| > and investment companies need operating capital even in (particularly in) down markets. Do they though? As far as I know, the premise of the public stock market is that there are companies that feel they have an idea/opportunity to make money, but it needs more capital than they have available to get going. Going even further back to basics - it's like saying, "We all need to eat, and by myself I can't take down this big animal I've spotted to kill, but if we get together as a pack, I think we CAN do it together, and we'll all benefit (i.e. eat.)" Given that view of the market, clearly some of the companies that wish to raise money from the public will succeed, and others will fail. In theoretical simpler times, we could evaluate companies based on the merits of their ideas (their prospectus), and decide whether or not to invest. Perhaps this "lightbulb" concept, or "horseless carriage", "telegram", or "Facebook" concept makes sense to us, and we choose to back the idea with our money. Things are clearly more complicated in this day and age. Because of this complexity, we have a new breed of companies - meta-companies, if you will - that promise to do the evaluation of other companies for us, and tell us which ones to put our money into. The product of these companies is not the actual product itself - the lightbulb, car, or social network - but instead, the return on investment itself. For traditional companies - when the product flops, we stop investing, and the company eventually ceases to exist. Sometimes you get General Electric or Ford, and other times you get Pets.com. To me, one of these meta-companies whose products is returns, that fails to produce said returns - should stop receiving capital. It seems to me that actively managed funds that continually fail to beat the market should not continue to collect people's money in the form or fees - and therein lies the madness of the current situation. (Note - I realize that investments do not provide returns immediately or overnight, and therefore timeframes should be attached to any sort of promises an investment company might offer. If they don't believe they are able to do so, even with a reasonably sized window of time - then I fail to see how they are any better than a roulette table.) |