FINANCE
The Markets Are Not Ready for Hillary
by Diego Jasson
2015-12-09 08:00:00
A Hillary Clinton presidency wouldn't bode well for the financial markets. Reckless pandering to Bernie voters may cost her the votes of the intelligent investors.

Hillary Clinton touted that today’s financial markets are held hostage by the "tyranny of today’s earnings reports.” In a quarterly practice, publicly traded companies disclose their financial statements for the last quarter in order to ensure investors make educated decisions on their investments. Inevitably, upon the releasing of these statements, if they exceed the analysts’ expectations, also known as the ‘street,’ the prices rise quickly. Conversely, if earnings are lackluster compared to expectations, the price will drop. Hillary Clinton would like to tax different length investments differently, believing that it will encourage investment for the US economy focused on the long run. Like most of her proposals, her rationale is misguided.

High Frequency Trading firms have become a scapegoat for regulator aggression over the last couple of years. These firms execute trades that may last milliseconds until the position is covered, or ‘sold.’ It is the liberal sentiment that these firms are unfair to common investors due to their superior speed, yet HFTs have become crucial to today’s markets.

In markets, the measure of the facility to buy or sell a security is measured and called liquidity. The higher the liquidity, the fairer the bid ask spread on these stocks will be. The bid ask spread is the difference between the price that an investor is willing to sell a security at and the price at which an investor is willing buy it. The vast amount of trades that HFTs make create a significant amount of liquidity in the markets, making it fairer for all. Punishing HFT firms and short term investors in general will not make markets safer, or the investment horizon longer; it will simply decrease liquidity, creating an unfair marketplace with inaccurate price data.

Furthermore, the longevity of someone’s ownership of an asset does absolutely nothing to affect a company’s approach or strategy. Fundraising from stocks and bonds is received by the company upon issuance, or when the company first offered the security. Someone still owns the asset once it is sold, it just simply is not the same person.

It is clear to the editor of this column that this policy would be detrimental to the health of the markets, and is in clear violation of the liberalism and free market principles this column seeks to champion.



The Markets Are Not Ready for Hillary

Hillary Clinton touted that today’s financial markets are held hostage by the "tyranny of today’s earnings reports.” In a quarterly practice, publicly traded companies disclose their financial statements for the last quarter in order to ensure investors make educated decisions on their investments. Inevitably, upon the releasing of these statements, if they exceed the analysts’ expectations, also known as the ‘street,’ the prices rise quickly. Conversely, if earnings are lackluster compared to expectations, the price will drop. Hillary Clinton would like to tax different length investments differently, believing that it will encourage investment for the US economy focused on the long run. Like most of her proposals, her rationale is misguided.

High Frequency Trading firms have become a scapegoat for regulator aggression over the last couple of years. These firms execute trades that may last milliseconds until the position is covered, or ‘sold.’ It is the liberal sentiment that these firms are unfair to common investors due to their superior speed, yet HFTs have become crucial to today’s markets.

In markets, the measure of the facility to buy or sell a security is measured and called liquidity. The higher the liquidity, the fairer the bid ask spread on these stocks will be. The bid ask spread is the difference between the price that an investor is willing to sell a security at and the price at which an investor is willing buy it. The vast amount of trades that HFTs make create a significant amount of liquidity in the markets, making it fairer for all. Punishing HFT firms and short term investors in general will not make markets safer, or the investment horizon longer; it will simply decrease liquidity, creating an unfair marketplace with inaccurate price data.

Furthermore, the longevity of someone’s ownership of an asset does absolutely nothing to affect a company’s approach or strategy. Fundraising from stocks and bonds is received by the company upon issuance, or when the company first offered the security. Someone still owns the asset once it is sold, it just simply is not the same person.

It is clear to the editor of this column that this policy would be detrimental to the health of the markets, and is in clear violation of the liberalism and free market principles this column seeks to champion.