Opinion

Ben Walsh

Do stocks really trade for fractions of a penny? Sort of

Ben Walsh
Nov 18, 2013 14:54 UTC

When Nick Lemann’s New Yorker profile of SEC chair Mary Jo White came out, Felix took issue with this assertion:

In 2000, the S.E.C. permitted stocks to be traded in pennies or fractions of pennies, rather than the customary eighths or thirty-seconds of a dollar. That made it easier for traders to make money by placing very large orders for very small variances in the price of a stock.

Decimalization, Felix said, meant stocks traded in penny increments, not fractions of pennies.

Who’s right?

Felix and Lemann were both sort of right, and both sort of wrong. Stocks can in fact trade in fractions of pennies, but not because of the SEC’s 2000 rule change. Or, at least, not solely because of the SEC’s 2000 rule change.

How common is it for stocks trade at sub-penny increments?

Less than 1 in 10 trades are done at sub-penny price increments. Here’s a chart from Nanex’s Eric Hunsader showing the percentage of stock trades that were executed at sub-penny increments:

from Data Dive:

America’s problem with productivity — and wages

Ben Walsh
Nov 15, 2013 18:58 UTC

Yesterday, the Bureau of Labor Statistics Released third quarter productivity and labor costs data. Non-farm worker productivity grew at an annual rate of 1.9% versus a 1.8% increase in the previous quarter, while non-farm labor costs fell at an annual rate of 0.6%. In other words, workers aren't getting much more productive, and, by one measure, wages aren't really increasing either.

First, here's the BLS's chart of the productivity numbers:

Notice that the red line, which is the change in productivity growth from the previous year, is flat. In other words, compared to the third quarter of 2012, Americans haven't gotten any more productive. A 1.8% increase in output, says the BLS, was offset by a 1.8% increase in hours worked.

Reuters' charts the relationship between increases in productivity, labor costs, and GDP growth:

Ken Griffin wants to break up the big banks, or run one

Ben Walsh
Nov 14, 2013 16:47 UTC

Ken Griffin, who runs the $14 billion hedge fund Citadel, said Tuesday that he wants to break up banks:

“We don’t have a good legal justification for breaking up the banking system. But if I could wave a magic wand, I’d break up the banking system.”

Asked whether the big banks had gotten too big to fail, or too big to manage, Mr. Griffin said, “They’re both.” When asked about how he’d break up some of Wall Street’s largest institutions, Griffin suggested pulling the securities businesses out of the banking system.

from Counterparties:

Payment plans

Ben Walsh
Nov 12, 2013 23:08 UTC

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com.

The world of payments constitutes a big, profitable, sometimes less than competitive industry that has attracted a long list of well-funded startups.

Square, a company whose card reader plugs directly into mobile phones, has talked to Goldman Sachs and Morgan Stanley about going public next year, the WSJ reports. The company has annual net revenues of an estimated $110 million to $165 million, and expects to process $30 billion in purchases next year. That’s a big number in comparison to the $90 billion that mobile payments are expected to reach in 2017, but it’s minuscule compared to the volume MasterCard and Visa do annually: those two companies, which dominate the credit card market, together handle more than $5 trillion in purchases each year.

from Counterparties:

We didn’t build that

Ben Walsh
Nov 6, 2013 23:03 UTC

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com.

The US government isn’t just cutting spending, Matthew O’Brien writes, it’s cutting the best kind of spending: particularly in “things like infrastructure, schools, and scientific research. The kind of things the economy needs to grow, but the private sector won't invest enough in”. The FT’s Robin Harding, Richard McGregor, and Gabriel Muller chart the fall in US public investment, showing that it has reached “its lowest level since demobilisation after the second world war”.

Earlier this year, the American Society of Civil Engineers gave the country’s infrastructure a grade of D+. As Ezra Klein and others have repeatedly pointed out for quite some time, this decline in public investment has come at precisely the time when the US government can essentially borrow for free.

from Data Dive:

The decline of America’s middle-class neighborhoods

Ben Walsh
Nov 5, 2013 15:29 UTC

New research shows a steady increase in the extent to which Americans are geographically divided by income. The below charts are from a paper by Kendra Bischoff and Sean Reardon, professors at Cornell and Stanford respectively, on what they refer to as "residential segregation by income". (h/t to Kevin Drum)

They find a shrinking number of Americans live in middle class neighborhoods, and a growing number of people living in poor, affluent, or high income areas.

 

 

 

 

 

 

 

 

 

 

 

 

Drum worries the trend means that the "well-off have less and less interaction with the poor outside of the market economy, and less and less empathy for how they live their lives."

Apple > Goldman (in revenue and profit per employee)

Ben Walsh
Nov 1, 2013 18:28 UTC

Fortune’s Philip Elmer-Dewitt finds an interesting chart in a research note from ISI’s Brian Marshall. Apple is bringing in far, far more revenue per employee than other US tech companies.

Marshall’s takeaway: “The scale [Apple] is executing on is nothing less than astonishing”. And not only does Apple beat out its tech peers, it sits above the US banks in both revenue and profit per employee for the most recent four quarters.

Apple is generating more revenue and profit per employee than the biggest banks, companies that are at least partially set up to deliver eye-popping per employee financial performance. Marshall’s statement applies more broadly than perhaps he intends. Apple’s performance is indeed “nothing less than astonishing”, and not just in comparison to tech companies.

from Data Dive:

Tablet wars: Apple cedes market share to Samsung

Ben Walsh
Nov 1, 2013 14:55 UTC

Today is the release date for Apple's new iPad Air. Globally, Apple continues to dominate the growing tablet market. But as these Reuters charts show, in the last year, Samsung has been gaining ground, more than doubling the number of tablets it has shipped, and taking market share from Apple:


As for the new iPad sales, the crowd at Apple's flagship New York store this morning does not appear to be the crazy launch day that the company was expecting (via Joe Weisenthal):

 

 

 

 

 

from Counterparties:

All consuming inflation

Ben Walsh
Oct 28, 2013 21:56 UTC

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com.

Why, during the Great Recession, with a sputtering economy and increased unemployment, didn’t prices fall in the US? Instead, prices have risen, albeit much slower than normal. A new paper by economists Olivier Coibion and Yuriy Gorodnichenko puts that question in more precise, academic terms: why has the US had really low levels of inflation, when instead, they assert, economic theory says there should have been disinflation (falling prices)?

The reason prices didn’t fall in the Great Recession, the researchers find, is that businesses follow households’ lead on inflation expectations. And households have an unorthodox way of setting their inflation expectations: they pay a lot of attention to gas prices, which rose after the financial crisis. This is a marked difference from how academics and businesses gauge inflation: they intentionally exclude oil prices from their primary inflation metrics, in part because they are so volatile.

from Counterparties:

You can’t wish away QE

Ben Walsh
Oct 23, 2013 22:13 UTC

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com.

Beyond being released on a Tuesday, there wasn’t much interesting about yesterday’s mildly disappointing report that showed the economy added 148,000 jobs in September. With the debt ceiling standoff in the past (or at least on hold until February), the focus was back on the taper.

Jon Hilsenrath thinks the weak jobs number “assures that the Fed won’t act at its October 29-30 policy meeting” and “this raises the bar to action in December”, because by then we will have better information about how the shutdown affected the economy. Hilsenrath argues that the Fed is in a bind because it has tied its policies to the unemployment rate:

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