A few days ago, on November 15, we passed a rather random unobserved anniversary. That was the 158th anniversary of the debut of the first stock ticker machine. It was unveiled, appropriately, in New York City, by its inventor Edward A. Calahan. Calahan was building upon the now ubiquitous telegraph, combining it with a printer so that institutions that chose to get one could receive a steam of stock prices, transaction by transaction, from a particular exchange whose action they were following. The transactions would print out on a tape. The machine with its click click clickity click became quite familiar very rapidly, and lasted a long time. I seem to remember that the father in the old Addams Family sitcom had one in the family abode. Also, the tape generated by such machines could then be cut up and thrown out of windows on festive occasions like so many streamers. Hence the expression "ticker tape parade". So: congratulations Mr. Calahan for gi...
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Four recent or forthcoming books that may deserve the attention of some of the readers of this blog, below. 1. AFRICA, EMPIRE, AND FLEET STREET, by Jonathan Derrick. Published by Oxford University Press, this is the story of Albert Cartwright, an anti-colonialist, and the newspaper he ran for decades, the London based WEST AFRICA MAGAZINE. 2. WHITE SHOE, by John Oller, published by Dutton. This one is forthcoming -- March 2019. It tells the story of the Wall Street lawyers of the end of the 19th century and the early 20th who created what are still considered the establishment (or "white shoe") law firms in that vicinity to this day. 3. CONSCIOUSNESS AND PHYSICALISM, by Andreas Elpidorou and Guy Dove. Published by Routledge. "Physicalism" in the philosophy of mind is roughly what used to be known as "materialism." These authors think it should be regarded not as a dogma but as a research program, and that it is a sensible program. A reviewer in the...
There is a kerfuffle underway about a statue called "fearless girl" recently installed in the financial district of Manhattan. It isn't the biggest of controversies, but it does have some symbolic significance, and there is a pragmatic lesson here about how markets work. http://www.creditslips.org/creditslips/2017/04/wheres-the-bear-.html#comments Since 1989, the financial district has featured the "Charging Bull," a statue by Arturo Di Modica. He originally located it directly in front of the New York Stock Exchange, but it was subsequently moved to a small park in the neighborhood. In March of this year, a four foot tall bronze statue of a grade school aged girl (pigtails and billowing dress) standing in the path of the bull in the usual stance of defiance (legs spread, hands on hips, face forward toward the danger) made its appearance. Fearless Girl is sufficiently close to Charging Bull that they appear to be a single work , which has Di Modica ...
President Obama apparently decided to support the omnibus budget bill late Thursday morning, December 11th. He supported the bill because Senate Majority Leader Harry Reid told him the threat of a government shutdown in the first quarter of 2015 was otherwise a real one, and the President should act quickly to get that off the table. The next few hours appear to have been hectic ones, as alliances formed and shifted both for and against the bill, across party lines. The bill came to be called "cromnibus," apparently for "Continuing Resolution Omnibus." [Personally my first impression was that the "cr" stood from "cram." Alas not.] At 9:37 Thursday evening, the bill passed the House, 219 to 206. Obama and House Speaker Boehner had both kept enough of their troops in line to get the result they both wanted. The Senate passed it on Saturday night, with a vote of 56 to 40. The 40 who voted "no" included both Elizabeth Warren and Te...
From a recent book by Howard Blum: Dark Invasion (2014). Ever since the 1880s, when Kansas City undertaker Almon Strowger invented what became known as the Strowger switch, it had become easy to listen in on a telephone call. Strowger's circuit-switched system, an ingenious electromagnetic contraption that clicked and clacked noisily like a telegraph key, did the operator's work. The Strowger switch automatically connected the relays and slides at the central telephone offices, completing the circuit that allowed people to talk to each other. Twist another wire around the right switch at the central office and a party line was created: you could hear someone's conversation and he'd never know it....It didn't take long for Wall Street speculators to realize fortunes could be made with the sort of inside information collected by eavesdropping on telephone conversations....
My erudite readers are surely aware by now that Michael Lewis has a new book out, Flash Boys: A Wall Street Revolt. It concerns high-frequency trading (HFT), especially as used as part of a process of scalping, or lawful front-running. Here's the amazon page . CNBC has on Lewis, and Brad Katsuyama, a man flatteringly profiled in his book, as well as one of the bad guys in the book's story, William O'Brien of BATS. They looked like they were about to start punching each other now and then. If you haven't seen it: here it is . Felix Salmon has reviewed the book for Slate, here. But Salmon was writing about the book before he wrote that piece, even (by his own admission) before he had finished it. Salmon, and many other people at that stage of the brouhaha, were reacting as much or more to the 60 Minutes roll-out of the book as to the book itself. For the informed reactions of Ginger Szala, a veteran financial markets reporter, go here . And for m...
My recent reading has included a novel kindly given me by a friend for Christmas, TOP PRODUCER written by Norb Vonnegut and brought out in 2009 by St. Martin's Press. SPOILER ALERT: On the off chance you haven't read this novel yet and plan to do so: please don't read further. The book begins by taking the metaphor of Wall Street as a "shark tank" quite literally. The boss of a hedge fund --or, strictly speaking, of a fund of hedge funds -- is murdered by being fed to the sharks at an aquarium. It turns out that the dead man, Charlie Kelemen, was engaged in various financial shenanigans that unsurprisingly made him enemies, and part of this was the blackmail of other people involved in financial shenanigans. The protagonist of the story is a friend of Charlie's named Grover O'Rourke, who works at the prop desk of a second-tier investment bank, and is a "top producer" there. Whether he was named after a president or a muppet is unc...
Jason Kelly, in a recent book about the private equity industry, tells a story about a visit he made to Zuccotti Park in lower Manhattan in November 2011. As you may remember, the “Occupy Wall Street” folks had taken over the park two months before and were seeking to focus public anger about “Wall Street,” both as a literal and as a metaphorical term. When people think of “Wall Street” they think first of the big investment banks, the folks who received their much-discussed bail-outs in the fall of 2008. They don’t necessarily think of private equity: of Bain Capital, or Carlyle, or even Blackstone. But at least some portions of the Occupy movement wanted to change this. As Kelly was walking around the park he saw as sign that said, “No Bulls, No Bears, just Pigs.” That was catchy: it played upon well-known animal metaphors for Wall Street optimists and pessimists respectively. But he also saw a sign that was a good deal less catchy. It was made up of ora...
Unless memory fails me, we have never before discussed on this blog the crash of something-or-other at a ranch near Roswell, New Mexico on July 7, 1947. I bring it up now only to say that Roswell, and the much-discussed theory that the crash was of an alien flying saucer, makes a brief appearance in the recent book by Guy Lawson: Octopus: Sam Israel, the Secret Market, and Wall Street's Wildest Con. The gist of Lawson's book is difficult to explain, but I'll dive in anyway. Sam Israel was one of the three principals of a high-flying hedge fund in the early years of the 21st century, a hedge fund called Bayou Capital, though it was run out of Fairfield County, Connecticut. It was called Bayou in recognition of Israel's renown Louisianan family. In 2005, CNN Money described Bayou's collapse as "one of the most bizarre hedge fund blowups in recent years." But they didn't know the half of it. What Lawson focuses on is the strange confidence th...
Thinking this through. What happens to the value of shares of public stock if the company buys some of the stock back in the marketplace? Think of it first as a simple accounting matter, and let's assume for simplicity's sake that the actual or potential buyers of the stock in the marketplace (who constitute the market demand) know and care about the book value on the balance sheet: that is, the equity as defined by the formula Assets - Liabilities = Equity . Suppose the company has 1,000 shares of stock outstanding, each selling for $50. Its market capitalization, then, is $50,000. Now, it uses some of its own cash (an asset) to buy back some of the shares of stock. This decreases the amount of stock still available to a would-be buyer. So if 100 shares are retired and 900 are left, as a first approximation -- assuming demand for the stock stays the same, we might well expect the value of those to increase to $55.55 per. BUT something else has taken place, ...
WSJ story Tuesday, vaguely sourced by plausible, tells us that the London Whale, Bruno Iksil, "once confided" to a certain colleague, "that when he wanted to avoid questions from supervisors about his trades, he sometimes would start discussing a mathematical term, equation, or other technical jargon, to confuse and end the conversation." He'd get free rein/reign because his bosses were afraid of hearing his explanation of the analytical expression of a Lévy distribution one more time? Aaaaah.