The Stock Exchange should report, in real time, the current average holding period for each security.

Sir, Megan Greene writes: “The average holding period for a security on the New York Stock Exchange has fallen from two months in 2008 to just under 20 seconds today, according to analysis from Cumberland Advisors” “Passive investing is storing up trouble” August 3.

I had no idea we were into holding periods measured in seconds. Some years ago U.S. Sen. Mark Warner mentioned "The average time someone used to hold a share of stock back in the ’60s was eight years.”

Seeing this, it’s clear the stock market should begin to report the individual holding period for each security. Any ordinary investor, who makes his own slow analysis to come up with a decision whether to buy or sell, I assume would not really want to be competing against computers working in milliseconds… distant from fundamentals.

And Megan writes about the systemic risk present in “Passive investments… Often set up to mimic an index, ETFs have to buy more of equities rising in price, sending those stock prices even higher…creates a piling-on effect as funds buy more of these increasingly expensive stocks and less of the cheaper ones in their indices — the polar opposite of the adage “buy low, sell high” … [with] no regard for underlying fundamentals”.

In that Megan is not very far away from that systemic risk I so often write to you about, namely that of higher capital requirements for banks against what is perceived safe than against what is perceived risky. First, those capital requirements take no consideration of the purpose of the credit; and second they are the polar opposite of what they should be, since what is perceived as safe is in fact much more dangerous to our bank systems than what is ex ante perceived as risky.

@PerKurowski

Why and how are medium and small businesses, entrepreneurs and start ups, and normal citizens, ruled to be a systemic danger to the financial system?

Sir, Gina Chon reports that some senators are questioning how the Financial Stability Oversight Council might rule some non-bank financial institutions to represent a systemic risk to the financial system; and which among other could lead these to face higher capital requirements, “Senators warn over non-banks regulation”, November 29.

And again I must ask, for the umpteenth time, why and how are the medium and small businesses, entrepreneurs and start ups, and normal citizens, ruled to be a systemic danger to the financial system?

And I ask this because all higher capital requirements demanded from any financial institutions, when subjected to risk-weighing, naturally impacts the most those against which businesses the most capital is required, and which is of course those who have a high risk-weight.

Others, like the sovereign and the AAAristocracy, are often even favorably impacted by these higher capital rulings since, as the song goes, when capital gets to be scarce the low risk weighted get going.

Chon comments that “the senator’s criticisms could delay the council’s assessment of asset managers, giving them more time to lobby for the regulation to be watered down”. How sad no senator, in the home of the brave, seems interested in watering down the completely unwarranted and odious discrimination against those though correctly perceived as risky, have precisely because of that, never ever caused a major financial crisis.