The Role of the Stock Market - In Defense of Financial Markets

In this lesson, Dr. Yaron Brook continues his discussion of the stock market, including the pricing of stocks, the economic role of speculators, the short term vs. the long term in the stock market, and the impact that regulations have on risk and the markets as a whole. He also discusses the best way to defend the stock market from an economic standpoint: by showing that markets are efficient and objective.

In Defense of Financial Markets: Lesson 4 of 7

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[science]

Financial markets, stock exchange, speculators, etc. The civilization itself.

[GiovanniH]

Is anybody aware of the formula(s) he’s speaking about? Thanks!

[sathyath]

In the end, everything is a speculation and everyone is a speculator. And if the definition of speculator in its essence is a gambler simply because it will always involve risk no matter how small it is, then we all gambler. Because no one knows the future. And it is fine.
Whether you are a short-term trader, long-term investor, fundamental or technical, rational investor, irrational investor, riskier or safer investor, even a non-trader/investor who think you're taking no risk by not investing in anything, is currently taking risk. And therefore a gambler. If you're not taking any investing position on any asset, that means you're taking position on cash/currency. Which in itself contain inherent risks since its value also determined by external factors such as government policies and collective sentiments.

[derumweger]

YB thoroughly confuses product consumption with monetary spending. See 3:00-4:00. Why money is worth more today than in the future. He says we can consume it today. No, you cannot consume money. It's only paper/coin. The Austrians are the only people who get this issue right. You value the services money provides today because you prefer to act sooner rather than later. See Carl Menger, Eugen Bohm-Bawerk & Ludwig von Mises.

[derumweger]

21:00 Technical Analysis is nonsense. I agree. But, in order for anything to make sense, there must be context. That includes Technical Analysis. So, before you throw those charts away, simply do some supply/demand analysis. Examine prices, volumes & times. Create an imaginary construction or story line and test it using counterfactuals. This is how I make money.

[derumweger]

Not connected to Reality. Whim Seeking trading (33:50)
But, if the Whim Seeking Trader uses price to formulate his trades, does he not keep a connection to Reality? How can it be that a Whim Seeking Trader is disconnected if he uses price as a tool to decide his trades? Well, the answer is that he is not a Whim Seeking Trader. He is actually connected through the mechanism of Price. So, the moniker ‘Whim Seeking Trader’ is insufficient to describe this aspect of market as a process. Maybe a better description of this prospective trader is to describe him as acting on incomplete information. This fact creates the appearance of whim seeking behavior.

[peggyfranzen]

This has nothing to do with Miss Rand- nice railroad for you.Most farmers would say you are nuts.