High-frequency trading raises an existential question for capitalism, one that most traders try to avoid confronting: Why do we have stock markets? To promote business investment, is the textbook answer, by assuring investors that they can always sell their shares at a published price—the guarantee of liquidity. From 1792 until 2006, the New York Stock Exchange was a nonprofit quasi utility owned by its members, the brokers who traded there. Today it is an arm of NYSE Euronext, whose own profits and stock price depend on getting high-frequency traders in the door. Trading increasingly is an end in itself, operating at a remove from the goods-and-services-producing part of the economy and taking a growing share of GDP—twice what it did a century ago, when Wall Street was financing the enormous industrial expansion of the economy. “This is counterintuitive, to say the least,” wrote New York University economist Thomas Philippon in an article for the Russell Sage Foundation. “How is it possible for today’s finance industry not to be significantly more efficient than the finance industry of John Pierpont Morgan?”
If you’re further interested in the topic, I strongly recommend reading this interview with an experienced high-frequency trading expert.
Marissa Mayer, one of the top executives at Google, will be the next C.E.O. of Yahoo, making her one of the most prominent women in Silicon Valley and corporate America.
The appointment of Ms. Mayer, who was employee No. 20 at Google and was one of the few public faces of the company, is considered a surprising coup for Yahoo, which has struggled in recent years to attract top flight talent in its battle with competitors like Google and Facebook.
I honestly think that Yahoo! as a brand is unfixable. No one can fix it, not even Marissa Mayer.
Public companies aren’t going to disappear, but we are witnessing a significant shift in power from shareholders to entrepreneurs and managers, one that may make the stock market less central to American capitalism.
Great op-ed by Joe Nocera published in the New York Times yesterday. He is totally on point by stating that the main problem with initial public offerings nowadays is the short term thinking of investors:
What [the current Facebook stock price] doesn’t reflect is where Facebook will be 5 or 10 years from now. I could easily make a bullish case for Facebook — with its 900 million users, and its wise-beyond-his-years chief executive. I could just as easily make a bearish case: Maybe Facebook will never figure out mobile. Maybe its moment will pass before it ever becomes the kind of technology juggernaut that Microsoft once was, or Google is. But being either bullish or bearish requires making a judgment that is years away from being revealed. For bullish investors, it means holding the stock patiently, waiting for the judgment to pay off. That’s what good investors do.
The chart above shows how the stock of Monster Beverage Corporation (MNST) performed yesterday (April 30, 2012). What can you learn from it? Trading on unconfirmed rumors or third party tips is dangerous and in most cases downright stupid. More info here.
Netflix (NFLX) is getting demolished right, left and center. The stock is down nearly 35% today alone. Even though I’m still very optimistic about the future of this company, I think it’s time for CEO Reed Hastings to go.