Wednesday, December 20, 2000

Paternalism in the post-New Economy Age Economic fads and market manias may come and go, but its nice to see that wrong-headed paternalism keeps marching along. In this profoundly ignorant article, it states:
A daisy chain of entrepreneurs, venture capitalists, Wall Street investment bankers and stock brokerages pulled off something unprecedented. They transferred almost all risk into the public markets.

The people with the least amount of information were sold the most speculative investments. The sellers were insiders who fully understood the reality.

Where to begin? First of all, people were not sold anything, they chose to buy it, which is their perogative. Secondly, it was these same techno-idiot-pundits nattering on about how fat cat VC's were keeping all the money to themselves which made the transfer of speculative grade equity to the capital markets a good thing. The truth of the matter is that there is no such thing as a free lunch, and people cannot force risk onto markets that are not willing to accept that risk. Just as there is now a thriving junk bond market, injecting liquidity and efficiency into speculative debt, there will one day be a junk equities market IF such a market injects liquidity and efficiency into speculative equity.


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