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• China Leaps to Second Spot in Global Science
• Weekend Readings: Chess, Rhodes Scholars, Trade, etc.
• Readings: Lawyers, Wealth, and Rare Earths
• Isildur1 and the Week That Changed Online Poker
• The Rise and Fall of Empires

 

Where the Jobs Aren’t: Everywhere Except Education

While U.S. jobs are few and far between in many sectors, this year-over-year data shows that if you really want to be sure your applications get no response you need be sure to avoid education.

[via Indeed]

 

Superstar CEOs Suck

From a new Quarterly Journal of Economics paper:

Superstar CEOs

Compensation, status, and press coverage of managers in the United States follow a highly skewed distribution: a small number of “superstars” enjoy the bulk of the rewards. We evaluate the impact of CEOs achieving superstar status on the performance of their firms, using prestigious business awards to measure shocks to CEO status. We find that award-winning CEOs subsequently underperform, both relative to their prior performance and relative to a matched sample of non-winning CEOs. At the same time, they extract more compensation following the awards, both in absolute amounts and relative to other top executives in their firms. They also spend more time on public and private activities outside their companies, such as assuming board seats or writing books. The incidence of earnings management increases after winning awards. The effects are strongest in firms with weak corporate governance. Our results suggest that the ex post consequences of media-induced superstar status for shareholders are negative. [Emphasis mine]

Source: Ulrike Malmendier and Geoffrey Tate, “Superstar CEOs*,” Quarterly Journal of Economics 124, no. 4 (November 1, 2009): 1593-1638.

 

Readings: Fox Biz, Bill Gross, Real Estate, etc.

• Fox Business News, Where Green Arrows Turn Brown Eyes Blue (Vanity Fair)
• Is Fox Business a lost cause? (Vanity Fair)
• Bill Gross Says Value Diminishing in Credit Markets (Bloomberg)
• Commercial Real Estate ‘Crisis’ Looming for U.S.: Chart of Day (Bloomberg)
• I Want More Information, Not Less (Feld)

 

Diversions: Powers of Ten

Fantastically cool powers of ten visualization. Click to try:

[via judell]

 

Readings: Dollar, Dinosaurs, Deficits, etc.

• Dollar knocked by China renminbi hints (FT)
• Google launches searchable access to WorldBank data (Google)
• Spanish Wind Power Tops 50% of Electricity Demand (Source)
• Interesting new complexity events at Santa Fe Institute (SFI)
• A New Geopolitical Jevons Paradox? A Look at Non-OECD Oil Demand (TOD)
• Mass extinctions: I am become Death, destroyer of worlds (The Economist)
• The significance of the contemporaneous Shiva impact structure and Deccan volcanism at the KT boundary (GSA)
• California’s stealth stimulus from delayed foreclosures (ForeclosureTruth)
• U.S. ran record deficit in October (Marketwatch)

 

The Dow in Gold: Pricing Yo-yos in Meerkats?

I’m always uneasy about these “Let’s price Thing X in Commodity Y” exercises (hey, let’s price yo-yos in meerkats!) – if thing X was supposed to be priced in commodity Y, it would be priced in commodity Y – but this one is at least semi-useful. Here is the Dow index in gold since 1900:

[via Rolfe]

 

Books: The Greatest Trade Ever

Lots of chatter about Greg Zuckerman’s new book about John Paulson’s subprime trade. Titled The Greatest Trade Ever, the book chronicles how Paulson’s risky trade came together and how it paid out, controversies, warts, timing and all. I have a copy on the way and am looking forward to reading it, but here is an opening excerpt:

The tip was intriguing. It was the fall of 2007, financial markets were collapsing, and Wall Street firms were losing massive amounts of money, as if they trying to give back a decade’s worth of profits in a few brutal months. But as I aid at my desk at The Wall Street Journal, tallying the pain, a top hedge-fund manager called to rave about an investor named John Paulson who somehow was scoring huge profits. My contact, speaking with equal parts envy and respect, grabbed me with this: “Paulson’s not even a housing or mortgage guy … And until this trade, he was run-of-the-mill, nothing special.”

… Paulson’s winning were so enormous they seemed unreal, even cartoonish. His firm, Paulson & Co., made $12 billion in 2007, a figure that topped the gross domestic products of Bolivia, Honduras, and Paraguay, South American nations nations with more than twelve million residents. Paulson’s personal cut was nearly $4 billion, or more than than $10 million a day. That was more than the earnings of J.K. Rowling, Oprah Winfrey and Tiger Woods put together. At one point in late 2007, a broker called to remind Paulson of an account worth $5 million, an account now so insignificant that it had slipped his mind. Just as impressive, Paulson managed to transform his trade in 2008 and early 2009 in dramatic form, scoring $5 billion more for his firm and clients, as well as $2 billion for himself. the moves put Paulson and his remarkable trade alongside Warren Buffet, George Soros, Bernard Baruch, and Jesse Livermore in Wall Street’s pantheon of traders. They also made him one of the richest people in world, wealthier than Steven Spielberg, March Zuckerberg, and David Rockefeller Sr.

 

A Few Good IPOs?

There is a new Grant Thornton report out arguing that the U.S. is suffering from an IPO drought caused by high-frequency trading and broken market microstructure (but not SarbOx). The alleged consequences? 22-million fewer jobs in the U.S. than would otherwise be the case.

Whoa, it’s a provocative claim. Does it hold up?

It would indeed be good see more IPOs, so I’m with the authors on that, but after that they mostly lose me. I have multiple objections, including that the authors refuse to recognize that the venture industry has grown too large; that the technology industry is maturing; and that financial markets have changed & are no longer engineered for brokers & bankers to make money via flipping over-valued startups to retail investors via institutional cronies.

Instead of recognizing this, the authors want to blame high-frequency trading. You know, computers. And hedge funds. Baddies in black hats, in other words.

While that is au courant, it is tough to support. It has never been easy to build institutional-class trading volumes in early-stage public companies -- I used to cover them as an equity analyst -- and now is no different. That market-makers in large public companies are increasingly algorithmic – 75% of the trading volume in the largest U.S. stocks -- is something to be applauded, not decried, and it has little to do with the relative dearth of IPOs in the U.S.

Further, the implied claim that market microstructure -- increased efficiency, decimalization, etc. -- has cost the U.S. 22-million jobs via the under-production of IPOs is cargo cult illogic. It is tantamount to ignoring everything that has changed in markets and technology over the last decade, all in favor of positing an immutable relation between IPO rate and GDP. Financial markets are not nearly so neat, tidy and predictable.

The authors have a solution, however. They want to turn the capital market clock back to the days of dealer-driven markets, wide spreads, research analysts who are really bankers, and a brokerage industry that preyed on retail investors. It's like hungry great white sharks proposing that newly speedier seals be fattened up, given weight handicaps and kept in open water, away from dry land & rocks.

Technology has changed the way growth companies are produced, funded, and sold in this country. Some people might not like it, but not liking disruptive change is the response of most industries that have been disintermediated.

 

Dying Dollar Dings Exporters? Not So Much

Pace my Marketplace radio comment on the dollar's decline yesterday, this graph from Bloomberg of the recent stock market outperformance of U.S. exporters is noteworthy.


 

Uptick in October Trade Data

Read the rest of this entry »  

The Edwards Strikes Back

The indefatigably bearish SocGen strategist Albert Edwards made some entertainingly grumbling comments in Hong Kong today. Here’s a summary:

• Market will hit new lows in 2010 as we go back into recession
• Faith in growth stories is a “sick joke”
• Japan will fumble into bond sale trouble in 2010 as investor appetite dries up and yields climb

You have to give Edwards credit for having more staying power than most of his bearish brethren. Like Han Solo at the end of The Empire Strikes Back, Edwards is frozen in the bearish equivalent of carbonite – which is part of why we love him so.

More here.

 

Can Startups Save the World? Startups vs. GDP/Capita

For a recent presentation, I graphed gdp/capita against ease of starting a company in more than 100 countries around the world. Here is the result for countries with GDP/capita more than $20k. Note that “ease of use” is a ranking, so big numbers are bad (low ease) and low numbers are good (high ease).

 

And here is the result for countries with GDP/capita less than $20k:

There are all sorts of issues with measures, dependent and independent, so I wouldn’t make overly much of it, but it’s still interesting stuff.

 

Readings: The End, IPOs, Biased News, Harry Potter, Species Risk, etc.

• IEA whistleblower says global oil data exaggerated & incorrect (Guardian)
• The great securities delisting machine [ed., more on this later] (Grant Thornton)
• Life After the End of History (NYT)
• Second Quarter 2009 Cambridge Associates Private Equity and Venture Capital Benchmark Commentaries (PE Hub)
• Biased News Has Delayed Impact (M-M)
• For “new economics,” look to old economists (Reuters)
• H.R. 3962 roughly same length as last Harry Potter book (CLS)
• Rick Bookstaber to the SEC (Bookstaber)
• Studies 'overstate species risks' (BBC)
• AGRITECHNICA 2009 is on: The World’s largest Exhibition of agricultural Machinery (Source)

 

Weekend Reading: Goldman, Gold, Vegas, Sex, and Commercial Real Estate

A few links from my weekly Weekend Reading column:

• Just doing God’s work: Inside Lloyd Blankfein’s Goldman Sachs (Times)
• Inside the Global Frenzy for Gold (NYT)
• Las Vegas construction nears standstill (Las Vegas Sun)
• The Technology Behind the Madoff Scam (IDD)
• Bank of England says financiers are fuelling an economic 'doom loop' (Telegraph)
• U.S. oil reserves down by record amount in 2008 (EIA)
• Why this commercial real estate bust is different (BusinessWeek)
• First iPhone, now Droid. Who needs Windows? (CNET)
• Sex toys sell, even in a recession (S.F. Chronicle)

 

Checking Gold’s Hotness

A daily heatmap of gold performance – as proxied by GLD – over the last four years. Remarkable change in behavior since 2005.