Advertisement

Stock market turmoil shows need for a transaction tax

To the editor: Not all panic is human. Despite a fundamentally sound U.S. economy, volatile fluctuations in securities prices are driven by panicked reactions to insecurity in China. ("U.S. stocks, after surging to start the day, end with a thud," Aug. 25)

Wall Street is a largely unregulated jungle in which a few wealthy investors can program computers to anticipate trends and generate transactions they hold for tiny fractions of a second, with no direct human oversight. These program trades reflect and multiply trends, exacerbating wild swings as small external inputs are digitally exaggerated.

Advertisement

We need two solutions to cool down the process. First, we must enact legislation requiring all investment trades to be held for at least five minutes. This allows for fairly rapid turnover but on a more human-accessible scale.

Second, there should be a very small transaction tax, preferably progressive to protect small investors, to dilute and disincentivize profits from rapid turnover.

Douglas Dunn, Escondido

..

To the editor: Indeed, per Michael Hiltzik, CNBC's coverage of the stock market resembles sports event coverage. It is much like the calls at a horse race but with more repetition, emotion and occasional squeals. ("Market 'turmoil' and the problem of CNBC," Aug. 24)

My favorite recent exchange was between two commentators, one of whom asked why Merck went down five points that day. His colleague's response: Because it went up five points the previous day.

Not such a hot tip, but certainly much wisdom.

Maren Henderson, Los Angeles

Follow the Opinion section on Twitter @latimesopinion and Facebook

Advertisement
Advertisement