From: john@anasazi.com (John R. Moore)
Subject: Re: Short term vs. Long term (Was Re: why progressive tax rates (was Re: Clinton's Economic plan attacked))
Reply-To: john@anasazi.com
Organization: Anasazi Inc, Phoenix AZ USA
Date: Wed, 26 Aug 1992 18:06:49 GMT

Keywords: 

In article <1992Aug26.000004.6424@oracle.us.oracle.com> mfriedma@uucp (Michael Friedman) writes:
]In article <1992Aug19.140423.18845@anasazi.com> john@anasazi.com writes:
]>It depends on your expectations at the time you make the two investment
]>decisions (buy and sell). If you purchased expecting short term gain,
]>you are encouraging companies to go for the short term. If you purchase
]>for long term gain, you are encouraging companies to adopt strategies
]>that may depress earnings in the short term but increase them in the
]>long term. 
]
]This seems rather illogical.  After all, if I am investing for the
]short term that means that I need someone else to be willing to buy in
]the short term.  But if the company has not been putting funds into
]R&D then why would that second investor buy?  He doesn't want a bum
]stock.
No, because by the time you sell, the R&D will not have made any
difference. The second guy will have seen the earnings go up quickly
during your ownership (due to short term investments by the company),
and will buy expecting the same. The funds managers (who control
most of the stock) will have sold to other funds managers and
gained a nice profit for their portfolio which gives them nice
bonuses (they are investing for the short term, not long term).
Overall, this places strong quarterly earnings demands on
companies.

If you think I'm imagining this, let me mention that I have been
involved in merger/acquisition situations, and planning for them,
and have talked to others who have done same. The rule is simple:
in order to get a good stock price, one must have a continuously
increasing earnings rate. This is antithetical to a company (especially
a small one) that is likely to do long term planning. In fact, many
companies avoid going public (and giving the public an opportunity
to invest in them) simply to avoid the tyranny of the quarterly
earnings report.

This is NOT theory.... this short term orientation is an observed
(by me) fact.
]
]If you were correct, then you could make a killing looking for
]companies which were investing for the long term and whose stock was
]therefore undervalued.  Since you aren't quietly chortling to yourself
]while counting your millions I am inclined to disregard your opinions.
I'm not??? (investing for the long term?) There are a number of
people who invest for the long term, but they are outnumbered by the
fund and pension managers who invest (for their own selfish reasons)
for the short term, and thus distort the market for those who invest
for the long term.

]I am not an official Oracle spokesman.  I speak for myself and no one else.
                      ^^^^^^
Unfortunately, I DID invest in Oracle, just before it became apparent
that they had mislead analysists about a quarterly earnings projection, 
and my stock took an enormous dive (19 to 5). This is an example of how 
short term the market behavior is.... the stock has gone back up to around 
18 now.  Since the long term prospects of the company really didn't change 
during those few days of price collapse, this is another indication of the
short term bias to the market and how silly it is.


-- 
John Moore NJ7E, 7525 Clearwater Pkwy, Scottsdale, AZ 85253  (602-951-9326)
john@anasazi.com ncar!noao!asuvax!anasaz!john anasaz!john@asuvax.eas.asu.edu
 - - Saddam Hussein... he just keeps going... and going... and going - -