Tuesday, September 14, 2010

Increasing concentration of trading in fewer names...

A data analytics firm announced that in August

"* The cumulative volume of the top twenty equities, sorted by average daily principal traded, represent over 26% of domestic principal traded.

* Once you reach just the 112th ranked symbol, you have accounted for over half of a day’s volume."

Think about that the top 20 stocks account for 1/4th of all volume on the US stock market! This level of concentration among a select number of stocks could one day be a contributing factor to another flash crash b/c these stocks tend to march in lock step together.

At some point in the next 5 years the stock market will consist entirely of the daily moves in Apple and Google (sarcasm off).

The markets rocketed higher yesterday on news that the European banks were in a heap of trouble but they have up to 8 years to fix the situation. Well, if we've learned anything through the financial crisis it's that kicking the can down the road always fixes things, right?

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Debt is the anchor around the neck of many Americans. Student debt is a particularly dangerous because it can hinder young Americans from moving forward toward the next stages of wealth building and household formation. From the NY Times consider this article on how debt can impact a relationship.

"Nobody likes unpleasant surprises, but when Allison Brooke Eastman’s fiancĂ© found out four months ago just how high her student loan debt was, he had a particularly strong reaction: he broke off the engagement within three days.

Ms. Tidwell will probably rack up $250,000 in debt by the time she is done with school.
Ms. Eastman said she had told him early on in their relationship that she had over $100,000 of debt. But, she said, even she didn’t know what the true balance was; like a car buyer who focuses on only the monthly payment, she wrote 12 checks a year for about $1,100 each, the minimum possible. She didn’t focus on the bottom line, she said, because it was so profoundly depressing.

But as the couple got closer to their wedding day, she took out all the paperwork and it became clear that her total debt was actually about $170,000. “He accused me of lying,” said Ms. Eastman, 31, a San Francisco X-ray technician and part-time photographer who had run up much of the balance studying for a bachelor’s degree in photography."

Like so many other debt related issues, there are many parties at fault in the higher education system - the universities and their bloated infrastructures, the students that chose to borrow to fund degrees in photography, the lenders that lend to people pursuing degrees in photography, etc., but I think we should address this issue in the next session of Congress.

Cheers!

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