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For many years, from 2003 to 2006, volatility was at an all time low. People were complacent and we were happily at war living off of deficit spending. As a result, the markets were overpriced by a factor of three or so. Now price correction is in full swing and volatility will be experienced until it has settled in a several years.
The basic problem with what you are suggesting is that there is no reality to the reporting of corporate earnings, since they are being leveraged by debt, personal, national, and corporate debt. Once that leverage has fully unwound, we'll get a clear picture of what true earnings are and it won't be nearly as high as it is presently reported.
P/E ratios at bear market bottoms are in the 6 to 8 range and we have much further to go to reach that. And since earnings will be getting less, it is much more than what present earnings might indicate, since they are still leveraged. We're bailing out the financial market, the auto industry, and now the consumer, i.e., we're still trying to keep the leverage bubble inflated. Once it finally pops, we'll see where we are.
Hopefully, we'll have a fairer system one day, one that reports true earnings and evaluations. But the idea of requiring a fixed time to hold stock doesn't seem like it would work. They are not free markets in that case. There is too much of a greed mentality that expects stock to grow, that expects our economy to grow. There is only one Earth and it is finite in size, and it can't support continual growth. Sustainable markets that don't require growth are the ultimate answer. We need to promote savings not investment in Ponzi growth schemes such as the stock market is. I think bonds are a more healthy thing to invest in. Stock market promotes a greed oriented casino mentality like you say, but requiring a minimum ownership time isn't the answer in dealing with that.
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