San Diegans on bringing in the feds

An stock analyst friend of mine wrote this in 2001 about IPO's done in the 1990's. With the help of Thomson Financial/Securities Data and Wilshire Associates we tracked the 4,567 companies that went public between Jan. 1, 1990 and Dec. 29, 2000. Our research excluded initial offerings valued at less than $5 million or below $5 a share. We also excluded foreign stocks, blind pools, real estate investment trusts, limited partnerships and closed-end funds. Bolstered by Cisco, the average new issue in our survey is up 111% since going public. (For those issues that were acquired during the course of our study, we calculated their performance up to the day they were acquired, using the acquisition or merger price.) Measured against the S&P 500, this universe of initial public offerings has a relative performance of 104, slightly better than an S&P-matching score of 100. But take out Cisco and the other top nine new issues—a list that includes AOL (now AOL Time Warner), JDS Uniphase and Veritas Software—and the remaining 4,557 stocks had an average gain of 74% and a relative performance of just 92. The median performance data are even more revealing: For all 4,567 stocks—including Cisco and the other nine best-performing issues—the median new issue is down 31% and has a relative-to-market score of just 40. In short: If you bought all 4,500 stocks you made money; if you bought any four you probably lost money. Which begs the question....If you bought all 4500 stocks and made money, does that mean that most IPO's are utter scams? I mean, they beat the S&P and it would be a stretch in saying the S&P index was an utter scam.
— October 18, 2011 9:08 a.m.

San Diegans on bringing in the feds

Here's GS's reaction to the OWS. http://pointsandfigures.com/2011/10/18/a-letter-f…
— October 18, 2011 8:43 a.m.

San Diegans on bringing in the feds

I read books for enjoyment and analyze hard data to make business decisions. Editorial from books doesn't usually have a place in making profitable trades(unless you might be doing the opposite of what the pundit is calling for), but government reports and peer reviewed academic papers have a huge impact on market direction. This has been quantified:)
— October 18, 2011 8:38 a.m.

San Diegans on bringing in the feds

Fred, it's interesting that you bring up the concept of "Parasitic Traders." My role as a parasitic trader is indirect. Along with thousands of other traders, I try to predict the prices of common goods a day or two or a few months in the future. If I think the price of an item will go up, I buy today and sell later. If I think the price is going down, I'll sell at today's higher price. The miracle is that in taking care of myself, my speculations somehow ensure that producers all over the world will provide the right quantity and quality of goods at the proper time, without undue waste, and that this meshes with what people want and the money they have available. When a harvest is too small to satisfy consumption at its normal rate, speculators come in, hoping to profit from the scarcity by buying. Our purchases raise the price, thereby slowing consumption so that the smaller supply will last longer. Producers encouraged by the higher prices further lessen the shortage by growing or importing to reduce the shortages. On the other side, when the price is higher than we think the facts warrant, we sell, which reduces prices, thus encouraging consumption, exports, and helping to reduce the surplus. Bureaucrats and other central planners have little incentive to improve, invest or innovate. They might have a price for everything, but they know the value of nothing. When speculators are wrong, we are punished severely for their mistakes by losses of our own money. If left unchecked, the tendencies of our modern governments to interfere with the natural working of the marketplace might lead to destruction. But speculators, searching for profit, send signals to producers and consumers to modify their behavior which ensures a supply. It might not be a perfect system, but it works. Governments always attempt to bypass speculators in the name of a higher good(usually lining their own pockets instead of allowing the speculator to do his job). Central planning leads to unintended consequences, and usually not good ones. Imagine a world where there was no speculator as a counterparty to a voluntary exchange. Who would the farmers and other producers sell their product to? Without the speculator to make a year round market, a loaf of bread would cost a nickel at harvest time and $50 six months later on. Other seasonal crops would be similarly affected. Without speculators making a market, one would not be able to freely exchange currencies, to get a mortgage without a call provision, a term life policy would be difficult, the US government would have trouble financing its debt, and interest rates might approach 1907 levels. There would be scarcities much of the time of money, credit, food, lumber, coal, iron, rubber, oil, etc. We get called nasty things all the time, but you couldn't live without us.
— October 18, 2011 8:32 a.m.

San Diegans on bringing in the feds

@jon, Wall Street was never set up to act in your interest. Wall Street only acts for it's own interest, for the interest of the players, exchange members, etc. They get this privilege because the government cannot exist without the primary dealers and there's a big quid pro quo. Question, you said, "Well, I'm part of a third group, trying to follow the old saying: "Neither a borrower or lender be." If you don't borrow nor lend, I assume that you don't have any bonds or money in the bank....where do you put your money, all in stocks or commodities?
— October 18, 2011 5:55 a.m.

San Diegans on bringing in the feds

Pup, you just don't get it. Funny how I can control you, and you don't even realize I've made you my bitch. All I have to do is post, and there you are, just like a trained barking seal looking for a snack. I will say that you've given me a lot of laughs. On a professional note, I hope you serve your clients better than you analyze economic and taxation trends and statistics. Also, you better hope that none of your clients read your rants, put 2+2 together and find out who you really are.
— October 18, 2011 5:53 a.m.

San Diegans on bringing in the feds

See below
— October 18, 2011 5:46 a.m.

San Diegans on bringing in the feds

Little puppy, Why read someone else's books when I can analyze hard data myself. Unlike you, I have the intelligence to do my own thinking and don't need to look through the lens of someone else. Did you ever realize, all the time you spend dissing me, you could be studying statistics and really getting to that graduate level, not the imaginary level in what in your case, passes for a mind.
— October 18, 2011 5:43 a.m.

San Diegans on bringing in the feds

Stiglitz and Krugman have weighed in considerably on the "Killing of the middle class." I read everything they write, and note that their articles on this are editorials, and not peer reviewed academic papers. Both have considerable expertise, but not in this area which falls way outside their purview. Articles in the NYT and Vanity Fair are not the same as academic papers. Plus, Stiglitz made those claims, without citations and it is intellectually lazy for a reader to take claims like this as gospel without checking the raw data. Here's some raw data that disputes their editorials. http://www.cbo.gov/publications/collections/tax/2… Domhoff....isn't he a sociologist with a big mouth? Anyways, there is evidence that the middle class is under pressure, but evidence of it being destroyed simply doesn't jibe with the actual data. The mention of personal debt by the bottom 90% suggests some behavior modifications are needed by that class. Remember, there's two kinds of people in the world, those who pay interest and those who collect it. The top 10% collects it and that's a good reason why they're part of that top 10%. Furthermore, the 70% share of output that's remained pretty constant over 50+ years is what kills those premature obituaries.
— October 17, 2011 9:42 a.m.

San Diegans on bringing in the feds

Has the middle class really been destroyed? Has business killed off it's own market?? These statements, while sounding passionate, must be tested. While there is much anecdotal evidence supporting these contentions, the actual data doesn't support the statement of the middle class being destroyed. If you look at the middle class's share of the pie, Labor's share of output has stayed pretty constant at roughly 70% from 1950-2008 with expected fluctuations from economics cycles. Find all kinds of data here. http://www.bea.gov/ Robert J Gordon at my alma mater has made similar observations in several papers. http://faculty-web.at.northwestern.edu/economics/… If labor's share isn't shrinking, it must be something else...It's obviously the inequality of the distribution. Noted economist Emmanuel Saez http://www.econ.berkeley.edu/~saez/ described income changes of the top 10% relative to the bottom 90%. He showed the share of income earned by the top 10% declined from a peak of nearly 50% in 1928, the height of the Roaring '20s, to a plateau of around 35% until about 1982. After that decline, the share of the top 10% took off, reaching nearly 50% by 2006. What was very evident from the data was not the decline of the middle class(which stayed relatively constant), but a new, gilded-age of the super rich. There are extensive arguments in the literature about the impact of tax cuts, about extraordinarily high CEO compensation, corporate greed, and more. But the recent research(Saez et al) does not seem to support these as major causes. The most compelling argument for this dramatic increase in income has been the overwhelming technological change. Those with the human capital to take advantage of the new technology gained, and continue to gain, at the expense of those who don't have it. The fact that this income disparity has increased in most of the richest countries is also consistent with this explanation. There is a slippery slope for policy makers here, and not buying into the conventional wisdom fallacies is important. Attempts to redistribute income levels, share the wealth...respond to populist sentiment and make a more fair and level playing field and attenuate social discord could backfire and stifle innovation. Instead of stifling innovation, we need policies(or an absence of) that will encourage innovation, which will ultimately minimize class differences. But I digress, while the middle class might be under pressure, it is by no means destroyed.
— October 17, 2011 6:43 a.m.