Investment Exchanges: Operation Safety Patrol

by David Jenyns on September 18, 2009

Is the market safe? This question, still asked and still wondered about, assumes that there is something inherently perilous about a stock exchange. An exchange is simply an agency, a market where buyers and sellers can meet — through their brokers — to complete a transaction.


An investment exchange — the market — is a complex and turbulent place, but it exists on the traffic of investors. When the pace is hot, the exchange boils. An exchange does not set prices. It does not issue stock. It does not, for itself, buy or sell a single share. The fact was that stock values were not an accurate indicator of business conditions. The downhill slide was long, steep, and agonizing.

Was the investment exchange innocent? In its role as agent, arranging purchases and sales on demand, it was. The automobile salesman cannot keep his customer from driving 90 miles per hour. On the other hand, it has long since become clear that exchange regulations in 1929 were far too loose. The practices that were permitted, if not encouraged, accentuated the feverish performance of the market and provided no means for braking the drop or for stimulating a recovery.

Nothing less than high-caliber performance is now permitted by the Exchange and its members. So in summation, yes, the stock market overall is a very safe place to invest your money.

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