President Gore on algo traders

And yes he was elected president of the US in 2000.

Capitalism overall is arguably the best system in the world. This is true even with the sometimes immoral principle of "ends justify the means" of capitalism. Yet, is there anyway to promote benenficial long term investment. People have long lambasted the downside of short-term investments, sheer focus on quarterly profits, the ingoring of social justice and the environment, etc. Yet, is there something to do about it, or instead now in the recovery will it be business as usual.

Capitalism has been tested and found wanting – or at least the variant that currently prevails in most of the western world, often labelled crony or insider. The big rewards are accruing to a tiny minority, who can buy political influence to ensure the system remains geared to rewarding them further. Some of those reaping the rewards are questioning the system. Jeremy Grantham, chief investment strategist at GMO, a Boston-based fund manager, wants higher taxes on the rich and more help for the poor, as he wrote in FTfm recently.

Welcome though Mr Grantham’s contribution is, arguably his prescription is just about tweaking the moving parts when the whole engine needs rebuilding. Another way forward was offered last week by Al Gore, former US vice-president, and David Blood, an ex-partner at Goldman Sachs, in a paper on sustainable capitalism.

The duo has built a successful business (Generation Investment Management, founded in 2004) on the back of their belief in sustainable investment. They are now seeking a wider audience for their message that investing for the long term and viewing risk and return through the prism of environmental, social and governance factors is not at odds with capitalism’s central tenet of profit maximisation.

Building the business case is particularly important, they say in an interview with FTfm. They had hopes that sustainable investment was about to go mainstream in 2008, having been distinctly niche in 2004. But the conversation has gone backwards in the wake of the financial crisis, as the focus has moved to jobs or other issues. The crisis should have been a huge wake-up call – proof that the myopic focus on short-term profits was destroying value on a grand scale, and damaging the planet, too. But despite the ongoing soul-searching, the most obvious desire on the part of the powerful is a return to business as usual.

Messrs Gore and Blood suggest this is crazy: the short-term perspective is “driving our economies and our planet into liquidation”, says the paper, quoting economist Herman Daly. It offers five concrete ideas for moving toward a more sustainable style of capitalism. Top of the list is to assess and incorporate the risks from so-called “stranded assets” – those that could be hit hard by putting “a reasonable price” on carbon or water, for example, or if regulation raised labour standards in emerging nations.

Also called for are mandating integrated reporting, whereby companies combine financial and ESG performance in one report; moving away from quarterly earnings guidance; loyalty-driven securities, to reward investors who hold shares for three years or more; and better aligned incentive structures for asset managers and corporate executives. These are changes business and investors can drive, according to Messrs Blood and Gore. But it is not clear why those groups should suddenly step up to the plate.

As FT columnist Martin Wolf observed recently: “UK corporates are run not for long-term health, but for executive wealth, with bad results for the businesses themselves and, still more, for the entire economy.” The same goes for companies worldwide. On the rare occasions when a company does want to take a sustainable approach, executives complain that investors tend to get in the way rather than be supportive.

This is odd, considering that investors and asset managers have signed up in their droves to the United Nations Principles for Responsible Investment, committing $30tn . . . If those assets “were actually shifted into truly sustainable investment models, the effect would be dramatic”, says the paper.

There may not be $30tn worth of truly sustainable investment opportunities in the world, but companies would presumably respond if investors made more demands. Such demands are a lot to expect in current circumstances, with investors and managers alike casting around for something – anything – that will yield a return. It is hard to avoid the conclusion that little will change without regulatory or government intervention. And the chances of that, particularly in the US, seem slim.

The best thing Generation could do to convert investors to its cause is to show superior long-term performance. But, like other long-only managers, it is up against a rigged system. Mr Gore decries the increasing influence of high frequency traders. “The high profits from algorithmic trading often come at the expense of long-term investors,” he says. He describes as “hogwash” the claims of the HFT community that they bring valuable liquidity to markets. “The idea that more liquidity is always better is not true.”

Moving forward on sustainable capitalism is about much more than taking on the algo traders, but that may be a good place to start.

http://www.ft.com/intl/cms/s/0/5d2ab9a0-5987-11e1-8d36-00144feabdc0.html#axzz1ms3UKaKu

Originally posted by moon1969
And yes he was elected president of the US in 2000.

Capitalism overall is arguably the best system in the world. This is true even with the sometimes immoral principle of "ends justify the means" of capitalism. Yet, is there anyway to promote benenficial long term investment. People have long lambasted the downside of short-term investments, sheer ...[text shortened]... quote]
http://www.ft.com/intl/cms/s/0/5d2ab9a0-5987-11e1-8d36-00144feabdc0.html#axzz1ms3UKaKu

NAFTA and the WTO were both passed, and Glass-Steagall was repealed, on Al Gore's watch as vice president. If capitalism has gotten significantly worse, he certainly has his share of blood on his hands.

Originally posted by moon1969
And yes he was elected president of the US in 2000.

Capitalism overall is arguably the best system in the world. This is true even with the sometimes immoral principle of "ends justify the means" of capitalism. Yet, is there anyway to promote benenficial long term investment. People have long lambasted the downside of short-term investments, sheer ...[text shortened]... quote]
http://www.ft.com/intl/cms/s/0/5d2ab9a0-5987-11e1-8d36-00144feabdc0.html#axzz1ms3UKaKu

Just let venture capitalists take their lumps in a downturn. The government doesn't have to get involved.

A downturn is the moment for government to begin spending money WHICH IT HAS SAVED UP -- but not primarily to act as a stimulus. Simply because that's when you get good prices and so it is sound public finance. The fact that it stimulates the economy is good, too, but not the main reason to do it.

BUT the government must have saved up during good times. For the government to arrive at an economnic downturn heavily in debt is totally irresponsible. The whole crew of politicians should be thrown out as collective punishment and technocrats installed.

Originally posted by spruce112358
Just let venture capitalists take their lumps in a downturn. The government doesn't have to get involved.

A downturn is the moment for government to begin spending money WHICH IT HAS SAVED UP -- but not primarily to act as a stimulus. Simply because that's when you get good prices and so it is sound public finance. The fact that it stimulates the eco ...[text shortened]... e crew of politicians should be thrown out as collective punishment and technocrats installed.

So do you agree with the auto industry bailout that has led to recovery and success of those companies.