Home > financial markets, Keynes > Investors — people knowing almost nothing whatever about what they are doing

Investors — people knowing almost nothing whatever about what they are doing

from Lars Syll

How far the motives which I have been attributing to the market are strictly rational, I leave it to others to judge. They are best regarded, I think, as an example of how sensitive – over-sensitive if you like – to the near future, about which we may think that we know a little, even the best-informed must be, because, in truth, we know almost nothing about the more remote future …

6a00e551f080038834019101e7a534970cThe ignorance of even the best-informed investor about the more remote future is much greater then his knowledge … But if this is true of the best-informed, the vast majority of those who are concerned with the buying and selling of securities know almost nothing whatever about what they are doing … This is one of the odd characteristics of the Capitalist System under which we live …

It may often profit the wisest to anticipate mob psychology rather than the real trend of events, and to ape unreason proleptically … (The object of speculators) is to re-sell to the mob after a few weeks or at most a few months. It is natural, therefore, that they should be influenced by the cost of borrowing, and still more by their expectations on the basis of past experience of the trend of mob psychology. Thus, so long as the crowd can be relied on to act in a certain way, even if it be misguided, it will be to the advantage of the better informed professional to act in the same way – a short period ahead.

 

 

  1. July 6, 2014 at 5:44 am

    Most people know nothing and they know that they know nothing. So they entrust their fortunes (in savings and pensions) to money managers, who also know nothing, but proceed nevertheless to fleece their clients like sheep. The individual-investor capitalism described by Keynes and assumed in finance textbooks is not really the situation of today’s manager capitalism.

    • Teh CSiang
      July 6, 2014 at 8:25 pm

      Fully agreed with you,.. and the money managers(who also know nothing) collect their fees upfront,… i.e….. make or lost money, clients still have to pay…

    • BC
      July 7, 2014 at 10:51 pm

      Indeed. The equity markets eventually over a lifetime become a kind of zero-sum shell game-like wealth-transfer scam, transferring savings and deferred investment and consumption to those who already own most of the financial wealth in the first place, resulting in increasing concentration and hoarding of financial wealth by the top 0.1-1% at no velocity in the productive sector.

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