I suggest most of the trading in CFDs ect is speculative gambling. As is commodity trading, currency trading and so on.

The point about all this is ? The systems that are the lynch pin of our financial stability seem to be largely driven by short term gambling strategies. If/when things get ugly we face horrific impacts on our banks, superannuation funds and major businesses. Is that a price we are prepared to pay for allowing almost unbridled gambling ?

Put aside Spiderbrains suggest of a 90% tax on profits. How about a small tax on share transactions (that went to a worthwhile fund...) to send a financial message that relentless trading was going to have a cost and thus discourage hyper speculation? Any thoughts ?

 

[Mr J]

On the bigger scene I suggest most of the trading in CFDs ect is speculative gambling. As is commodity trading, currency trading and so on.

Everyone is gambling.

How about a small tax on share transactions (that went to a worthwhile fund...) to send a financial message that relentless trading was going to have a cost and thus discourage hyper speculation? Any thoughts ?

I have a thought, but it isn't appropriate for this site.

 

[nunthewiser]

Everyone is gambling.



.

Not everyone

But we already had this discussion .

 

[joeyr46]

Pretty courageous suggestion by Spiderbrain to tax short term profits at 90%..

However.. I can see a point. In theory I thought stock markets were about initially financing companies and then seeing the value of these companies rise and fall as they became more or less successful at actually producing a product.

The reality ? I suspect that the main game these days is manipulating and trading shares particularly in smaller caps to make a profit. The question of whether there is any reality in the company is often overlooked if one can trade and make a buck on the daily ups and downs.

On the bigger scene I suggest most of the trading in CFDs ect is speculative gambling. As is commodity trading, currency trading and so on.

The point about all this is ? The systems that are the lynch pin of our financial stability seem to be largely driven by short term gambling strategies. If/when things get ugly we face horrific impacts on our banks, superannuation funds and major businesses. Is that a price we are prepared to pay for allowing almost unbridled gambling ?

Put aside Spiderbrains suggest of a 90% tax on profits. How about a small tax on share transactions (that went to a worthwhile fund...) to send a financial message that relentless trading was going to have a cost and thus discourage hyper speculation? Any thoughts ?

How you can say that short term traders had any impact on banks super funds and major businesses is beyond me when they stopped people shorting banks they still tanked. Traders provide liquidity and when shorting has been stopped the shares often tank faster without anyone to buy them. Super funds buy and kid you they know what they are doing but there were plenty of analysts who saw the GFC and the bottom in march and the future moves at the moment but they are analysts not economists, and most of them have put the reasons down to debt (which short term traders did not create).
Any logic says prices can not just keep going straight up which is what most people who are complaining about the GFC seem to expect. this bear market is no different to any others just a little bit longer since the last one and IMO still a few years to go.
We could put a small tax on transactions but governments don't give money to worthwhile funds they just spend it stupidly and wastefully so why should I give them any more of my money than I already do.

 

[Trembling Hand]

The reality ? I suspect that the main game these days is manipulating and trading shares particularly in smaller caps to make a profit. The question of whether there is any reality in the company is often overlooked if one can trade and make a buck on the daily ups and downs.

On the bigger scene I suggest most of the trading in CFDs ect is speculative gambling. As is commodity trading, currency trading and so on.

Any thoughts ?

Here is a thought, Or more to it some back ground. From the ADI thread today

Yipee!! I'm back to where I started with ADI.

Originally jumped in at 30c I think Nov 2008 when there was a drill that was going to be the goods....

Anyway 15 months later it all looks so much better.

Just lol when are losers going to put their hand up and blame themselves for THIER mistakes.

 

[ROE]

Well I admit to be pretty ignorant about it all and only came in to see if there were any threads about APA (since they're wanting me to buy more) and impetuously responded to this thread. And yes I have been burnt. I have a few shares and funds that I watched collapse during the GFC, sold CBA back in March and then watched them skyrocket, bought Elders at 19.5 cents recently and watched them plummet and a few other disasters.

You will no doubt call me stupid but the way the market can go bonkers seems completely crazy to me and short term buying and selling like playing a game of poker is just part of the craziness I think.

Anyway, glad you all think it's a productive activity. It's certainly not as bad as all the other shonky crap that goes on in the market like the CDS MBS and CDOs tied to frauds and shysters that brought the financial system to its knees.

Oh and I'm definitely not a communist! I'm not an advocate of unregulated markets either though.

Learn to be a better investor, learn from your mistakes
everyone make mistakes just make sure you don't make the same mistakes over and over again

Who knows 10 years from now you can make all those money back and then more.

With discipline and buy only quality company at reasonable price you WILL get a decent return.

 

[Mr J]

Not everyone

But we already had this discussion .

Okay, true arbitrage isn't gambling :.

How about a small tax on share transactions

Since when has a tax solved anything? Do you even know the consequences of such a tax? Do you know the consequences of removing shorterm traders from the market? I doubt it, otherwise you wouldn't have suggested the tax and whinged about the traders. Either that, or you have an axe to grind. The mob and their pitchforks will be the end of me .

 

[nulla nulla]

Exactly.
I'm just a bit surprised that anyone has actually taken the initial post seriously enough to argue about it.
Such ignorance really deserves to fester.

I agree with Julia. Why are we wasting time and space with this crock. Since when did the members of the ASF feel the need to justify their existance and individual perspectives, on various forms of trading the markets, to someone that obviously has not taken the time and effort to learn something before trying to deal with it?

 

[newbie trader]

Spider,

Until you learn that there is no one else to blame but yourself when trading then I don't think you should participate. Like the old time saying you need to learn from your failures and see where you went wrong (keep a trading diary). Over time you will improve if you can accept this and then you will no longer need to blame others. I'm 18 and i've been helping my parents trade since i was around 16...I think I would have been more mature and accepting than you at age 16.

N.T