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Affluent Christian Investor | October 21, 2017

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‘Rigged’ Discussion: Why High Frequency Trading Is Beside The Point

CNBC debate

The current ‘big’ story is celebrity journalist Michael Lewis’ claim that financial ‘markets are rigged’. If it’s said on 60 Minutes, it’s a big story. If the nice gentlemen who is going door-to-door, who visited the Bowyers in our kitchen to talk about doing seismic testing on our property searching for Marcellus Shale, asks me about high frequency trading and the market’s rigging claim; if the talk radio show which I’ve been invited to today wants to talk about it; if the debate on CNBC becomes a viral video, then it is the ‘big’ story.

A principled approach to the topic would take a wider and longer view. Instead of focusing on whether the ultra-high frequency trading currently provides an advantage over high frequency trading (which parallels the earlier debate about whether high frequency trading gave an unfair advantage in comparison with regular electronic trading, or whether prior to that electronic trading gave an unfair advantage in comparison with fast-moving human trading pits), perhaps the focus should be on whether short-term trading in any form (whether in seconds, milliseconds or nanoseconds) is a wise way to preserve and build wealth. The overwhelming evidence is that a long-term approach, based on predictable principles and a focus on fundamentals in terms of valuation, is much more likely to build wealth than any short-term strategy.

Ultra-high frequency is just another step in an increasingly chaotic, shorter and shorter-term mindset.  It is short-termism taken to its ultimate conclusion. Principled reasoning would tend to take the discussion away from a debate between milliseconds and nanoseconds and start to focus on years and decades, where principles tend to express themselves and where true investor time horizons actually lie.

To see the CNBC video, click here.

As of this writing, the discussion has been one which seems more likely to sell books, pave the way to the next trial lawyers’ pot of gold, and fatten the budgets of regulators, than to actually help any investors.

 

Article originally published on Forbes.com.

Jerry Bowyer is a Forbes contributor, contributing editor of AffluentInvestor.com, and Senior Fellow in Business Economics at The Center for Cultural Leadership.

Jerry has compiled an impressive record as a leading thinker in finance and economics. He worked as an auditor and a tax consultant with Arthur Anderson, as Vice President of the Beechwood Company which is the family office associated with Federated Investors, and has consulted in various privatization efforts for Allegheny County, Pennsylvania. He founded the influential economic think tank, the Allegheny Institute, and has lectured extensively at universities, businesses and civic groups.

Jerry has been a member of three investment committees, among which is Benchmark Financial, Pittsburgh’s largest financial services firm. Jerry had been a regular commentator on Fox Business News and Fox News. He was formerly a CNBC Contributor, has guest-hosted “The Kudlow Report”, and has written for CNBC.com, National Review Online, and The Wall Street Journal, as well as many other publications. He is the author of The Bush Boom and more recently The Free Market Capitalist’s Survival Guide, published by HarperCollins. Jerry is the President of Bowyer Research.

Jerry consulted extensively with the Bush White House on matters pertaining to the recent economic crisis. He has been quoted in the New York Times, The Wall Street Journal, Forbes Magazine, The International Herald Tribune and various local newspapers. He has been a contributing editor of National Review Online, The New York Sun and Townhall Magazine. Jerry has hosted daily radio and TV programs and was one of the founding members of WQED’s On-Q Friday Roundtable. He has guest-hosted the Bill Bennett radio program as well as radio programs in Chicago, Dallas and Los Angeles.

Jerry is the former host of WorldView, a nationally syndicated Sunday-morning political talk show created on the model of Meet The Press. On WorldView, Jerry interviewed distinguished guests including the Vice President, Treasury Secretary, HUD Secretary, former Secretary of Sate Condoleezza Rice, former Presidential Advisor Carl Rove, former Attorney General Edwin Meese and publisher Steve Forbes.

Jerry has taught social ethics at Ottawa Theological Hall, public policy at Saint Vincent’s College, and guest lectured at Carnegie Mellon’s graduate Heinz School of Public Policy. In 1997 Jerry gave the commencement address at his alma mater, Robert Morris University. He was the youngest speaker in the history of the school, and the school received more requests for transcripts of Jerry’s speech than at any other time in its 120-year history.

Jerry lives in Pennsylvania with his wife, Susan, and the youngest five of their seven children.

 

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