Ch 1 – Too Much Cost, Not Enough Value
But our financial economy, by definition, deducts from the value created by our productive businesses. Think about it: While the owners of business enjoy the dividend yields and earnings growth that our capitalistic system creates, those who play in the financial markets capture those investment gains only after the costs of financial inter-mediation are deducted. Thus, while investing in American business is a winner’s game, beating the stock market before those costs is a zero-sum game. But after inter-mediation costs are deducted, beating the market – for all of us as a group – becomes a loser’s game. P 47
Ch 2 – Too Much Speculation, Not Enough Investment
When our market participants are largely investors, focused on the economics of business, the underlying power of our corporations to earn a solid return on the capital invested by their owners is what drives the stock market, and volatility is low. But when our markets are driven, as they are today, largely by speculators, by expectations, and by hope, greed, and fear, the inevitably counterproductive swings in the emotions of market participants – from the ebullience optimism to the blackness of pessimism – produce high volatility, and the resultant turbulence that we are now witnessing became almost inevitable. P 52
So not only is speculation a loser’s game; it’s a game whose outcome can’t be predicted with any kind of confidence. The laws of probability don’t apply to our financial markets. For in the speculation-driven financial markets there is no reason whatsoever to expect that just because an event has never happened before, it can’t happen in the future. Metaphorically speaking, the fact that the only swans we humans have ever observed are white doesn’t mean that no black swans exist. P 59
Ch 3 – Too Much Complexity, Not Enough Simplicity
The fundamental market failure in the mutual-fund industry involves the interaction between sophisticated, profit-seeking providers of financial services and naïve, return-seeking consumers of investment products. The drive for profits by Wall Street and the mutual-fund industry overwhelms the concept of fiduciary responsibility, leading to an all too predictable outcome by David Swensen. P 93