Comment What could we do to change this? (Score 2) 99
An idea I've had for a long time is that corporate executives shouldn't be paid based on the quarterly stock price, as is so often the case, but the stock price five years from now.
One way to do that would be to still pay them with options, but they would be contractually forbidden to sell the stock until five years after each vesting.
If they had exercised their options in the meantime, they would still get dividends. That's the way it should be - companies should drive investment by actually earning profits, not through market manipulations that drive up short-term stock prices.
I once worked for a privately-held hedge fund that had a software package that I referred to as "A License To Print Money". While not perfectly accurate, it did a pretty good job of predicting the commodities futures market.
There were just two dozen employees of that company which invested just one very wealthy guy's cash, but even so they traded in ONE THOUDAND different commodities. They got real-time quotes via a high-speed point-to-point wireless link to an ISP in a nearby city, which I imagine was tied into the Internet via either satellite or optical fiber.
That's not what the commodities futures markets are for! That kind of "investment" is not investment at all. It's Just Wrong.
The commodities futures markets were created to provide financing for farmers to grow their crops, for livestock herders to feed their cattle and so on. When one bought a contract for pork bellies, for example, when a pig farmer's pigs were eventually slaughtered, one's meat-packing plant would receive a bunch of refrigerated boxcars full of pork.
The guy I worked for "invested" in pork bellies as well, but to prevent a bunch of pig carcasses from ever showing up on his doorstep, one of my tasks was for my code to perform what is called a "roll", in which it would keep track of the delivery date of the contract, then sell it back on the Chicago market.
I don't know what can be done about the stock market, but perhaps one way to control the wild gyrations in the commodities market would be to forbid participation by parties who have no actual use for the physical commodities.