Category Archives: economics

Hmmm… Holland – Outside the Box Investment Newsletter – John Mauldin

Hmmm… Holland

John Mauldin

March 26, 2012

For your Outside the Box today I treat you to another big, juicy slab of Grant Williams’ Things That Make You Go Hmmm… I don’t want to be all Grant all the time, but this is just so good I couldn’t resist. This week, Grant is digging deep into the history and mystery of the European Union, taking us all the way back to the first inter-country treaty in April 1951 and then following the rather tortuous bureaucratic proceedings that led, by hook and by crook, to today’s increasingly problematic eurozone.

Grant then zeroes in on the ever-stalwart Dutch, who, it now appears, are in something of a pickle. He notes that the Dutch “were signatories to the Treaties of Paris and Rome and to every major European Treaty since and are staunch supporters of a unified Europe as well as having a reputation for being amongst the more fiscally disciplined members of the EU.” And in September of last year, the Dutch prime minister and his finance minister penned a rather incendiary little diatribe on eurozone behavior that built, with eminently sensible Dutch logic, to the conclusion that “Countries that do not want to submit to this [new, rigorous fiscal] regime can choose to leave the eurozone. Whoever wants to be part of the eurozone must adhere to the agreements and cannot systematically ignore the rules. In the future, the ultimate sanction can be to force countries to leave the euro.”

How unfortunate, then, that a mere six months later – and just days after Spain’s unilateral decision to favor its own budget projections over those dictated by Brussels, who did we find but the Dutch confessing that they too would violate, by a mile, the fiscal deficit limit imposed by the EU’s new treaty. And to make matters worse, Geert Wilders, head of the far-right-wing Freedom Party and a key player in the right-of-center coalition that now governs Holland, has been making noises about a Dutch referendum on continued eurozone membership.

Grant then jumps right across the Channel to catch us up on the antics of the English government, whose much-ballyhooed austerity program appears to be anything but, depending as it does on some rather figmentary revenue assumptions and other fiscal legerdemain. I haven’t included that portion of this issue of Hmmm…, because I want to keep the focus this week on eurozone woes (England is not in the euro and didn’t sign the new EU treaty, arousing much Continental ire), and to mention that I’m in Paris, attending a very powerful conference on central-bank monetary policy and strategies for dealing with sovereign debt. Organized by the Global Interdependence Center (GIC), the conference could hardly be more timely. I’m here with good friend (and long-time GIC supporter) David Kotok, who mentions today in his own commentary that:

“Our private meetings here involve bankers, central bankers, investors, and money managers – the gamut of those interested in financial markets and economics. We find that one theme persists. All of them are watching the credit spreads involving Portugal and Spain. They realize the market is sending a message of concern. The market is saying that the episode with Greece is not over, and the contagion is spreading in spite of the massive liquidity injections of the European Central Bank. They observe and discuss the use of collective action clauses and how they have to adjust their portfolios now that a government has inserted itself in a retroactive forced alteration of a debt structure. In public, they are polite, but they dissect the risks strenuously. In private, the debates become fierce.” (You can read David’s whole piece on the Cumberland Advisors website.)

He’s right: the tension here, both behind closed doors where the “players” assemble and in public, between the European leadership and their increasingly disgruntled constituencies, is palpable.

And yet, after a tough winter, Paris is bursting with the hopeful energy of spring, and I’m very glad to be here.

Your learning a lot and loving it analyst,

John Mauldin, Editor
Outside the Box

Things That Make You Go Hmmm…

Grant Williams
March 25, 2012

On March 25, 1957 in Rome, two representatives each from West Germany, Italy, the Netherlands, Belgium and Luxembourg sat around a large, fancy table, took out their large, fancy fountain pens and signed a rather large and fancy document that was rather grandly known as The Treaty of Rome. At a stroke the European Economic Community (or ‘Common Market’) was established (along with the European Atomic Energy Commission those…

See the whole article here: Hmmm… Holland – Outside the Box Investment Newsletter – John Mauldin


The Bats Affair: When Machines Humiliate Their Masters – Businessweek

By Brian Bremner
March 23, 2012 6:18 PM EDT

The spectacularly botched initial public offering of Bats Global Markets on March 23 is so rich in irony that it’s difficult to know where to begin. What’s far less amusing is the prospect that the current era of high-frequency trading, in which powerful computers sift through massive information flows in search of price discrepancies and split-second trades, will bring even more episodes of market mayhem far more costly to investors and the broader economy.

In the annals of business screw-ups, Bats has certainly made its mark. Bats stands for Better Alternative Trading System and the company runs two exchanges that collectively rank third in terms of U.S. share trading, behind New York Stock Exchange and Nasdaq. The Bats exchanges account for 11 percent to 12 percent of daily U.S. equity trading, according to its website. The company came of age with the expansion of high-frequency trading over the last decade and the proliferation of quant-jock-driven electronic firms that dominate the buying and selling of U.S. equities. Bats founder Dave Cummings is chairman and owner of high-frequency trading firm Tradebot Systems.

Today was supposed to be the Lenexa (Kan.)-based company’s moment in the limelight as it tried to sell about 6.3 million shares in the $16 to $18 dollar per share range. Instead, something went terribly wrong. The company’s shares somehow ended up trading for pennies per share early in the trading day on both the Bats bourse and Nasdaq, according to data reviewed in this Bloomberg story. Then tech investors and Apple fanboys the world over were dismayed when a single trade for 100 shares executed on the Bats market sent Apple’s shares to $542 per share, down sharply from recent levels. (The company set a new 52-week high of $609 per share on March 21.) The stock temporarily halted trading and recovered.

It’s far too early to know what went wrong, though Bats took the unusual step of withdrawing its IPO late in the trading day. “In the wake of today’s technical issues, which affected the trading of certain stocks, including that of Bats, we believe withdrawing the IPO is the appropriate action to take for our company and our shareholders,” said Joe Ratterman, chairman, president, and chief executive officer of Bats.

As it happens, the Securities and Exchange Commission has started reviewing whether the trading practices of high-frequency trading firms has given them an unfair advantage over other investors. More fundamentally, it’s not clear that the SEC—or even experienced Wall Street traders—really have a handle as to whether computer driven trading is a good thing or a dangerously disruptive one. These days, about 55 percent of U.S. equity-trading volume comes from firms using high-frequency trading strategies, according to Bloomberg.

Stock trading circa 2012 is increasingly controlled by former computer scientists and mathematicians—and the computers at their disposal—that look at stocks not as traditional value investors looking at earnings and growth, but as streams of price data. When, say, the price of a futures contract strays from an underlying stock, the machines pounce and execute a trade. Back in May 2010, during the fabled flash crash, these digital networks temporarily went haywire and triggered a market panic.

High-frequency trading advocates say all this automation creates far more liquidity and makes the markets efficient. That may be true; there is no stuffing this genie back into the bottle. Yet regulators had better figure out whether or not we have the effective safeguards in place to prevent computerized trading system meltdowns from doing serious damage to investors.

Jim Rogers Blog: My Advice To Young People: Get Into Agriculture

Jim Rogers with some handy advice for the younger ones among us.

Jim Rogers Blog: My Advice To Young People: Get Into Agriculture: My advice to young people would be to get into agriculture. If you want to make money over the next 20 years, agriculture is the way to go. …

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