Posts
No sign of a double-dip here.
Monday, August 23, 2010
Subscribe to:
Post Comments (Atom)
Blog Archive
-
▼
2010
(688)
-
▼
August
(65)
- Gold leads commodity prices, and both respond to m...
- Harpex update
- Gold as an investment
- More evidence that housing has stabilized
- If you subsidize unemployment, don't be surprised ...
- Inflation update—still tame, but still a concern
- Putting the yen into perspective
- Incomes and spending are improving
- Corporate profits are very strong
- Quick thoughts on Bernanke's speech
- A bond bubble?
- CRE update
- Claims back on track
- 20 bullish charts
- Credit spread update
- July capital goods orders were very weak, but poss...
- What double-dip?
- The stock/corporate bond disconnect
- Why deflation is not in the cards
- The Bush/Obama $4.4 trillion spending boom
- Chicago Fed index reflects continued growth
- Shipping update
- Tighter spreads on jumbo mortgages are a good sign
- NSA Claims and the unemployment rate
- The bounce in weekly claims could be just bad seas...
- A brief history of the dollar
- The Tea Party Manifesto
- Commodity prices hit new post-recession high
- Housing starts have been stable for over a year
- No sign of deflation at the producer level
- Industrial production is steadily improving
- Bond yields and inflation
- Commercial paper comeback
- A look at inflation over the past century
- Earnings yields tower over bond yields
- No shortage of liquidity, rather an excess of spen...
- The death of Keynesian theory
- Container traffic update
- Japan: What deflation? What depression?
- Thoughts on TIPS and gold as inflation hedges
- Market pessimism is distorting the facts
- Pulse of Commerce Index points to continued growth
- July budget numbers show revenues improving
- Our Botswana safari
- Understanding China's property boom
- The good news behind the June trade deficit
- Today's FOMC announcement adds marginally to infla...
- Temp jobs are increasing at a very healthy rate
- Thoughts on monetary policy and productivity
- Record-low mortgage rates don't signal a weak hous...
- Unemployment claims do not suggest a double-dip
- Recent commodity correction is over
- Fed expectations reveal very pessimistic market ps...
- Jobs are growing at a modest 1% rate
- Emerging market update
- ISM service sector indices a bit on the weak side
- Corporate layoffs are low and stable
- 10-30 spread hits record high
- Car sales continue to be very strong
- Inflation update
- Cape Town is magnificent
- fear subsides, prices rise
- Construction spending holds steady
- ISM indices say the "new normal" economy is a no-show
- Victoria Falls
-
▼
August
(65)
About Me
Favorite blogs
Favorite books
- "A Random Walk down Wall Street" -Burton Malkiel
- "FDR's Folly" -Jim Powell
- "I Am John Galt" -Don Luskin
- "Panic" -Andrew Redleaf and Richard Vigilante
- "Parliament of Whores" -P.J. O'Rourke
- "Popular Economics" -John Tamny
- "The Education of a Speculator" -Victor Niederhoffer
- "The Financial Crisis and the Free Market Cure" -John Allison
- "The Seven Fat Years" -Robert Bartley
- "The Way the World Works" -Jude Wanniski
- "Wealth and Poverty" -George Gilder
8 comments:
Scott,
I read an interesting article by Mark Cuban who says that the stock market is "for suckers" given the type of computer day trading that moves stocks out of positions as soon as they rise a bit so that the trader gets a quick profit. Does this suggest that it will be hard to see any decent long term growth in equities for the average investor if the big traders are unwilling to keep their money in equities long term?
Count me as skeptical of the whole notion that high-speed or computerized trading is depressing the stock market or otherwise distorting valuations.
If anything, it has added to the market's liquidity and I think that is a good thing. The only thing that computerized trading is capable of exploiting is a lack of liquidity that leads to volatile stock prices. You can profit from a volatile but relatively trendless stock market by buying dips and selling rallies. I think that's what has been going on for the past few months. And I note that the Vix (implied volatility) has been trending down since May, and that is good evidence that rapid-fire traders may be contributing to market liquidity.
Bill-
Not that you asked me, but a worthy read is Redleaf/Vigilante's "Panic."
They argue that public onwership (that is, stocks publicly traded etc) is weak ownership.
This is a profound commentary--and suggests that shareholders are in a weak position to exercise their perogatives and interests. I have long held this view.
My guess is that investing in companies in which there are a few large shareholders might make sense--the large common shareholders will effectively represent all common shareholders.
As an aside, Ray Irani, ceo-chair of Oxy Petroleum, has "earned" nearly $900 million in wages in the last 10 years. Oxy is a medium-sized oil company, and publicly held.
If there was a single individual who owned Oxy, do you think they would have hired a chief executive and paid him $900 million in 10 years?
Public shareholders seem to have little recourse, but to "vote with their feet" -- that is, sell.
Bill,
I disagree with Scott. There is no need for HFT that seeks to exploit milliseconds. This does nothing for liquidity, valuations, or confidence.
I would argue it undermines all three. In times of market stress, HFT et al derail what would normally be well functioning markets.
We long passed the benefits of technology improving the market and reducing costs. We should heavily tax day/HFT trading as it only serves to scalp money from one hand to another without providing any economic benefit to our country.
RE HFT: Please describe to me what profit opportunities or arbitrage opportunities that these people are exploiting? I will then tell you how to profit yourself from doing the same thing.
Otherwise, trading that is driven by a mechanical analysis of prices can impart no trend or direction to prices, since it lacks any fundamental focus.
Banks and HFs can setup collocated servers on stock exchanges to pick-off stock price information before it hits the public wires.
Companies can submit faux orders across markets to analyze what the impact of a real trade could be.
We are not talking about trends, we are talking scalping markets.
Quote from the Cuban article:
"Remember the rule about first there are the innovators, then the imitators, then the idiots ? It is why the stock market is truly in trouble.
There is SO MUCH CAPITAL available at so little cost to so many that the time-line from innovator to idiot is measured in days, hours and probably even milliseconds.
The guys who are actually smart and uncover new opportunities can’t even get in a position large enough to make it worth their while before the imitators and then idiots pile in right behind them."
My beef with the HFT thing is that it implies that there are those who trade with an advantage to the average investor. This is destructive to confidence in a fair, level, playing field. It is counterproductive to bringing average investors back to the market.
Speaking of that, the average investor is largely nonexistant in today's equity markets. He is parked in bank accounts and bonds, probably of short duration, and/or he is in gold. I believe he will return, to some extent, but not soon, and not before meaningfully higher prices. HFT in an impediment to this IMO.
It might well be that these contraptions contribute somehow to overall liquidity (they work in up markets as well as down) but for my money it isn't worth it. I agree with Pub. Shut the machines down and make EVERYONE play by the same rules. It will contribute to a much healthier market over time.
Bill,
The numbers of people who think the stock market is for suckers are legion. It is one of the things that indicate to me there is great value there now. There have ALWAYS been traders in the markets and always will be. Money that comes out frequently comes back in somewhere else. Rest assured there are many many institutions that can and will hold equities over long periods of time. You and I will never see them. They do not appear on CNBC nor do they write investment letters that require bold attention demanding headlines. They care not a whit for the 'fast money' crowd and pay little to no attention to them. When prices are right, they will buy in sizes that would stun average individual investors...and they just might turn around the next day and do it again.
Equities have gone into and out of favor many times over the years and will continue to do so.
John,
Thanks for your input. I wish you were still in the business so I could buy an hour or two of your time!
Post a Comment