Friday, December 09, 2011

When a bad deal is better than no deal

European leaders seemed to have cobbled together some outline of a plan but the wording remains very loose.  In general, this seems like another attempt to kick the can further down the road and we will be discussing the same issue - European debt levels - over and over again in 2012.

The markets seem to like it (but oddly it's just Europe and N. America - the rest of the world was fairly weak on this news), but I sense it's just a relief rally at the prospect of not having to watch N. Sarkozy on TV 25 times a day.

This is the most amazing/scary stat I've seen in some time - From 1990 to 2000 there were 29 market trading days where at least 400 of the 500 stocks in the S&P 500 moved in the same direction.  This means that on roughly 1% of the trading days or 3 times a year you would get a day where every stock moved in unison. 

Since, July of this year there have been 34 such days!!  On 30% of the trading days since July stocks have moved has one unit either up or down.

It's hard to call this a trend, but I think it is a trend and I'll extrapolate it bit further to show how it may impact you.  NY State has benefited for an extended period by being the financial capital of the world.  Everyone has to have an office in NY in order to gain edge, meet clients, etc, etc.  Well, in an increasingly automated world, where stocks trade less and less on their individual merits and more and more on what's happening to the "market" there will be less of a need to operate in NY.  I don't have to meet with the CEO of GE if I can just gauge the direction of the market and trade accordingly.  This offers a great deal of career flexibility to people like myself but it also means that that the best days of Wall Street are in the rear view mirror. 

So what, you might be saying?  Well, it's worth noting that Wall Street activities account for roughly 20% of NYS tax revenues.  As Wall Street shrinks it will have a direct impact on NY State budgets, schools, government employees, etc. 

It's too early to confirm that this what is happening but let's look back 5 years from now and if NYC starts to get a Detroit feel, we'll remember when it started.


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