I consider myself more of a Warren Buffett type investor. I don’t trade, even though I could, and prefer holding shares for the longer term. But Warren’s rant against short term traders just does not make sense.
The statement argues that a "healthy society requires healthy and responsible companies" working to achieve long-term goals.
Instead, "boards, managers, shareholders with varying agendas, and regulators … have allowed short-term considerations to overwhelm the desirable long-term growth and sustainable profit objectives of the corporation."
The Aspen statement calls for boards, managers, and "most particularly, shareholders" … institutional investors .. to shift their focus to long-term goals and not push for "high-leverage and high-risk corporate strategies designed to produce high short-term returns."
Why should the longer term investor get precedence over the shorter term? Once a stock has been sold in the market unless the company pays a dividend that share becomes a ponzi scheme. This is actually one of the main reasons why I simply do not invest in software companies or many tech companies.
The only reason to hold a share of a company is to take over a company or hope that they buy them back at some later point in time. Otherwise there is no real reason to hold a share of a company if it does not pay a dividend.
Based on that premise whether you hold the share for the long or short term you are expecting some other fool to pay you more than what you paid for it. You are a speculator!
I also think that always thinking of the long term works if the short term is in order. If the short term is not in order then there will be no long term.
Of course many people argue that being part of a public company requires thinking of quarter to quarter and not longer term. While that might be true a CEO that only focuses on quarter to quarter will not last.
My wife read the book Success, Built to Last is an excellent example of long term thinking companies that survive in the short term. In the book some examples are Michael Dell, and Jack Welch. You cannot argue that both of these individuals did not create great companies while being publically traded.
Long term investing has become more challenging because you cannot buy, hold and forget. You need to be strategic about your positions, and there is nothing wrong with that. After all if the stock price is going down is that not an indicator that management is doing something wrong?
These days running a company is hard and the problem is that people who are paid millions upon millions need to perform. That performance is lacking and thus the share price will go down, even though the company is not doing its job.
In fact I WANT the company to be penalized if it is screwing up. My entire investing strategy relies on that fact. I am a contrarian and I buy companies that are down in the dumps share price, but are rebuilding their glory.
Is it easy to pick such stocks? No! But then again should it be? I say no, and I say blaming the short term traders is not the answer.