Category Archives: investment markets

17/9/20: Stonks are Getting Balmier than in the Dot.Com Heat

Via Liz Ann Sonders @LizAnnSonders of Charles Schwab & Co., Inc. a neat chart summarizing the madness of the King Market these days:


Yeah, right: PE ratio is heading for dot.com madness levels, PEG ratio (price earnings to growth ratio or growth-adjusted PE ratio) is now vastly above the dot.com era peak, and EPS is closer to the Global Financial Crisis era lows. 

What can possibly go wrong, Robinhooders, when a mafia don gifts you some chips to wager at his casino?


9/1/20: Herding and Anchoring in Cryptocurrency Markets


Our new paper, with Daniel O'Loughlin, titled "Herding and Anchoring in Cryptocurrency Markets: Investor Reaction to Fear and Uncertainty" has been accepted to the Journal of Behavioral and Experimental Finance, forthcoming February 2020.

The working paper version is available here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3517006.

Abstract:
Cryptocurrencies have emerged as an innovative alternative investment asset class, traded in data-rich markets by globally distributed investors. Although significant attention has been devoted to their pricing properties, to-date, academic literature on behavioral drivers remains less developed. We explore the question of how price dynamics of cryptocurrencies are influenced by the interaction between behavioral factors behind investor decisions and publicly accessible data flows. We use sentiment analysis to model the effects of public sentiment toward investment markets in general, and cryptocurrencies in particular on crypto-assets’ valuations. Our results show that investor sentiment can predict the price direction of cryptocurrencies, indicating direct impact of herding and anchoring biases. We also discuss a new direction for analyzing behavioral drivers of the crypto assets based on the use of natural language AI to extract better quality data on investor sentiment.

5/1/20: EU’s Latest Financial Transactions Tax Agreement


My article on the proposed EU-10 plan for the Financial Transaction Tax via The Currency:


Link: https://www.thecurrency.news/articles/5471/a-potential-risk-growth-hormone-what-the-financial-transaction-tax-would-mean-for-ireland-irish-banks-and-irish-investors or https://bit.ly/2QnVDjN.

Key takeaways:

"Following years of EU-wide in-fighting over various FTT proposals, ten European Union member states are finally approaching a binding agreement on the subject... Ireland, The Netherlands, Luxembourg, Malta and Cyprus – the five countries known for aggressively competing for higher value-added services employers and tax optimising multinationals – are not interested."

"The rate will be set at 0.2 per cent and apply to the sales of shares in companies with market capitalisation in excess of €1 billion. This will cover also equity sales in European banks." Pension funds, trading in bonds and derivatives, and new rights issuance will be exempt.

One major fall out is that FTT "can result in higher volumes of sales at the times of markets corrections, sharper flash crashes and deeper markets sell-offs. In other words, lower short-term volatility from reduced speculation can be traded for higher longer-term volatility, and especially pronounced volatility during the crises. ... FTT is also likely to push more equities trading off-exchange, into the ‘dark pools’ and proprietary venues set up offshore, thereby further reducing pricing transparency and efficiency in the public markets."

13/7/19: Mapping the declines in jobs creation


Increasing market power concentration, falling entrepreneurship, rising concentration amongst the start ups, unicorns and billions in investment, the markets have been rewarding larger companies at the expense of the smaller and medium enterprises for years. And this has had a problematic impact on human capital and jobs creation.

Here is the data on the levels of employment in medium-large companies over the years, based on the U.S. markets data:


In simple terms, per each dollar of investors' money, today's companies are creating fewer jobs - a trend that was present since at least 2000, and consistent with the onset of the Goldilocks Economy. But the most pronounced collapse in jobs creation from investment has been since 2017. Excluding recessionary periods, in 2002-2006 average annual decline in the number of employees per $1 billion in market valuation was 3.45%. Over 2009-2013 this number rose to 4.73% and in 2014-2019 the rate of decrease averaged 8.05% per annum.