This series of articles was authored to point out some of the often hidden, unrecognized, ignored, or forgotten assumptions underlying the functioning of markets in capitalism. Additionally, ways in which markets fail in their intended purpose also feature prominently.
Markets frequently fail, despite their pristine reputation among capitalists. One way is the many actions taken by buyers and sellers to tilt a transaction in their favor. These visible hands create asymmetries between the parties. Jason Voss, CFA, explains.
Markets are usually not systemic. Instead, from the bird’s-eye perspective of "Capitalism," many businesses are "opportunities" in the same way that it feels good to hit yourself in the head with a hammer: It's much better once you stop.
Markets are useful but imperfect, says Jason Voss, CFA. One imperfection is that they assume fungibility. Assuming that a dollar spent on one thing is equivalent to a dollar spent on something else has serious consequences for investors.
Markets assume a context entirely out of view of their participants, which can have deleterious effects for both suppliers and demanders, Jason Voss, CFA, observes in the latest installment of his Where Markets Fail series.
Markets are useful, but imperfect, Jason Voss, CFA, explains in the first installment of his Where Markets Fail series. One glaring flaw is their inability to discount the future. This results in many deleterious and often long-term consequences.
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A survey that fails to address several key issues has obliged the European Commission to postpone a review of the revised Markets in Financial Instruments Directive, sources say. The survey "didn't provide any ideas or solutions, and it's not relevant to the problems the industry faces," one source says. Practice Insight (16 Jan.)
The UK Financial Conduct Authority and the Bank of England have announced a series of deadlines for Libor phaseout. The first deadline is March 2, when users and issuers of derivatives should shift to the Sterling Overnight Index Average. Pensions & Investments (free access for SmartBrief readers) (16 Jan.)
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