I quite enjoy the Telegraph Business Club, and am often moved to contribute to debates. Sometimes I 'm quoted, sometimes perhaps not (one can become a tad prevalent). This was from the latest question posed (in blue, below). It does reflect a certain lack of faith in the current system, sadly:
"I know next to nothing about financial markets, and their contribution to the complex interactions that make up and are essential to driving a modern economy. I just have to presume that they are necessary, as they have been around for a heck of a long time, and an awful lot of folk are permitted to make an awful lot of money doing whatever it is they do. The best I can come up with is it all acts a 'buffer' between those making stuff and those who can help to fund them to do so.
The thing I have had trouble getting to grips with is how all this lot get sustained when few actually make anything beyond their own salaries and bonuses. At best most are facilitators to varying degrees of constructive processes. But from my reading of David's piece many are simply self-interested parasites actively damaging forward progress through, at best, the uncertainties created by second-guessing of their actions, or worse still by the damage that gets inflicted when these actions are taken for that 'quick buck'.
I was going to say I wouldn't mind if all this effort and money was consumed and made in the cause of skillful decisions, but without sounding like 'Citizen Smith' I must say I do. Especially when, like politicians and many business leaders, the rewards seem to flow in quickly when a lucky decision is made (or they're simply in the room when something good happens), but for some reason still get retained when they are not. At least football managers seem to reap the consequences of their positions and the decisions made whilst in them.
So to [the] question whether I think the stock exchange has become corrupted?... take that as a yes. But it's not just in this sector. I await a sense that any part of our society today has a view beyond making as much as possible tomorrow, literally, at the expense of future considerations in the longer term."
Do you share my exasperation by the panic gripping financial markets? Stock indices are shaky, but nothing has really changed. When a company loses ten percent of its share value it does not mean it's doing ten percent less business or making ten percent less profit. It simply means City traders have taken a decision to withdraw some of their bets.
I use the word 'bets' deliberately. Many City traders seem to know more about gambling than the real world of business. In real companies, managers take strategic decisions with a view to increasing sales and profits over a three or five year time-frame. But far too many City traders look no further than the next set of quarterly results. It is little wonder that one hears of so many companies like Marks & Spencer undertaking share buy-backs so they can get off the Stock Exchange and focus on satisfying customers rather than pleasing the packs of City lemmings.
Not every City trader is a lemming, of course. Some wiser heads look at the bigger picture and make longer-term investment decisions. But most City traders follow the herd and scrabble around in pursuit of the latest opportunity to make a 'quick buck'.
Want proof? Look at Gizmondo Europe. This company was going to be 'the next big thing', making a hand-held computer game to rival Sony and Nintendo. It did not matter that the company bosses had dubious backgrounds. The City traders didn't care that Gizmondo was hardly selling anything, either. The market hype was loud enough for the firm to reach a market valuation of $1bn and the directors to spend £160m living the high life before the truth became apparent. Now the company is in liquidation.
The principles of a stock exchange are totally sound, but it has become corrupted. If only investments were made to help businesses grow, rather than to help City gamblers get rich quick, the business environment would be far less volatile. What do you think?
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