Traders Warn of Market Cracks

The WSJ is finally noticing that markets have become, you know, weird:

Amid the wild swings of the past few weeks, cracks are appearing deep in the workings of the stock market that some professional investors say are making the market treacherous to trade.

Hedge-fund traders and mutual-fund managers say it has become increasingly tough to trade an individual stock without causing a big swing in its price. Thats led many large investors to step back from the market instead of risking being stung by the trading difficulties.

The big moves in stock indexes have caught attention. Just on Monday, the Dow Jones Industrial Average dropped 247.49 points, or 2.13%, to 11397.00. But market participants say trading conditions are much worse when they drill down to individual stocks, highlighting skittishness of investors of all stripes.

Even among some of Wall Streets most actively traded stocks, such as Apple Inc. or Netflix Inc., traders say it has been more challenging than usual to buy or sell.

The problem is a lack of liquidity—a term that refers to the ease of getting a trade done at an acceptable price.

via Traders Warn of Stock-Market Cracks – WSJ.com.

Tracking the Great Canadian Real Estate Bubble

Apparently Vancouver has now tagged Toronto “it” in the Great Canadian Real Estate Bubble. While the former is decelerating from absurd to only insane price gains year-over-year, the latter is hanging in at absurd, thus threatening Vancouver’s bubble price-gain lead.

Canada bubble

Look at how nice a job those Canadians are doing at leaving the U.S. behind in the bubble game. Okay, the following chart, while provocative, is bizarre. I can accept converting to a common currency, and alibi the distorting effects of Vancouver, but it should not compare average Canadian prices to median U.S. prices. That’s just wrong. I’ll leave the graph up, but this is a distorting view.

Widening gap

More here.

Small Business Lending Ticks Up. A Little. Sort Of.

From a new FRB SF paper, data showing an uptick in small business lending, at least from large banks. Now we’re only at really low levels, as opposed to being at really low levels and falling.

Lending

Got you all glowing and optimistic? Well, hold on there. Things aren’t as happy when it comes to small banks lending to small business, as the following figure shows.

Smallbanks

Urbanism and The Pruitt-Igoe Myth

The Pruitt-Igoe Myth: an Urban History – Film Trailer from the Pruitt-Igoe Myth on Vimeo.

The U.S.’s Second Economy

Brian Arthur on the U.S’s “second economy” and its growth:

How fast is the second economy growing?

Here’s a very rough estimate. Since 1995, when digitization really started to kick in, labor productivity (output per hours worked) in the United States has grown at some 2.5 to 3 percent annually, with ups and downs along the way. No one knows precisely how much of this growth is due to the uses of information technology (some economists think that standard measurements underestimate this); but pretty good studies assign some 65 to 100 percent of productivity growth to digitization. Assume, then, that in the long term the second economy will be responsible for roughly a 2.4 percent annual increase in the productivity of the overall economy. If we hold the labor force constant, this means output grows at this rate, too. An economy that grows at 2.4 percent doubles every 30 years; so if things continue, in 2025 the second economy will be as large as the 1995 physical economy. The precise figures here can be disputed, but that misses the point. What’s important is that the second economy is not a small add-on to the physical economy. In two to three decades, it will surpass the physical economy in size.

via The second economy – McKinsey Quarterly – Strategy – Growth.

Tax Rates, Warren Buffett & Progressivity

From Michael Cembalest’s latest, comparing progressively of tax rates in U.S. As he points out, the system ceases being as progressive after $500k in income — but even then, Warren Buffett’s tax rate is an outlier, which doesn’t make for good policy.

Buffet

Twitter Digest: 2011-10-17

  • Ritholtz: My New Approach to Spam (Also, Constant Contact Sucks) http://t.co/0WPNbeUx #
  • Halfway through Pinker's new book about declining violence over time, and, while he writes well, I'm less convinced than before reading. #
  • My issue with Pinker is about distributions. I see declines bookended by paroxysms higher; he sees continuous decline. I hope he's right. #
  • Indifferent first review of Spielberg's new Tintin movie. Ugh. http://t.co/Fn48HxuJ #
  • Finally getting around to listening to Radiolab's latest episode, on Loops. It is, of course, excellent. http://t.co/ACAr88Mm #
  • Saudi Aramco, world's top energy producer, is beginning to look beyond oil. Interesting augury http://t.co/p3Bw3pIz #
  • "People used to be shocked at tourists visiting favelas. Now there are funk and jazz parties and favela movie shows." http://t.co/jvOyZpHB #
  • For my sins, I am in Vegas for a chunk of next week, Seems appropriate, in the circumstances. #
  • Why, all of a sudden in IOS 5, is my NYer subscription only available in Newsstand? Can't I have it in the standalone app anymore? #
  • Debates this year have almost twice as many viewers as Democratic or Republican debates did 4 years ago. http://t.co/EbGRTNqL #
  • Institutional trading positions and market bubble patterns – http://147.9.1.61/cas/economics/pdf/upload/Buyuksahin-paper.pdf #
  • Sports medicine doctors are from mars; ultra endurance athletes are from Venus — http://t.co/OSaU9nds #
  • The second economy: Brian Arthur on how we're ushering in the biggest changes since the Industrial Revolution – http://t.co/RAHv8iQh #
  • Q: Where have all the IPOs gone? A: Gone forever, even with regulatory changes – http://t.co/Yn56QE8Y #
  • RIM is screwed, Part XXXIV in a series. Collect them all. http://t.co/N9JNqMfz #
  • Some provocative new work on tumor vascularization & Peto's Paradox — why whales don't die of cancer – http://t.co/0ESUlkQ3 #
  • Fun LA Times piece about a favorite town, Nelson BC: "Picture a college town that has misplaced its university." http://t.co/dmTsgEyU #
  • And … with that barrage of tweets, consider yourselves duly informed about something or another. #
  • Strange Headlines: A new study looks at how regularity can be used to identify cases of fraud in public documents http://t.co/e4o2Sx8n #
  • QotD: "…it seems to me that 15 years of email is plenty for one lifetime." – Donald Knuth http://t.co/uQfgWKox #
  • This is almost unbearable, so be forewarned, but Atlantic's WWII photo series moves on to the Holocaust – http://t.co/UeRjcwhA #

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PC Market Sales Data

I’m biased horribly given my Microsoft position, but I can’t help bfeel reinforced by Gartner’s continuing revisions downward to PC sales.

Pcgrowth 460

Occupy Wall Street, the Cover

Tumblr lt7r2hsiK51qav5oho1 500

Where Have All the IPOs Gone?

New paper from Jay Ritter et al., on the the disappearance of IPOs. He argues they’re gone for good.

Where Have All the IPOs Gone?

Abstract

During 1980-2000, an average of 311 companies per year went public in the U.S. Since the technology bubble burst in 2000, the average has been only 102 initial public offerings (IPOs) per year, with the drop especially precipitous among small firms. Many have blamed the  Sarbanes-Oxley Act of 2002 and the 2003 Global Settlement’s effects on analyst coverage for the decline in U.S. IPO activity. We offer an alternative explanation. We posit that the advantages of selling out to a larger organization, which can speed a product to market and realize economies of scope, have increased relative to the benefits of remaining as an independent firm. Consistent with this hypothesis, we document that there has been a decline in the profitability of small company IPOs, and that small company IPOs have provided public market investors with low returns throughout the last three decades. Venture capitalists have been increasingly exiting their investments with trade sales rather than IPOs, and an increasing fraction of firms that have gone public have been involved in acquisitions. Our analysis suggests that IPO volume will not return to the levels of the 1980s and 1990s even with regulatory changes.