"Short-Termism" In The Market

I have blogged constantly about the value and importance of long term investing, and a recent report from the Aspen Institute came out with some practical proposals to fight what they call "short-termism" in the market.

Let's start with the problem as outlined by the institute:

"High rates of portfolio turnover harm ultimate investors’ returns, since the costs associated with frequent trading can significantly erode gains."

"Fund managers with a primary focus on short-term trading gains have little reason to care about long-term corporate performance or externalities, and so are unlikely to exercise a positive role in promoting corporate policies, including appropriate proxy voting and corporate governance policies, that are beneficial and sustainable in the long-term."

"The focus of some short-term investors on quarterly earnings and other short-term metrics can harm the interests of shareholders seeking long-term growth and sustainable earnings, if managers and boards pursue strategies simply to satisfy those short-term investors."

The report recommends market incentives to discourage such short term behavior. This would include revising the capital gains structure to impose a lower tax on stocks held for a longer time period, and an excise tax on short term trading.

These sound like sensible suggestions and should be taken seriously by the powers that be.

The full report is here.

Another Greenshoot

Another green shoot in the economy hit the tape last week:

"FedEx Corporation (NYSE: FDX) today announced that it expects to report earnings of $0.58 per diluted share for the first quarter ended August 31, down 53% from $1.23 per diluted share a year ago. The company's guidance for the quarter was $0.30 to $0.45 per diluted share."

"FedEx expects earnings to be $0.65 to $0.95 per diluted share in the second quarter, which reflects the current outlook for fuel prices and a continued modest recovery in the global economy."

How many green shoots equal a recovery?