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Today's election in Greece seems to have created a majority for those opposing the austerity measures agreed to by Greek politicians in exchange for the bailout by the European Union.  Now what? The real tragedy here is that if Greece abandons the austerity program, which frankly they should do, then they will be booted out of the Eurozone and forced back onto their own currency.  Some economists think this is great.  Now, Paul Krugman would say, Greece can simply deflate the heck out of their currency and prosperity will be just around the corner.  That, of course, is ridiculous. The best solution would have been for Greece to do a structured bankruptcy while remaining in the Eurozone.  The Eurozone is a good thing not a bad thing.  The US has benefitted greatly from being a single currency union and the same beneficial effects have flowed to Europe.  Remaining in the Eurozone should be a completely separate issue from the question of dealing with Gre...

The President continues to attack the "big corporations" and promotes his concern for the "middle class."  But who owns the big corporations?  When the big corporations make obscene profits, who gets them.  The answer -- middle class Americans.  Yes, middle class Americans own the big corporations, mostly through their pension funds.  So, an attack on "big corporations" is an attack on the retirement hopes and dreams of middle class Americans. What the attack on "big corporations" doesn't do is reduce the excessive compensation of senior executives of the big corporations.  After all, these senior executives are mostly Democrats and support the President, so let them keep all the perks and obscene compensation that we can arrange for them.  Instead let's go after the big corporations' owners -- the middle class.  Let's chop them up. This parallels the President and his allies approach to big financial institutions.  Let's make...

Nicolas Sarcozy was supposed to bring a return of free enterprise back to France.  To do this, you have to tackle two things: 1) the entitlements and the entitlement mentality; 2) the regulations that stifle commerce including the absurd laws that effectively prohibit the firing of employees.  Sarcozy did neither. Sarcozy's strategy was to substitute smaller issues for the bigger issues and to join hands with Angela Merkel to promote an expansion of sovereign debt and force austerity on their fellow countries in the Eurozone.  In the waning moments of the campaign for the Presidency in France leading up to tomorrow's vote, Sarcozy has stooped to thinly-veiled anti-Muslim appeals to motivate far right voters.  Gone is any interest in free enterprise and promoting entrepreneurship.  All of that disappeared in Sarcozy's alliance with Angela Merkel, another conservative leader gone astray. Meanwhile, the fruits of the Merkel-Sarcozy alliance are everywhere to see as...

Yesterday, the US bureau of labor gave a disappointing jobs report.  In April, only an additional 115,000 workers were added to nonfarm payrolls, making it the weakest gain in the last six months.  Additionally, the unemployment rate declined to 8.1% due to a significant number of people no longer seeking work.  In response to the poor report, the major indexes were in the red across the board with the S&P 500 dropping 1.6% for the day.  Also in response to the negative report, the yield on the 10-year Treasure note declined from 1.93% to 1.88%, and the price of oil dropped to its lowest level in almost six months.                 Obama’s 2012 campaign had been shaping up very well before yesterday with a cornerstone of his campaign being the recovery in the US economy since his election to office in ’08.  However, Friday has brought doubt on whether the United States really is in a recove...

           With all of the news surrounding recent IPOs like Groupon, Yelp, and Facebook, it is easy for us to forget the larger picture:  There are significantly less IPOs now, then there were 10 years ago, and the market for initial public offerings has effectively been slow.  The IPO market has changed in the past decade for a number of reasons.  Most importantly, there are simply less IPO underwriters now than there were before.  Major players in the IPO space such as Hambrecht & Quist; Alex, Brown; Robertson Stephens and Montgomery Securities have either merged or been consolidated into larger banks than focus on larger deals.  This focus on larger deals means those underwriters are no longer interested in the smaller initial public offerings and do not bother doing investment research on small-cap companies.  We can see this shift to larger deals clearly.  In the 1990s, the average deal size for a NASDAQ IPO was ...

We have markets to trade thousands of stocks, bonds and derivatives, but Intrade is taking ‘market making’ to a whole new level. Intrade allows people to play the prediction markets, in which you buy or sell into hundreds of real world events. Instead of searching for a company’s intrinsic value, an investor in the prediction markets is simply finding the probability of an uncertain future events from occurring. Some examples of markets include Barack Obama being reelected or the Avengers grossing over $175M in its opening weekend. Markets are always defined on a yes or no basis, such that you buy shares of an event you believe is going to happen and sell otherwise. If the event does happen, then the market is settled at $10 and if it does not then it is settled at $0. The idea  for this range being that a market price of $4 indicates a 40% probability of the event actually occurring. The evolution of prediction markets brings the world of investing and trading to an entire differe...

The media pushes the notion that somehow there is a "political" problem in Europe.  The Euro, they say, was a bad idea in the first place and should be abandoned.  Conservative as well as liberal economists push this notion.  Why the Euro, they say?  That's what caused the current problem. A parallel theme is the idea that if Germany would just "step up to the plate" and use government pump priming to get their economy going, all would be well and prosperity would return to Europe. This is "smoke."  Abandoning the Euro is completely irrelevant to the problems in the Eurozone.  Switzerland is not doing well because it is not in the Eurozone.  Switzerland is not devaluing their currency as a pathway to prosperity.  Nope.  The Swiss Franc is doing just fine and so is Switzerland, other than the fact that the Swiss live in an economic neighborhood that is collapsing around them. There is nothing virtuous about having your own currency.  If t...