What's the difference between short-term and long-term?
[Fairly long post: scroll to the bottom for a one-paragraph summary] I've been interested in this debate for many years. It takes several different forms, but the simplest statement is: stockmarket investors are too focused on short-term returns at the expense of the long-term investment that builds real economic capital. I first heard this argument deployed against "asset strippers" such as Hanson, a UK conglomerate prominent in the 1980s. Since then it's been used to describe stockmarket traders, company shareholders in general , financial institutions of all kinds, and US and UK companies who supposedly focus greedily on quarterly earnings, unlike the more virtuous French, German and Japanese firms who are willing to take the long view. The first problem with the argument is this: long-term returns are just a string of several short-term returns in a row. For example, £1,000 invested over 20 years to return £5,000 is equivalent to an annual return of 8.3%. B...