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Javier E

An Adaptation From 'Flash Boys: A Wall Street Revolt,' by Michael Lewis - NYTimes.com - 0 views

  • Ryan was making hundreds of thousands of dollars a year building systems to make stock-market trades faster. He was struck, over and over again, by how little those he helped understood the technology they were using
  • Ryan described what he witnessed inside the exchanges: The frantic competition for nanoseconds, clients’ trying to get their machines closer to the servers within the exchanges, the tens of millions being spent by high-frequency traders for tiny increments of speed. The U.S. stock market was now a class system of haves and have-nots, only what was had was not money but speed (which led to money).
  • A salesman at RBC who marketed Thor recalls one big investor calling to say, “You know, I thought I knew what I did for a living, but apparently not, because I had no idea this was going on.”
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  • Eventually Brad Katsuyama came to realize that the most sophisticated investors didn’t know what was going on in their own market. Not the big mutual funds, Fidelity and Vanguard. Not the big money-management firms like T. Rowe Price and Capital Group. Not even the most sophisticated hedge funds.
  • The deep problem with the system was a kind of moral inertia. So long as it served the narrow self-interests of everyone inside it, no one on the inside would ever seek to change it, no matter how corrupt or sinister it became
  • Technology had collided with Wall Street in a peculiar way. It had been used to increase efficiency. But it had also been used to introduce a peculiar sort of market inefficiency. Taking advantage of loopholes in some well-meaning regulation introduced in the mid-2000s, some large amount of what Wall Street had been doing with technology was simply so someone inside the financial markets would know something that the outside world did not. The same system that once gave us subprime-mortgage collateralized debt obligations no investor could possibly truly understand now gave us stock-market trades involving fractions of a penny that occurred at unsafe speeds using order types that no investor could possibly truly understand.
  • The trouble with the stock market — with all of the public and private exchanges — was that they were fantastically gameable, and had been gamed: first by clever guys in small shops, and then by prop traders who moved inside the big Wall Street banks. That was the problem, Puz thought. From the point of view of the most sophisticated traders, the stock market wasn’t a mechanism for channeling capital to productive enterprise but a puzzle to be solved.
  • As they worked through the order types, the Puzzle Masters created a taxonomy of predatory behavior in the stock market. Broadly speaking, it appeared as if there were three activities that led to a vast amount of grotesquely unfair trading. The first they called electronic front-running — seeing an investor trying to do something in one place and racing ahead of him to the next (what had happened to Katsuyama when he traded at RBC). The second they called rebate arbitrage — using the new complexity to game the seizing of whatever legal kickbacks, called rebates within the industry, the exchange offered without actually providing the liquidity that the rebate was presumably meant to entice. The third, and probably by far the most widespread, they called slow-market arbitrage. This occurred when a high-frequency trader was able to see the price of a stock change on one exchange and pick off orders sitting on other exchanges before those exchanges were able to react. This happened all day, every day, and very likely generated more billions of dollars a year than the other strategies combined.
  • IEX had made its point: That to function properly, a financial market didn’t need to be rigged in someone’s favor. It didn’t need payment for order flow and co-location and all sorts of unfair advantages possessed by a small handful of traders. All it needed was for investors to take responsibility for understanding it, and then to seize its controls. “The backbone of the market,” Katsuyama says, “is investors coming together to trade.”
  • If an investor as large as T. Rowe Price, which acted on behalf of millions of investors, had trouble obtaining the information it needed to determine if its brokers had acted in their interest, what chance did the little guy have?
  • The stock market really was rigged. Katsuyama often wondered how enterprising politicians and plaintiffs’ lawyers and state attorneys general would respond to that realization. (This March, the New York attorney general, Eric Schneiderman, announced a new investigation of the stock exchanges and the dark pools, and their relationships with high-frequency traders.
caelengrubb

Insider Trading - Econlib - 0 views

  • Insider trading” refers to transactions in a company’s securities, such as stocks or options, by corporate insiders or their associates based on information originating within the firm that would, once publicly disclosed, affect the prices of such securities.
  • Corporate insiders are individuals whose employment with the firm (as executives, directors, or sometimes rank-and-file employees) or whose privileged access to the firm’s internal affairs (as large shareholders, consultants, accountants, lawyers, etc.) gives them valuable information.
  • Famous examples of insider trading include transacting on the advance knowledge of a company’s discovery of a rich mineral ore (Securities and Exchange Commission v. Texas Gulf Sulphur Co.), on a forthcoming cut in dividends by the board of directors (Cady, Roberts & Co.), and on an unanticipated increase in corporate expenses (Diamond v. Oreamuno).
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  • Such trading on information originating outside the company is generally not covered by insider trading regulation.
  • Insider trading is quite different from market manipulation, disclosure of false or misleading information to the market, or direct expropriation of the corporation’s wealth by insiders.
  • Regulation of insider trading began in the United States at the turn of the twentieth century, when judges in several states became willing to rescind corporate insiders’ transactions with uninformed shareholders.
  • One of the earliest (and unsuccessful) federal attempts to regulate insider trading occurred after the 1912–1913 congressional hearings before the Pujo Committee, which concluded that “the scandalous practices of officers and directors in speculating upon inside and advance information as to the action of their corporations may be curtailed if not stopped.”
  • The Securities Acts of 1933–1934, passed by the U.S. Congress in the aftermath of the stock market crash, though aimed primarily at prohibiting fraud and market manipulation, also targeted insider trading.
  • As of 2004, at least ninety-three countries, the vast majority of nations that possess organized securities markets, had laws regulating insider trading
  • Several factors explain the rapid emergence of such regulation, particularly during the last twenty years: namely, the growth of the securities industry worldwide, pressures to make national securities markets look more attractive in the eyes of outside investors, and the pressure the SEC exerted on foreign lawmakers and regulators to increase the effectiveness of domestic enforcement by identifying and punishing offenders and their associates operating outside the United States.
  • Many researchers argue that trading on inside information is a zero-sum game, benefiting insiders at the expense of outsiders. But most outsiders who bought from or sold to insiders would have traded anyway, and possibly at a worse price (Manne 1970). So, for example, if the insider sells stock because he expects the price to fall, the very act of selling may bring the price down to the buyer.
  • A controversial case is that of abstaining from trading on the basis of inside information (Fried 2003).
  • There is little disagreement that insider trading makes securities markets more efficient by moving the current market price closer to the future postdisclosure price. In other words, insiders’ transactions, even if they are anonymous, signal future price trends to others and make the current stock price reflect relevant information sooner.
  • Accurately priced stocks give valuable signals to investors and ensure more efficient allocation of capital.
  • The controversial question is whether insider trading is more or less effective than public disclosure.
  • Insider trading’s advantage is that it introduces individual profit motives, does not directly reveal sensitive intercorporate information, and mitigates the management’s aversion to disclosing negative information (
  • Probably the most controversial issue in the economic analysis of insider trading is whether it is an efficient way to pay managers for their entrepreneurial services to the corporation. Some researchers believe that insider trading gives managers a monetary incentive to innovate, search for, and produce valuable information, as well as to take risks that increase the firm’s value (Carlton and Fischel 1983; Manne 1966).
  • Another economic argument for insider trading is that it provides efficient compensation to holders of large blocks of stock
  • A common contention is that the presence of insider trading decreases public confidence in, and deters many potential investors from, equity markets, making them less liquid (Loss 1970).
  • Empirical research generally supports skepticism that regulation of insider trading has been effective in either the United States or internationally, as evidenced by the persistent trading profits of insiders, behavior of stock prices around corporate announcements, and relatively infrequent prosecution rates (Bhattacharya and Daouk 2002; Bris 2005).
  • Despite numerous and extensive debates, economists and legal scholars do not agree on a desirable government policy toward insider trading. On the one hand, absolute information parity is clearly infeasible, and information-based trading generally increases the pricing efficiency of financial markets. Information, after all, is a scarce economic good that is costly to produce or acquire, and its subsequent use and dissemination are difficult to control. On the other hand, insider trading, as opposed to other forms of informed trading, may produce unintended adverse consequences for the functioning of the corporate enterprise, the market-wide system of publicly mandated disclosure, or the market for information.
sanderk

The coronavirus-induced recession could become a depression, PIMCO says | Markets Insider - 0 views

  • The coronavirus pandemic has brought much economic activity around the world to a halt, making a global recession appear inevitable — it could become a depression if policy makers don't act fast enough, according to Joachim Fels of Pacific Investment Management Co. 
  • On Sunday, the Federal Reserve sprang into action in an attempt to save the US economy from fallout amid the coronavirus pandemic. The central bank lowered its benchmark interest rate to near zero and said that it will increase bond holdings by $700 billion, among other measures. 
  • The task at hand for governments and central banks continues to be that the recession "stays relatively short-lived and doesn't morph into an economic depression," Fels said. This will require a "very large fiscal response" to support individuals and businesses adversely affected by the crisis, he wrote.
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  • US equities all but shrugged off the emergency measures — the Dow Jones Industrial Average shed 2,700 points at the open, and the S&P 500 slipped 8%, hitting a circuit breaker that halted trading for 15 minutes. When it resumed, stocks continued to slump. 
  • In addition to facilitating more expansionary fiscal policy, "central banks will also have to ensure that credit can continue to flow to companies and households," he said. 
anniina03

The Coronavirus Put Stock Market in Uncharted Territory - The Atlantic - 0 views

  • Over the past week, stock markets around the world plunged as distressing news about the spread of the novel coronavirus continued to accumulate.
  • The global stock market is, theoretically, the distillation of how investors think everything that happens in the world will play out in the economy. Right now, judging by these drops, investors are much less optimistic than they were a week ago. But what they’re predicting is not only how bad the outbreak could be in terms of workers staying home sick, drops in consumer spending, or supply-chain disruptions; it’s also how bad people think it could be.
  • What investors think the public is thinking is therefore crucial.
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  • Public perception of a crisis can be extremely consequential in financial markets.
  • Predicting the emotional reactions of the entire world population to coronavirus would be a bit easier if investors could turn to the market effects of previous pandemics for guidance. But history provides few indications of what might happen to the economy if the coronavirus and COVID-19, the disease it causes, continue to spread.
katherineharron

America is in turmoil and stocks are booming. Is the market broken? - CNN - 0 views

  • The stock market is not the economy. But rarely has the gap between Wall Street and Main Street felt so wide.
  • The United States is going through its worst race crisis since 1968 following the death of George Floyd, an unarmed black man, at the hands of a police officer in Minneapolis. Riots have hit cities across the nation. Looting is rampant. And President Donald Trump is threatening to send in the military to stop the violence.
  • The civil unrest could exacerbate the coronavirus pandemic that has already killed more than 100,000 Americans. That in turn could deepen the economic collapse that has forced more than 40 million people to file for unemployment.
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  • The S&P 500 closed Tuesday at the highest level in nearly three months. The Nasdaq has spiked 40% since March 23, fueled by the resilience of Big Tech, and is now within striking distance of all-time highs.
  • unprecedented stimulus from the Federal Reserve, and investors not wanting to miss out on monster returns once the economy recovers.
  • That means that while Main Street is still grappling with coronavirus, racial crisis and the impacts of both, Wall Street is doing just fine. Fed policy has allowed markets to decouple from economic reality.
  • Although the unrest was initially sparked by the killing of George Floyd, the continued broader economic discontent is an undercurrent.
  • that the American dream is not alive and well.
  • The divide between rich and poor was worsened by the Great Recession and its aftermath. The US government's response relied heavily on easy money from the Fed, rather than the kind of fiscal stimulus that can help lower-income Americans.
  • First, the coronavirus pandemic disproportionately hit poorer Americans, many of whom work in the hospitality and service sectors rocked by the pandemic. Nearly 40% of low-income workers lost their jobs in March alone, according to the Fed.
katherineharron

Fed takes emergency action to stave off a depression - CNN - 0 views

  • The Federal Reserve is signaling it will do whatever it takes to save the coronavirus-ravaged American economy from a depression.
  • Taken together, the Fed said the new programs will provide up to $300 billion in new financing to an economy getting crushed by the crippling health restrictions aimed at fighting the pandemic. The Fed is going all out to prevent the health crisis from turning into a full-blown financial crisis.
  • US stock futures spiked on the new emergency actions from the Fed, which has already slashed interest rates to zero. Recession fears and a liquidity crunch have crashed the stock market over the past month and caused parts of the bond market to malfunction.
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  • The Fed said it will support American households and businesses, but it acknowledged "our economy will face severe disruptions."
  • The social distancing policies imposed to fight the coronavirus crisis have brought the American economy to its knees. Malls are empty. Factories have been shut down. Casinos have gone dark. And countless flights have been suspended. The economic toll is massive.
  • Aided by extremely low interest rates, US businesses have borrowed heavily over the past decade to hire workers, build factories, research new products and pay for share buybacks. That debt now looks especially treacherous as the economy goes into a tailspin.
dicindioha

Nervous markets take fright at prospect of Trump failing to deliver | Larry Elliott | B... - 0 views

  • Shares, oil and the US dollar were all under pressure as global financial markets took fright at the prospect that Donald Trump would fail to deliver on his growth-boosting promises.
  • stock markets in Asia and Europe fell in response to Tuesday’s sharp decline on Wall Street.
  • Markets have become increasingly impatient with the new Trump administration for failing to follow through on pledges to use a package of tax cuts and infrastructure spending to raise the US growth rate.
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  • Investors believe a failure to secure agreement on Capitol Hill to repeal Barack Obama’s healthcare act – the new administration’s first legislative test – will lead to a further sell-off on Wall Street.
  • money flowed out of the dollar and into the safe haven of the Japanese yen. Sterling rose to stand at just under $1.25 against the US currency.
  • The “repeal and replace” of Obamacare was being seen as an acid test of whether Trump could deliver on his fiscal plans and the difficulties encountered were a “bad omen” for tax reform.
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    After watching inside job it is so interesting to see the way the world market flows around the major countries, and the small countries rely on the success of the big ones. It will be important to monitor whether Trump will be able to implement his campaign claims referring to the market and taxes.
sissij

Tesla Passes Ford in Market Value as Investors Bet on the Future - The New York Times - 0 views

  • But there is one exception. Tesla, the electric-vehicle upstart, continues to surge.
  • “Investors want something that is going to go up in orders of magnitude in six months to six years, and Tesla is that story,” said Karl Brauer, a senior editor at Kelley Blue Book. “Nobody thinks Ford or G.M. is going to do that.”
  • Tesla’s chief executive, Elon Musk, has shattered the conventional wisdom that automakers should be viewed as a stable, reliable investment. Instead, he promotes his California-based company as a dynamic vehicle for growth, despite the risks and challenges ahead of it.
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  • But neither automaker has convinced Wall Street that it has shed its boom-or-bust reputation tied to broader economic cycles, or is at the forefront of new technology being developed for self-driving vehicles and electric cars.
  • “It’s almost like Tesla is positioned in people’s minds as an energy storage company that happens to put most of its batteries on wheels,” said Andrew Stewart, chief investment officer at Exchange Capital Management, an investment firm in Ann Arbor, Mich.
  • While Tesla may enjoy the favor of investors, it still faces some daunting hurdles to reach its goals.
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    In my research on Tesla, I found it very interesting that Tesla never has advertisement spreading out like Ford, Motor or other motor companies do. Yet, it is very popular and well-known. How does Tesla manage to be known by the public if they don't have any advertisement and their target costumers are the elites? One of the reason I found online about its propaganda strategy is its skill on giving stock holder confidence. Thus their stock price is always positive and healthy. By generating new ideas, Tesla is able to stay on the headline of the newspaper. When I saw this news, my first reaction is that it's Tesla again and give me a very positive image on the future of Tesla. This new way of propaganda is directly related to the new form of economics in the society so I found it very interesting. --Sissi (4/4/2017)
sanderk

Coronavirus Tips: How to Protect and Prepare Yourself - The New York Times - 0 views

  • The coronavirus continues to spread worldwide, with over 200,000 confirmed cases and at least 8,000 dead. In the United States, there have been at least 8,000 cases and more than 100 deaths, according to a New York Times database.
  • Most important: Do not panic. With a clear head and some simple tips, you can help reduce your risk, prepare your family and do your part to protect others.
  • That might be hard to follow, especially for those who can’t work from home. Also, if you’re young, your personal risk is most likely low. The majority of those who contract coronavirus do not become seriously ill, and it might just feel as if you have the flu. But keeping a stiff upper lip is not only foolhardy, but will endanger those around you.
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  • Avoid public transportation when possible, limit nonessential travel, work from home and skip social gatherings. Don’t go to crowded restaurants or busy gyms. You can go outside, as long as you avoid being in close contact with people.
  • If you develop a high fever, shortness of breath or another, more serious symptom, call your doctor. (Testing for coronavirus is still inconsistent — there are not enough kits, and it’s dangerous to go into a doctor’s office and risk infecting others.) Then, check the Centers for Disease Control and Prevention website and your local health department for advice about how and where to be tested.
  • Wash your hands, wash your hands, wash your hands. That splash-under-water flick won’t cut it anymore.
  • Also, clean “high-touch” surfaces, like phones, tablets and handles. Apple recommends using 70 percent isopropyl alcohol, wiping gently. “Don’t use bleach,” the company said.
  • To disinfect any surface, the C.D.C. recommends wearing disposable gloves and washing hands thoroughly immediately after removing the gloves. Most household disinfectants registered by the Environmental Protection Agency will work.
  • There’s a lot of information flying around, and knowing what is going on will go a long way toward protecting your family.
  • Right now, there’s no reason for parents to worry, the experts say; coronavirus cases in children have been very rare. The flu vaccine is a must, as vaccinating children is good protection for older people. And take the same precautions you would during a normal flu season: Encourage frequent hand-washing, move away from people who appear sick and get the flu shot.
  • Unless you are already infected, face masks won’t helpFace masks have become a symbol of coronavirus, but stockpiling them might do more harm than good. First, they don’t do much to protect you. Most surgical masks are too loose to prevent inhalation of the virus. (Masks can help prevent the spread of a virus if you are infected. The most effective are the so-called N95 masks, which block 95 percent of very small particles.)Second, health care workers and those caring for sick people are on the front lines. Last month, the surgeon general urged the public to stop stockpiling masks, warning that it might limit the amount of resources available to doctors, nurses and emergency professionals.
  • Stock up on a 30-day supply of groceries, household supplies and prescriptions, just in case.That doesn’t mean you’ll need to eat only beans and ramen. Here are tips to stock a pantry with shelf-stable and tasty foods
  • No. The first testing in humans of an experimental vaccine began in mid-March. Such rapid development of a potential vaccine is unprecedented, but even if it is proved safe and effective, it probably will not be available for 12 to18 months.
  • If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.
  • That’s not a good idea. Even if you’re retired, having a balanced portfolio of stocks and bonds so that your money keeps up with inflation, or even grows, makes sense. But retirees may want to think about having enough cash set aside for a year’s worth of living expenses and big payments needed over the next five years.
Javier E

Male Stock Analysts With 'Dominant' Faces Get More Information-and Have Better Forecast... - 0 views

  • “People form impressions after extremely brief exposure to faces—within a hundred milliseconds,” says Alexander Todorov, a behavioral-science professor at the University of Chicago Booth School of Business. “They take actions based on those impressions,”
  • . Under most circumstances, such quick impressions aren’t accurate and shouldn’t be trusted, he says.
  • Prof. Teoh and her fellow researchers analyzed the facial traits of nearly 800 U.S. sell-side stock financial analysts working between January 1990 and December 2017 who also had a LinkedIn profile photo as of 2018. They pulled their sample of analysts from Thomson Reuters and the firms they covered from the merged Center for Research in Security Prices and Compustat, a database of financial, statistical and market information
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  • The researchers used facial-recognition software to map out specific points on a person’s face, then applied machine-learning algorithms to the facial points to obtain empirical measures for three key face impressions—trustworthiness, dominance and attractiveness.  
  • They examined the association of these impressions with the accuracy of analysts’ quarterly forecasts, drawn from the Institutional Brokers Estimate System
  • Analyst accuracy was determined by comparing each analyst’s prediction error—the difference between their prediction and the actual earnings—with that of all analysts for that same company and quarter.
  • For an average stock valued at $100, Prof. Teoh says, analysts ranked as looking most trustworthy were 25 cents more accurate in earnings-per-share forecasts than the analysts who were ranked as looking least trustworthy
  • Similarly, most-dominant-looking analysts were 52 cents more accurate in their EPS forecast than least-dominant-looking analysts.
  • The relation between a dominant face and accuracy, meanwhile, was significant before and after the regulation was enacted, the analysts say. This suggests that dominant-looking male analysts are always able to obtain information,
  • While forecasts of female analysts regardless of facial characteristics were on average more accurate than those of their male counterparts, the forecasts of women who were seen as more-dominant-looking were significantly less accurate than their male counterparts.  
  • Says Prof. Todorov: “Women who look dominant are more likely to be viewed negatively because it goes against the cultural stereotype.
Javier E

The Price of the Coronavirus Pandemic | The New Yorker - 0 views

  • “You don’t know anyone who has made as much money out of this as I have,” he said over the phone. No argument here. He wouldn’t specify an amount, but reckoned that he was up almost two thousand per cent on the year.
  • He bought a big stake in Alpha Pro Tech, one of the few North American manufacturers of N95 surgical masks, with the expectation that when the virus made it across the Pacific the company would get government contracts to produce more. The stock was trading at about three dollars and fifty cents a share, and so, for cents on the dollar, he bought options to purchase the shares at a future date for ten dollars: he was betting that it would go up much more than that. By the end of February, the stock was trading at twenty-five dollars a share
  • He quickly put some money to work
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  • He shorted oil and, as a proxy for oil, the Canadian dollar. (That is, he bet against both.) Finally, he shorted U.S. equities.
  • Last October, he listened to an audiobook by the Hardcore History podcaster, Dan Carlin, called “The End Is Always Near.” “So I had pandemics and plagues in my head,” the Australian said. “In December, I started seeing the first articles about this wet-market thing going on in China, and then in early January there was a lot on Twitter about the shit in Wuhan.” He was in Switzerland on a ski holiday with his family, and he bought all the surgical masks and gloves he could find.
  • The Australian, who spoke on the condition that his name not be used, is a voluble redhead just shy of fifty.
  • The problem, he said, was that, perhaps more now than ever, Americans lack what he called “social cohesion,” and thus the collective will, to commit to such a path.
  • perhaps the government should reward each citizen who strictly observed the quarantine with fifty thousand dollars. “The virus would burn out after four weeks,” he said. The U.S. had all the food and water and fuel it would need to survive months, if not years, of total isolation from the world. “If you don’t trade with China, they’re screwed,” he said. “You’d win this war. Let the rest of the world burn.
  • I’d been eavesdropping for a week on the friend’s WhatsApp conversation with dozens of his acquaintances and colleagues (he called them the Fokkers, for an acronym involving his name), all of them men, most of them expensively educated financial professionals, some of them very rich, a few with connections in high places. The general disposition of the participants, with exceptions, was the opposite of the Australian’s
  • they expressed the belief, with a conviction that occasionally tipped into stridency or mockery, that the media, the modellers, and the markets were overreacting to the threat of the coronavirus
  • They mocked Jim Cramer, the host of the market program “Mad Money,” on CNBC, for predicting a great depression and wondering if anyone would ever board an airplane again. Anecdotes, hyperbole: the talking chuckleheads sowing and selling fear.
  • it’s hard for a coldhearted capitalist to know just how cold the heart must go. Public-health professionals make a cost-benefit calculation, too, with different weightings.
  • This brutal shock is attacking a body that was already vulnerable. In the event of a global depression, a postmortem might identify COVID-19 as the cause of death, but, as with so many of the virus’s victims, the economy had a preëxisting condition—debt, instead of pulmonary disease.
  • “It’s as if the virus is almost beside the point,” a trader I know told me. “This was all set up to happen.”
  • the “smart money,” like the giant asset-management firms Blackstone and the Carlyle Group, was now telling companies to draw down their bank lines, and borrow as much as they could, in case the lenders went out of business or found ways to say no. Sure enough, by March’s end, corporations had reportedly tapped a record two hundred and eight billion dollars from their revolving-credit lines
  • In a world where we talk, suddenly, of trillions, two hundred billion may not seem like a lot, but it is: in 2007, the subprime-mortgage lender Countrywide Financial, in drawing down “just” $11.5 billion, helped bring the system to its knees.
  • It is hard to navigate out of the debt trap. Creditors can forgive debtors, but that process, especially at this level, would be almost impossibly laborious and fraught. Meanwhile, defaults flood the market with collateral, be it buildings, stocks, or aircraft. The price of that collateral collapses—haircuts for baldheads—leading to more defaults.
  • In New York State, where nearly half a million new claims had been filed in two weeks, the unemployment-insurance trust began to teeter toward insolvency. Come summer, there would be no money left to pay unemployment benefits.
  • As April arrived, businesses, large and small, decided not to pay rent, either because they didn’t have the cash on hand or because, with a recession looming, they wanted to preserve what cash they had. Furloughed or fired employees, meanwhile, faced similar decisions
  • On March 20th, Goldman Sachs spooked the world, by predicting a twenty-four-per-cent decline in G.D.P. in the second quarter, a falloff in activity that seemed at once both unthinkable and inevitable. Subsequent predictions grew even more disma
katherineharron

Stock market today: How the Dow and S&P 500 are trading - CNN - 0 views

  • Royal Caribbean Cruises (RCL) has received a $2.2 billion revolving line credit to help the beleaguered company stay afloat, it announced Monday.
  • Stocks are deep in the red at midday. The Washington gridlock on fiscal stimulus measures has overshadowed hopes that the Federal Reserve's onslaught of new monetary moves would lift markets higher.
  • The novel coronavirus outbreak has forced many people to stay home and work -- and kids are "going" to school virtually as well. That's a big reason why video conferencing company Zoom Video Communications (ZM) has been one of the rare Wall Street winners while the broader market has plunged into bear status.
peterconnelly

It's Doom Times in Tech - The New York Times - 0 views

  • The five biggest technology giants in the U.S. have collectively lost more than $2 trillion of stock market value this year.
  • Start-up founders who were turning away eager investors a few months ago now must make an effort to get more money. (Gasp.)
  • Every couple of years for the past decade, anytime there were some wobbles in technology or moments of doubt, smart people predicted that the growth of the tech economy since the Great Recession couldn’t possibly last.
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  • We haven’t seen this combination of economic anxiety and high inflation before. Economists are weighing the risks of a U.S. recession, and companies in many industries are worried that their businesses are slowing.
  • Fast growing start-ups in particular need the faith of investors, customers and employees to keep the momentum going.
  • If within a few months, stock prices bounce back, investors start putting money into start-ups again and the market for initial public offerings unfreezes, the industry might be fine. But if investors stay skittish for many months or years, that could lead to a major shake-up.
peterconnelly

Opinion | Elon Musk's Tesla Management Is a Bad Sign for Twitter - The New York Times - 0 views

  • His promises to preserve free speech, ban spam bots and dramatically boost revenue may have earned the blessing of the company’s founder, Jack Dorsey, but with Twitter’s stock falling well below his offer price, Mr. Musk appears to be reneging on a deal that has made even Wall Street grow skeptical.
  • The way that he has managed and marketed his businesses from Tesla’s early days reveals a dysfunction behind the automaker’s veneer of technofuturism and past stock market successes.
  • The way that he has managed and marketed his businesses from Tesla’s early days reveals a dysfunction behind the automaker’s veneer of technofuturism and past stock market successes.
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  • he forces his employees to bridge the enormous gap between technological reality and his dreams. This disconnect fosters a negligent and sometimes cruel workplace, to disastrous effect.
  • That fully self-driving announcement that so delighted his fans came as a far more jarring revelation to the project’s engineers, who found out about their staggering new mission when Mr. Musk tweeted about it.
  • This is the fundamental weakness of every organization run as a cult of personality: The dear leader can’t be everywhere or make every decision but often fails to provide the clear code of values that allows managers to independently shape their decisions around common goals.
  • Lawsuits by workers and California’s Department of Fair Employment and Housing allege that Black workers were tasked with menial physical labor in parts of the factory nicknamed “the plantation,” where they were subjected to racist slurs and graffiti.
  • He ultimately gave up and cobbled together a manual-labor-intensive production line in an open-air tent.
  • Female workers have sued, alleging a pervasive culture of sexual harassment and groping by supervisors. Mr. Musk was indifferent, emailing workers who experienced abuse that “it is important to be thick-skinned.”
  • lantatio
  • Mr. Musk’s reliance on hype is especially jarring.
  • By moving to buy Twitter, Mr. Musk has not only added another distraction to his long list but has also already shown the same drive to announce sweeping decisions in public.
  • Ultimately Mr. Musk’s goals for Twitter, as they are for Tesla, are not about making the right decisions for his companies or the people who make them possible.
  • They are about playing to the crowd and burnishing the legend that keeps fresh bodies and minds moving through the businesses that chew them up and spit them out.
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    Elon Musk's management at Tesla and his buying of Twitter
dicindioha

Democrats skeptical about SEC nominee's ties to Wall Street - The Washington Post - 0 views

  • Jay Clayton, on Thursday defended his ability to regulate Wall Street despite spending decades helping big banks weather government scrutiny
  • Clayton said, he would make sure “our markets are fair, open, orderly, and efficient and . . . that investors are protected
  • New York lawyer's deep connections to Wall Street, particularly Goldman Sachs, and inexperience with corporate prosecutions drew skepticism from Democrats
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  • Clayton, who made more than $7 million last year, is among six people with ties to Goldman Sachs chosen by Trump to serve in his administration.
  • He was warmly received by Republicans on the committee, who praised his financial industry experience.
  • It seems a little surprising to me that a person's success in a field in which we are asking them to now lead an agency could be a criticism,” said Sen. Mike Crapo
  • Advising on the deal was Clayton.
  • he said. U.S. markets are “less attractive to business than in the past,” and that should change.
  • It should be easier, and cheaper, for companies to sell stock on the public markets, Clayton told them.
  • In those cases, Warren said, if the rest of SEC's four commissioners vote along partisan lines, the investigations would stall and the firms could escape being held responsible.
  • “I think individual prosecutions, particularly in the white-collar area, have a significant effect on behavior,” Clayton said. “I want to be clear: Companies should be held responsible.”
  • Warren said she wants the SEC chair to look into and “put a stop to” any trading advantages Icahn might reap while serving in his new role.
  •  
    This article talks about Trump's pick for the SEC, who formerly advised on the deal where Warren Buffet salvaged Goldmann and Sachs with a $5 billion dollar investment. The article says some question his ability, then, to make sure that companies are held responsible for mistakes in the market. He wants to ensure our markets are "fair" which we know is not a term associated with efficiency, so it will be interesting to see if this occurs.
Javier E

The Obama legacy that can't be repealed - The Washington Post - 0 views

  • There is no mystery about Barack Obama’s greatest presidential achievement: He stopped the Great Recession from becoming the second Great Depression. True, he had plenty of help, including from his predecessor, George W. Bush, and from the top officials at the Treasury Department and Federal Reserve. But if Obama had made one wrong step, what was a crushing economic slump could have become something much worse.
  • It is Obama’s unfortunate fate that the high-water mark of his presidency occurred in the first months, when the world flirted with financial calamity. The prospect of another Great Depression — a long period of worsening economic decline — was not far-fetched.
  • In the first quarter of 2009, as Obama was moving into the White House, monthly job losses averaged 772,000. The ultimate decline in employment was 8.7 million jobs, or 6.3 percent. Housing prices and stock values were collapsing. From their peak in February 2007 to their low point, housing prices dropped 26 percent. Millions of homeowners were “underwater” — their houses were worth less than the mortgages on them. Stock prices fell roughly by half from August 2007 to March 2009.
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  • There was no guarantee that the economy’s downward spiral wouldn’t continue, as frightened businesses and consumers curbed spending and, in the process, increased unemployment. The CEA presents a series of charts comparing the 2008-2009 slump with the Great Depression. In every instance, the 2008-2009 downturn was as bad as — or worse than — the first year of the Great Depression: employment loss, drop in global trade and change in households’ net worth.
  • The starkest of these was the fall in households’ net worth (people’s assets, such as homes and stock, minus their debts, such as mortgages and credit-card balances). It dropped by $13 trillion, about a fifth, from its high point in 2007 to its trough in 2009. This decline, the CEA notes, “was far larger than the reduction [adjusted for inflation] . . . at the onset of the Great Depression.”
  • What separates then from now is that, after 18 months or so, spending turned up in 2009 while it continued declining in the 1930s. This difference reflected, at least in part, the aggressive policies adopted to blunt the downturn. The Fed cut short-term interest rates to zero and provided other avenues of cheap credit; the Troubled Asset Relief Program (TARP), enacted in the final months of the Bush administration, poured money into major banks to reassure the public of their solvency.
  • Still, Obama’s role was crucial. Against opposition, he decided to rescue General Motors and Chrysler. Throwing them onto the tender mercies of the market would have been a huge blow to the industrial Midwest and to national psychology. He also championed a sizable budget “stimulus.” Advertised originally as $787 billion, it was actually $2.6 trillion over four years when the initial program was combined with later proposals and so-called “automatic stabilizers” are included, the CEA says
  • More generally, Obama projected reason and calm when much of the nation was fearful and frazzled. Of course, he didn’t single-handedly restore confidence, but he made a big contribution
  • the recovery from the Great Recession is mostly complete. This seems plausible. Since the low point, employment is up 15.6 million jobs. Rising home and stock prices have boosted inflation-adjusted household net worth by 16 percent. Gross domestic product — the economy — is nearly 12 percent higher than before the financial crisis
  • his impact is underestimated. Suppose we had had a second Great Depression with, say, peak unemployment of 15 percent. Almost all our problems — from poverty to political polarization — would have worsened. Obama’s influence must be considered in this context. When historians do, they may be more impressed.
katherineharron

Global stocks lose momentum after Wall Street's third day in the green - CNN - 0 views

  • Global stocks failed to maintain their momentum Friday, indicating that a spectacular three-day rally that pushed the Dow Jones Industrial Average (INDU) out of a bear market could be losing steam.
  • Germany's DAX (DAX) dropped 1.4%. France's CAC 40 (CAC40) shed 2%, while the FTSE 100 (UKX) lost 3.7% in London.
  • Investors remained optimistic as US lawmakers put the finishing touches on a $2 trillion stimulus bill that will provide a boost to the economy. The Senate passed the bill 96-0, and the House of Representatives is expected to vote on the legislation Friday.
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  • "The market is running with the assumption that while this tumult will be the deepest recession in modern-day financial history, it will also be the shortest," Innes wrote.
martinelligi

S&P 500 jumps more than 1% to hit a record high, Nasdaq rallies 2.5% - 0 views

  • The S&P 500 climbed 1.3% to reach an all-time high, its first record since Feb. 16. The Dow Jones Industrial Average added 350 points to hit another intraday record. The Nasdaq Composite jumped 2.5% amid a rotation back into tech shares. Tesla was up 4%. Apple, Facebook and Netflix all jumped at least 2%, while Amazon, Alphabet and Microsoft shares were also higher.
  • Tech and growth stocks are rebounding from a swift correction triggered by rising interest rates. Higher rates make profits in far-off years seem less attractive to investors and can knock down stocks with relatively high valuations.
  • “The stimulus is beating the virus at least as far as the market is concerned,”
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  • President Joe Biden is expected to sign the $1.9 trillion coronavirus relief package Thursday afternoon. The plan will send direct payments of up to $1,400 to most Americans, and will also put nearly $20 billion into Covid-19 vaccinations and $350 billion into state, local and tribal relief.
  • The economic reopening, coupled with additional fiscal stimulus, accelerated the rotation into more cyclical sectors, such as energy. The S&P 500 energy sector has been the biggest winner this year, up 40% so far.
runlai_jiang

U.S. Stocks Surge After China's Xi Eases Trade Fears - WSJ - 0 views

  • Major U.S. stock indexes climbed Tuesday, with the Dow adding more than 400 points, as remarks from Chinese President Xi Jinping soothed concerns about a trade war that had rattled markets in recent weeks
  • Speaking at the Boao Forum, an annual economic summit, Mr. Xi pledged Beijing’s commitment to further economic liberalization as well as promising greater intellectual property protection and increased access to China’s financial and manufacturing sectors for foreign companies.
  • his conciliatory tone was taken well by the market
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  • In Asia, Hong Kong’s Hang Seng Index rallied 1.7%, as did Shanghai’s composite index, with Chinese banks among the sharpest risers.
caelengrubb

Investment - Econlib - 0 views

  • nvestment is one of the most important variables in economics.
  • Its surges and collapses are still a primary cause of recessions.
  • By investment, economists mean the production of goods that will be used to produce other goods. This definition differs from the popular usage, wherein decisions to purchase stocks (see stock market) or bonds are thought of as investment.
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  • Investment is usually the result of forgoing consumption. In a purely agrarian society, early humans had to choose how much grain to eat after the harvest and how much to save for future planting. The latter was investment.
  • In a more modern society, we allocate our productive capacity to producing pure consumer goods such as hamburgers and hot dogs, and investment goods such as semiconductor foundries. If we create one dollar worth of hamburgers today, then our gross national product is higher by one dollar.
  • Investment need not always take the form of a privately owned physical product. The most common example of nonphysical investment is investment in human capital.
  • In an economy that is closed to the outside world, investment can come only from the forgone consumption—the saving—of private individuals, private firms, or government.
  • In an open economy, however, investment can surge at the same time that a nation’s saving is low because a country can borrow the resources necessary to invest from neighboring countries.
  • That economists have a fairly strong understanding of firms’ investment behavior makes sense. A firm that maximizes its profits must address investment using the framework discussed in this article.
  • This method of financing investment has been very important in the United States. The industrial base of the United States in the nineteenth century—railroads, factories, and so on—was built on foreign finance, especially from Britain. More recently, the United States has repeatedly posted significant investment growth and very low savings.
  • Investment fluctuates a lot because the fundamentals that drive investment—output prices, interest rates, and taxes—also fluctuate. But economists do not fully understand fluctuations in investment. Indeed, the sharp swings in investment that occur might require an extension to the Jorgenson theory.
  • In Jorgenson’s user cost model, firms will purchase a machine if the extra revenue the machine generates is a smidgen more than its cost.
  • The general conclusion is that there is a gain to waiting if there is uncertainty and if the installation of the machine entails sunk costs, that is, costs that cannot be recovered once spent.
  • Although quantifying this gain exactly is a highly mathematical exercise, the reasoning is straightforward. That would explain why firms typically want to invest only in projects that have a high expected profit.
  • The fact of irreversibility might explain the large fluctuations in investment that we observe.
  • The theory of investment dates back to the giants of economics. irving fisher, arthur cecil pigou, and alfred marshall all made contributions; as did john maynard keynes, whose Marshallian user cost theory is a central feature in his General Theory.
  • Consumer behavior is harder to study than firms’ behavior. Market forces that drive irrational people out of the marketplace are much weaker than market forces that drive bad companies from the market.
  • Because the saving response of consumers must be known if one is to fully understand the impact of any investment policy, and because saving behavior is so poorly understood, much work remains to be done.
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