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By Shalom P. Hamou (about the author)
Become a Fan -- Page 6 of 11 page(s)
It is called a bear trap, but the fall will take place. I promise.
"If I may be allowed to appropriate the term speculation for the activity of forecasting the psychology of the market,
and the term enterprise for the activity of forecasting the prospective yield of assets over their whole life,
it is by no means always the case that speculation predominates over enterprise.
As the organization of investment markets improves,
the risk of the predominance of speculation does, however, increase.
In one of the greatest investment markets in the world, namely,
New York, the influence of speculation (in the above sense) is enormous.
Even outside the field of finance, Americans are apt to be unduly interested
in discovering what average opinion believes average opinion to be;
and this national weakness finds its nemesis in the stock market.
It is rare, one is told, for an American to invest, as many Englishmen still do, 'for income';
and he will not readily purchase an investment except in the hope of capital appreciation.
This is only another way of saying that, when he purchases an investment, the American
is attaching his hopes, not so much to its prospective yield, as to a favorable change
in the conventional basis of valuation, i.e. that he is, in the above sense, a speculator.
Speculators may do no harm as bubbles on a steady stream of enterprise.
But the position is serious when enterprise becomes the bubble on a whirlpool of speculation.
When the capital development of a country becomes a by-product of
the activities of a casino, the job is likely to be ill-done.
The measure of success attained by Wall Street, regarded as an institution
of which the proper social purpose is to direct new investment into
the most profitable channels in terms of future yield, cannot be
claimed as one of the outstanding triumphs of laissez-faire capitalism
--which is not surprising, if I am right in thinking that
the best brains of Wall Street have been in fact directed towards a different object."
John Maynard Keynes, 1st Baron Keynes of Tilton
June 5th, 1883 -- April 21st, 1946
The General Theory of Employment, Interest, and Money.
Chapter 12: The State of Long-Term Expectation, VI.
December 13tn, 1935
The Puzzle of the Dynamic of a Crash:
Yield Curve:
In The Tract Pro Bono I develop a novel model of the yield curve.
Become a Fan -- Page 6 of 11 page(s)
"If I may be allowed to appropriate the term speculation for the activity of forecasting the psychology of the market,
and the term enterprise for the activity of forecasting the prospective yield of assets over their whole life,
it is by no means always the case that speculation predominates over enterprise.
As the organization of investment markets improves,
the risk of the predominance of speculation does, however, increase.
In one of the greatest investment markets in the world, namely,
New York, the influence of speculation (in the above sense) is enormous.
Even outside the field of finance, Americans are apt to be unduly interested
in discovering what average opinion believes average opinion to be;
and this national weakness finds its nemesis in the stock market.
It is rare, one is told, for an American to invest, as many Englishmen still do, 'for income';
and he will not readily purchase an investment except in the hope of capital appreciation.
This is only another way of saying that, when he purchases an investment, the American
is attaching his hopes, not so much to its prospective yield, as to a favorable change
in the conventional basis of valuation, i.e. that he is, in the above sense, a speculator.
Speculators may do no harm as bubbles on a steady stream of enterprise.
But the position is serious when enterprise becomes the bubble on a whirlpool of speculation.
When the capital development of a country becomes a by-product of
the activities of a casino, the job is likely to be ill-done.
The measure of success attained by Wall Street, regarded as an institution
of which the proper social purpose is to direct new investment into
the most profitable channels in terms of future yield, cannot be
claimed as one of the outstanding triumphs of laissez-faire capitalism
--which is not surprising, if I am right in thinking that
the best brains of Wall Street have been in fact directed towards a different object."
John Maynard Keynes, 1st Baron Keynes of Tilton
June 5th, 1883 -- April 21st, 1946
The General Theory of Employment, Interest, and Money.
Chapter 12: The State of Long-Term Expectation, VI.
December 13tn, 1935
The Puzzle of the Dynamic of a Crash:
Yield Curve:
In The Tract Pro Bono I develop a novel model of the yield curve.
Take action -- click here to contact your local newspaper or congress people:
What If you Called 411 and The Crash Answered?
Click here to see the most recent messages sent to congressional reps and local newspapers
blog.yield-curve.net
Shalom P. Hamou
Tel Aviv, Ramat Aviv, Israel
I am the youngest economist at My Yield Curve.
Since spring of 1994 I have been working on economic depressions.
I am writing The Tract The Religious Interpretation of (more...)
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