Comments on: Internet blag of the year – “Wall Street” http://crookedtimber.org/2005/04/08/internet-blag-of-the-year-wall-street/ Out of the crooked timber of humanity, no straight thing was ever made Sun, 22 Nov 2009 12:35:08 -0800 http://wordpress.org/?v=2.8.6 hourly 1 By: trotstky http://crookedtimber.org/2005/04/08/internet-blag-of-the-year-wall-street/comment-page-1/#comment-67213 trotstky Tue, 12 Apr 2005 03:14:10 +0000 http://crookedtimber.org/2005/04/08/internet-blag-of-the-year-wall-street/#comment-67213 I got the odd extra spaces too. My big .pdf technical question is, How do you mark your page with an Adobe e-book? Up to 79 just now ... it is surprisingly readable for all its talk of FoF an FIRE. I got the odd extra spaces too. My big .pdf technical question is, How do you mark your page with an Adobe e-book?

Up to 79 just now … it is surprisingly readable for all its talk of FoF an FIRE.

]]> By: UncleVinny http://crookedtimber.org/2005/04/08/internet-blag-of-the-year-wall-street/comment-page-1/#comment-67094 UncleVinny Mon, 11 Apr 2005 16:53:35 +0000 http://crookedtimber.org/2005/04/08/internet-blag-of-the-year-wall-street/#comment-67094 Am I the only one who's having .pdf formatting issues? Many words in the book have an erroneous space inserted in the middle. Am I the only one who’s having .pdf formatting issues? Many words in the book have an erroneous space inserted in the middle.

]]> By: Bernard Yomtov http://crookedtimber.org/2005/04/08/internet-blag-of-the-year-wall-street/comment-page-1/#comment-67086 Bernard Yomtov Mon, 11 Apr 2005 15:59:08 +0000 http://crookedtimber.org/2005/04/08/internet-blag-of-the-year-wall-street/#comment-67086 But IPO's, and even secondary offerings, are not the whole story of providing capital. Investors (a less loaded word than "rentiers," I think) who provide private equity normally expect to realize their return in the public markets. That is, they hope that the firm they finance will ultimately go public or be acquired by a public company. This has to count in favor of the market as a provider of capital. This is especially so since many of these acquisitions are paid for with stock, rather than cash. But IPO’s, and even secondary offerings, are not the whole story of providing capital.

Investors (a less loaded word than “rentiers,” I think) who provide private equity normally expect to realize their return in the public markets. That is, they hope that the firm they finance will ultimately go public or be acquired by a public company. This has to count in favor of the market as a provider of capital.

This is especially so since many of these acquisitions are paid for with stock, rather than cash.

]]> By: Doug Henwood http://crookedtimber.org/2005/04/08/internet-blag-of-the-year-wall-street/comment-page-1/#comment-67072 Doug Henwood Mon, 11 Apr 2005 13:40:24 +0000 http://crookedtimber.org/2005/04/08/internet-blag-of-the-year-wall-street/#comment-67072 "Provision of equity to those firms with prospects." I haven't updated these figs since 2002, but a few words on that topic. From 1970 through 2002, IPO proceeds in the US were equal to an average of 1.8% of nonresidential fixed investment; even at the peak years in the late 1990s, that share never rose above 5%. From 1970 through 1989, the average was 0.9%. As a percentage of total market cap, IPOs never exceeded 0.5%. So there's a very large apparatus surrounding a very small provision of funds function. I realize, though, that the IPOs could never have happened without the larger makret providing a place to sell the shares. Which brings us back to the "convenience for rentiers" function, the most important of all. “Provision of equity to those firms with prospects.”

I haven’t updated these figs since 2002, but a few words on that topic. From 1970 through 2002, IPO proceeds in the US were equal to an average of 1.8% of nonresidential fixed investment; even at the peak years in the late 1990s, that share never rose above 5%. From 1970 through 1989, the average was 0.9%. As a percentage of total market cap, IPOs never exceeded 0.5%. So there’s a very large apparatus surrounding a very small provision of funds function.

I realize, though, that the IPOs could never have happened without the larger makret providing a place to sell the shares. Which brings us back to the “convenience for rentiers” function, the most important of all.

]]> By: Bernard Yomtov http://crookedtimber.org/2005/04/08/internet-blag-of-the-year-wall-street/comment-page-1/#comment-67035 Bernard Yomtov Sun, 10 Apr 2005 20:09:10 +0000 http://crookedtimber.org/2005/04/08/internet-blag-of-the-year-wall-street/#comment-67035 <i>But on a net basis, in a normal year, equity issuance is negative. </i> OK. But is it really meaningful to net things like buybacks (do dividends also count as negative equity issuance?) against new issuance in deciding to the degree to which the stock market is a source of new funding? It's two different things, after all - withdrawal of equity from firms with no good use for it and provision of equity to those with prospects. Isn't this sort of reallocation a benefit of the securities markets? But on a net basis, in a normal year, equity issuance is negative.

OK. But is it really meaningful to net things like buybacks (do dividends also count as negative equity issuance?) against new issuance in deciding to the degree to which the stock market is a source of new funding? It’s two different things, after all – withdrawal of equity from firms with no good use for it and provision of equity to those with prospects.

Isn’t this sort of reallocation a benefit of the securities markets?

]]> By: Adam Kotsko http://crookedtimber.org/2005/04/08/internet-blag-of-the-year-wall-street/comment-page-1/#comment-67016 Adam Kotsko Sun, 10 Apr 2005 16:02:22 +0000 http://crookedtimber.org/2005/04/08/internet-blag-of-the-year-wall-street/#comment-67016 Any ideas on how to print this thing off? Any ideas on how to print this thing off?

]]> By: abb1 http://crookedtimber.org/2005/04/08/internet-blag-of-the-year-wall-street/comment-page-1/#comment-67008 abb1 Sun, 10 Apr 2005 08:24:21 +0000 http://crookedtimber.org/2005/04/08/internet-blag-of-the-year-wall-street/#comment-67008 Also interesting that the initail 'public' portion the IPO stock is not sold using the stock market mechanism. In the 1990s usually the initial price was fixed and shares sold in a most cronyish and counterproductive kind of way; and the dutch auction thing isn't much better. But that's probably in the book too (I started reading yesterday night). Also interesting that the initail ‘public’ portion the IPO stock is not sold using the stock market mechanism. In the 1990s usually the initial price was fixed and shares sold in a most cronyish and counterproductive kind of way; and the dutch auction thing isn’t much better. But that’s probably in the book too (I started reading yesterday night).

]]> By: Donald Johnson http://crookedtimber.org/2005/04/08/internet-blag-of-the-year-wall-street/comment-page-1/#comment-66998 Donald Johnson Sat, 09 Apr 2005 23:51:37 +0000 http://crookedtimber.org/2005/04/08/internet-blag-of-the-year-wall-street/#comment-66998 But I loved the ads for Pets.com. I guess this is an example of the free-rider problem--I loved the ads, but someone else footed the bill. But I loved the ads for Pets.com. I guess this is an example of the free-rider problem—I loved the ads, but someone else footed the bill.

]]> By: guerby http://crookedtimber.org/2005/04/08/internet-blag-of-the-year-wall-street/comment-page-1/#comment-66992 guerby Sat, 09 Apr 2005 23:02:05 +0000 http://crookedtimber.org/2005/04/08/internet-blag-of-the-year-wall-street/#comment-66992 A funny thing about equity are dividends: they're marketing tools, not a way to pay shareholders (as commonly known). Since their allocation is based on having a stock overnight just before the "ex date", market arbitrage says that you'll see the stock dip by the dividend amount "during the night" (no free lunch), hence netting zero gain for the stock holder. A much better system would be to allocate dividends proportionally to the time you've been holding the stock (like normal coupons). I understand it would have been a nightmare to manage before electronic booking and trading systems but now it should be possible. This would probably decrease volatility and may be liquidity too... Laurent A funny thing about equity are dividends: they’re marketing tools, not a way to pay shareholders (as commonly known). Since their allocation is based on having a stock overnight just before the “ex date”, market arbitrage says that you’ll see the stock dip by the dividend amount “during the night” (no free lunch), hence netting zero gain for the stock holder. A much better system would be to allocate dividends proportionally to the time you’ve been holding the stock (like normal coupons). I understand it would have been a nightmare to manage before electronic booking and trading systems but now it should be possible. This would probably decrease volatility and may be liquidity too…

Laurent

]]> By: Doug Henwood http://crookedtimber.org/2005/04/08/internet-blag-of-the-year-wall-street/comment-page-1/#comment-66989 Doug Henwood Sat, 09 Apr 2005 21:36:35 +0000 http://crookedtimber.org/2005/04/08/internet-blag-of-the-year-wall-street/#comment-66989 Hi folks. Thanks for all the kind comments everyone, especially Daniel. I don't deny the stock market produces liquidity. As I remember (it's been a long time!) I quote Joan Robinson's characterization of the stock market as "a convenience for rentiers." In fact, my argument is that it's an institution that allows the owning class to diversify its claims, effectively owning the productive capital stock as a whole, more or less. Of course it does provide funds to corps via IPOs, but as I show in After the New Economy, it does that most intensely when buying the offerings makes the least economic sense. The great distinction of the late 1990s market was to provide finance for the likes of Pets.com, which didn't deserve the time of day, much less several bil. Hi folks. Thanks for all the kind comments everyone, especially Daniel.

I don’t deny the stock market produces liquidity. As I remember (it’s been a long time!) I quote Joan Robinson’s characterization of the stock market as “a convenience for rentiers.” In fact, my argument is that it’s an institution that allows the owning class to diversify its claims, effectively owning the productive capital stock as a whole, more or less. Of course it does provide funds to corps via IPOs, but as I show in After the New Economy, it does that most intensely when buying the offerings makes the least economic sense. The great distinction of the late 1990s market was to provide finance for the likes of Pets.com, which didn’t deserve the time of day, much less several bil.

]]> By: Barry Freed http://crookedtimber.org/2005/04/08/internet-blag-of-the-year-wall-street/comment-page-1/#comment-66987 Barry Freed Sat, 09 Apr 2005 20:24:43 +0000 http://crookedtimber.org/2005/04/08/internet-blag-of-the-year-wall-street/#comment-66987 Capitalism: It's a great blag if you can get it. Capitalism: It’s a great blag if you can get it.

]]> By: Daniel http://crookedtimber.org/2005/04/08/internet-blag-of-the-year-wall-street/comment-page-1/#comment-66980 Daniel Sat, 09 Apr 2005 18:56:52 +0000 http://crookedtimber.org/2005/04/08/internet-blag-of-the-year-wall-street/#comment-66980 <i>The pricing of the stock market sends signals about capital allocation</i> Kinda-sorta, but who listens to them? John: "you blagger" is, I believe, slang in Coventry for an unserious person. The pricing of the stock market sends signals about capital allocation

Kinda-sorta, but who listens to them?

John: “you blagger” is, I believe, slang in Coventry for an unserious person.

]]> By: abb1 http://crookedtimber.org/2005/04/08/internet-blag-of-the-year-wall-street/comment-page-1/#comment-66977 abb1 Sat, 09 Apr 2005 17:53:19 +0000 http://crookedtimber.org/2005/04/08/internet-blag-of-the-year-wall-street/#comment-66977 I'll read the book. Still, intuitively, OK: back when I had a mortgage and a credit line, on a normal year my home-equity issuance would be negative too, still the mortgage market certainly was a source of funds for me. What <i>is</i> undeniably true is that when my mortgage note was sold, changed hands (at least twice in the 1990s) it had absolutely no effect whatsoever on my financial situation. I’ll read the book. Still, intuitively, OK: back when I had a mortgage and a credit line, on a normal year my home-equity issuance would be negative too, still the mortgage market certainly was a source of funds for me.

What is undeniably true is that when my mortgage note was sold, changed hands (at least twice in the 1990s) it had absolutely no effect whatsoever on my financial situation.

]]> By: John Emerson http://crookedtimber.org/2005/04/08/internet-blag-of-the-year-wall-street/comment-page-1/#comment-66976 John Emerson Sat, 09 Apr 2005 17:52:21 +0000 http://crookedtimber.org/2005/04/08/internet-blag-of-the-year-wall-street/#comment-66976 A "blagueur" in French is a joker or bullshit artist. I've tried to popularize the term, but no one seemed interested. A “blagueur” in French is a joker or bullshit artist. I’ve tried to popularize the term, but no one seemed interested.

]]> By: jimbo http://crookedtimber.org/2005/04/08/internet-blag-of-the-year-wall-street/comment-page-1/#comment-66975 jimbo Sat, 09 Apr 2005 17:50:32 +0000 http://crookedtimber.org/2005/04/08/internet-blag-of-the-year-wall-street/#comment-66975 It's not a serious source of funds, but that doesn't mean it's useless. In Henwood's marxist analysis, the market acts a way for the capitalist class as a whole to "divide the spoils", which actually isn't a bad way to look at it. The pricing of the stock market sends signals about capital allocation, thus enabling the sort of continuous "creative destruction" that Shumpeter talked about. I've always thought the best explanation of it was given by "Larry the liquidator" in the movie "Other People's Money"... It’s not a serious source of funds, but that doesn’t mean it’s useless. In Henwood’s marxist analysis, the market acts a way for the capitalist class as a whole to “divide the spoils”, which actually isn’t a bad way to look at it. The pricing of the stock market sends signals about capital allocation, thus enabling the sort of continuous “creative destruction” that Shumpeter talked about. I’ve always thought the best explanation of it was given by “Larry the liquidator” in the movie “Other People’s Money”…

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