Why the anemic recovery?
In case you didn’t notice, the US economy isn’t recovering from the recession anywhere near how it should. But, Congress doesn’t seem the least bit concerned. Rather, like the proverbial general, they’re trying to fight the last war. Elsewhere people are focusing on a sense that something’s wrong. Unfortunately, among the general public that may be no more than a fascination with today’s headline.
While our “leadership” is busy trying to find someone to blame, in certain areas people are seriously looking at what’s wrong even if it isn’t pretty and runs counter to popular fiction. To tap in on one very informative discussion, see “Tech IPO's: What TechCrunch & Fred Wilson Are Leaving Out” at Urgent Speed. It will direct you to a number of other relevant postings.
The discussion focuses on the sad state of the IPO market. It references a previous posting (Urgent Speed: Why Ten Million Dollar IPOs Matter: ). What’s unique about the discussion is that it goes beyond the sound bite single-cause-reporting so common in the media. Further, it has the added benefit of making some points that almost everyone else avoids. It lists nine contributing factors:
1. Death of the mid-market investment firms
2. Decimalization.
3. Rise of the Internet Brokerages
4. Growth of Prop Trading.
5. End of Equity Research.
6. Increased Litigation Risk
7. The Internationalization of Wealth.
8. Larger Global Funds.
9. Increased Regulatory Expense including Sarbanes-Oxley.
Too many people are inclined to make a global judgment about whether each point is and/or was desirable. They then put on blinders and refused to objectively assess ALL the consequences of the phenomena being discussed. They thereby relegate themselves to the status of useless advocates rather than constructive analysts.
Unexpected consequences are fairly common. What’s tragic about them is the conceit of our “leadership” that turns unintended consequences into unacknowledged consequences. It seems that acknowledging any unexpected consequences would call their omnipotent prescience into question. Their egos just can’t take it.
Interestingly, this weekend an article in the WALL STREET JOURNAL, “The Demise of the IPO—and Ideas on How to Revive It,” addressed the IPO issue. Although not directly citing the factors listed by Urgent Speed, the article acknowledged some of them by implication. As an example, it didn’t reference decimalization, rather it referenced a proposal for 10 cent trading increments. The article is worth reading. It can be found at: How to Fix the IPO Market - WSJ.com.
The Hedged Economist’s April 9th posting, The Hedged Economist: Angels, entrepreneurs, and diversification: PART 1, pointed out one aspect of our “leadership’s” contribution to a hostile environment for new ventures. But, the truth is the problem is deeply rooted in how we choose our leaders. It we don’t ask for evidence that they care about business, we shouldn’t be surprised if they don’t care. Even those who think everyone should work for government should insist that their leader at least understand business.
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