Tagged: intermediation

BEST OF MSM – A Movable Feast

Happy Thanksgiving! Here’s a phrase Karen’s grandmother coined that you may find useful this time of year:  “We ate to dullness.” 

Since many of you are appropriately absent this week from the IR chair (or whichever office you occupy), we’ll revisit past turf. Among the most widely read Market Structure Maps of 2013 was this below from July 3. The images from our Provence cycling trip exercised influence, but sort through to the lesson.

I was reminded of it the last few days with three public companies you’d recognize. Each had the same scenario:  Declines in price of magnitude unjustified by news or facts – which had shareholders as flummoxed as the IROs.

What happens between buyers and sellers, before they ever meet each other, can have as consequential an impact as the act of changing ownership. Sometimes more. Witness the so-called Flash Crash of May 6, 2010. Shill bidders disappeared, leaving a vacuum that filled with nothing until a thousand DJIA points evaporated. That’s not selling; that’s the conveyor belt connecting our fragmented market just – poof! – vanishing.

Another major structural fact today is that investors are obsessed with risk. Read on.  Best, -TQ

July 3, 2013

We’re back from touring Provence aboard cycling saddles, weighing heavier on the pedals after warmly embracing regional food and drink. Lavender air, stone-walled villages perched over vineyards, crisp mornings and warm days, endless twilight, chilled Viogniers from small-lot Luberon wineries. If these things appeal, go.

In Avignon we feasted at Moutardier in the shadow of the Palais du Papes, the palace of the Roman Catholic popes in the 14th century. From tiny hilltop Oppede-le-Vieux with roots to earliest AD written in moldering stone and worn cobble we surveyed the region’s agricultural riches. After a long climb up, we saw why Gordes is where the rich and famous from Paris and Monte Carlo go to relax. And on Day 5 I scratched off the master life list riding fabled Mont Ventoux, which will host the Tour de France on Bastille Day, July 14. What a trip.

Meanwhile back at the equity-market ranch, things got wobbly. We warned before departing that options-expirations June 19-21 held high risk because markets had consumed arbitrage upside and new swaps rules would make the process of re-risking unusually testy. Markets tumbled.

The Fed? Sure, Ben Bernanke’s comments unnerved markets. But if we could see it in the data before the downdraft occurred, then there’s something else besides the reactions of traders and investors at work. (more…)

Kansas and Your Stock

We were in Kansas again.

We set a personal record, visiting the state twice last week. Even Wichita is nice this time of year, as this photo shows Saturday from our downtown Hyatt Regency room on the Arkansas River – don’t ask me why that river’s in Kansas.

IR pros, you’re not in Kansas anymore. The phrase popularized by Wizard of Oz author Frank Baum in 1900 remains metaphorically relevant. It means: “Things are not what they used to be,” or even better, “Rather than complaining, recognize reality and deal with it.”

It’s apropos to your stock. A vital but overlooked fact about stock prices is what actually sets them. It’s rarely investors alone. Ever heard a stock recap on the news that said stocks were up because intermediaries bid up short-term prices to trick investors? It happens all the time.

Growing up on a cattle ranch in eastern Oregon, we raised 300 hundred tons of hay. That’s a lot. But feeding 50 pounds of it per animal every day for five months to a herd of a thousand head, it’s a fraction of what’s needed.

So you buy. You may use a hay broker or you might go direct to growers, and it could take more than one. You want the right quality. Not grass, but alfalfa with its higher protein content, better for the hard winters in the Snake River Breaks.

Then you have to move it from Nevada or Georgia where you bought it. You might get a package deal, with the hay shipped and stacked for an all-in per-ton price. You might truck it separately if the deal’s better. But you’ll need truckers.

Costs are complicated. The weather during growing season, the supply of cattle in the market carrying over the winter, competition in the hay-growing industry, the price of fuel, government deals with foreign countries impacting the expected price for beef in the spring – all these determine what you pay for hay. My dad used to crunch numbers in his model for carrying costs to the target sale date. Expenses for feeding cattle could fluctuate wildly, sometimes doubling from one season to the next, requiring careful management. (more…)