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The West Continues to Rot at the Core as it Obsesses Over the Short-term - Nathan McDonald (17/08/2018)

From the archives of sprott money news

August 17, 2018

The stock market, by and large, is a farce.

This is not to say that it does not have a purpose, because undoubtedly it does. This cannot and will not be denied, except by those who identify themselves as having anarchist traits.

Yet, it is still a farce. It is corrupt, it is short-sighted and it is riddled with problems. But in our "semi" capitalistic system, it is what we have. And we have to make the best of it.

This, however, does not stop us from striving to improve it. In fact, I believe this should be a major goal of Western society as a whole. The stock market, in tandem with the free market, has led to the most powerful economic engine this world has ever seen. Even if it is now riddled with disease, it is and will be for the foreseeable future a juggernaut in the economic landscape.

We should constantly strive to weed out corruption within the system and work towards improving the function of the markets as a whole. However, one issue that has once again been pushed to the forefront is the fact that Western markets are incredibly short sighted.

Many legal and financial experts have argued this point for years. The stock market’s obsession over quartering reporting has pushed it to its breaking point, driving companies to overemphasize the short-term, rather than the long-term, health of the company as a whole.

This irrational way of thinking has driven many companies to the point of bankruptcy, as many CEOs and executives know they have a short term life span within any given company. This drives them to push short-term profits, hoping to beat the next quarterly consensus—driving the price of shares up, and thus their golden parachute packages along with it.

Sadly, this comes at a cost to a company’s longevity, often putting them in precarious, unhealthy positions.

This topic, although long in focus, was once again brought to the fore by President Trump, who recently criticized Wall Street's quarterly reporting method:

"In speaking with some of the world’s top business leaders, I asked what it is that would make business (jobs) even better in the U.S. ‘Stop quarterly reporting & go to a six month system,’ said one. That would allow greater flexibility & save money. I have asked the SEC to study!"

This is and should be something that is changed for the long-term benefit of Western society. It would allow businesses immense freedom to make the long-term, correct decisions that would benefit the company and the economy as a whole.

Our current obsession with short-term profits continues to erode our economy, while countries such as China take a much healthier long-term focus, allowing them to outmaneuver and outpace the West as the years drift by.

Unfortunately, I don't believe this change will ever happen, unless a forceful hand is applied—something I do not advocate for.

The simple fact is that the push-back will be intense. It will be overwhelming, as Wall Street and financial pundits, including the MSM—who have built an entire industry around obsessing over this short-term noise—fight back.

Too many people have too much to lose to allow this to ever unfold. But this should not stop you as an individual from continuing to push for change and adjusting your personal mindset.

The West may continue to rot at its core, but this does not mean you need to go along for the ride willingly. As I have always advocated, ignore the noise. Focus on the long term and think for yourself.

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About the Author

Nathan McDonald is a libertarian, entrepreneur and precious metals enthusiast. He has always taken a keen interest in free markets and economics since an early age, which naturally led him to become a true believer in precious metals and all that they stand for.

Nathan served eight years in the Royal Canadian Navy as an electronics technician, seeing the true state of the world, before starting his first successful business. He has since gone on to create a number of businesses, all of which are still in operation and growing.

In addition to this, Nathan runs a network of successful precious metals blogs, and a growing newsletter that has attracted readers from all around the world. He is a regular and highlighted writer for the highly respected Sprott Money Blog, which covers world events, geopolitics and of course precious metals.

*The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.

Comments

John Harris
August 18, 2018 at 10:48 AM
While I agree with you, Nathan, on the importance of precious metals and ridding the stock market of corruption, your assertion that those "having anarchist traits" see no purpose in the stock market has no factual basis. I not only have anarchist traits, but am an out-and-out anarchist, in the sense that I oppose all forms of government achieved by force. I fully endorse and support the existence of stock markets, and know of many other anarchists who do as well. I suspect you would enjoy reading Murray Rothbard when time permits.
gn
August 18, 2018 at 12:34 PM
Before Qly earnings debate, tRump should be attacking HFT TRADING! How about NON-GAAP ACCOUNTING FRAUD BY ACCOUNTANTS?