David Trainer argues that trust is the foundation of capital markets and economic success. He criticizes IPO practices that harm ordinary investors, notes how inflation hits non-asset owners hardest, and explains why New Constructs focuses on improving market integrity.
Chapters
There's a reason banks used to be called trust companies. It's all based on trust. And I'm going to jump on my soapbox for a minute and say, look, the entire capital markets is based on trust. And that's why the title of my business plan originally for New Constructs was to improve the integrity of the capital markets. What I meant by that is that if we don't trust Wall Street, the companies that are selling a stock, if the rest of America decides they're just not going to trust this system and our capital market implodes, we're in a bad place. Much of the success of the United States is attributable to its ability to allocate capital more effectively, or in other words, earn higher returns on capital than other countries. That's the reason we went from newcomer just a couple hundred years ago to the most successful and largest economy in the world. In a very short amount of time, we went from bottom of the heap to the top of the heap. And a lot of that was because of our capital markets and the ability for ideas and capital to flow to their highest and best use. That's ultimately what makes a liberal democratic society successful. And to the extent that we can't trust the underlying mechanism there, then our economy really Suffers. Standards of living suffer because if we're not taking a certain amount of capital and growing that into bigger capital, which is what happens when you have intelligent capital allocation, if instead that capital's being siphoned off to a wealthy few, that's bad for society. That's fleecing people. And all too often I think that's what's going on, especially when we go through those old IPOs. I mean, this was a fleecing of America in a lot of ways, of middle America. You're luring unsuspecting folks into the market so that you can take advantage of them. And this inflation problem doesn't make it any better. Asset owners aren't hurt by inflation. People who don't own assets are hurt by inflation. And those too often are the folks being targeted to jump into the stock market in an effort to keep up, only to get fleeced once again. So we believe in what we're doing here, and we think it's for the greater good. No question. And we're proud to do it.
