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The Curious Capitalist

Commentary on the economy, the markets, and business

The problem with more small-business lending as a creator of jobs

Posted by Barbara Kiviat

February 9, 2010 at 12:24 pm

1 Comment

I recently spoke to the owner of a small company who is buying a new building. He is in an industry—energy-related—that happens to be doing quite well right now. Banks, he said, are tripping over themselves to loan him money. Three different lenders are competing for his business, which means that he's been able to go to back to them to get better terms.

This anecdote is completely at odds with the notion that banks aren't lending enough to small businesses, and are thus hampering economic recovery and job growth. I've long wondered how much of the perception on the part of politicians that banks aren't lending enough is tied to the perception on the part of bankers that there aren't enough businesses in good enough shape to lend to.

A new survey out from the management consultancy George S. May International sheds some light on the issue.

banks economy , lending, small business

Driver's licenses for the Internet, Part 2

Posted by Barbara Kiviat

February 8, 2010 at 4:22 pm

8 Comments

The conversation about where to draw the line between privacy and security is as old as society itself. I didn't mean to so forcefully insert myself into the middle of that debate when I wrote about a Microsoft executive ruminating on the possibility of driver's licenses for the Internet. Alas, here I am. That original blog post is already one of the 15 most-read of all time on the Curious Capitalist (it warms my heart that the top post remains "What if oil weren't priced in dollars?"), and I am being assailed up and down the Internet for backing what one commentator calls a "web ID system that would outstrip Communist Chinese style net censorship"—at times even being personally threatened.

And yet here I go again. More thoughts on driver's licenses for the Internet.

technology , Craig Mundie, Internet driver's licenses

Dividends vs. Capital Gains: Which is better?

Posted by John Curran

February 8, 2010 at 1:06 pm

4 Comments

With the latest market declines reminding us anew of the inherent risks of stocks, it's a good time to re-examine how the stock market creates wealth. There are all sorts of wrinkles but it all really comes down to two big things: Stocks either rise in price (capital appreciation) or companies pay out a portion of profits (dividends). Collecting dividends can be a boring way to accumulate wealth, but it's pretty effective. The folks at Morningstar/Ibbotson have stock market data going back to 1926. Over that time (1926 through 2009) stocks have provided an annual average return of 9.81%. Of that return, the Ibbotson data show, capital appreciation accounts for 5.47 percentage points, a bit more than half. Dividends, however, are not far behind, delivering 4.13 percentage points.

Wall Street, efficient market, investing, recession, retirement, shareholder value

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Don't Blame Regulators for Stock Drop

Posted by Stephen Gandel

February 5, 2010 at 2:22 pm

7 Comments

The market is down again today and one of the reasons people have cited for the recent 800 point drop in the Dow is that investors are worried about the bank regulations coming out of the Obama administration. The first part of the argument is that Obama's plan to tax the banks and limit what they can and can't do will hurt profits of financial firms and possibly drive some out of business. The second part of the argument and why the market is falling in general, so the logic goes, and not just the banks, is that if banks go out of business it will be harder for companies to raise money and expand, thus hurting the economy. This very conventional wisdom these days is, of course, nonsense.

bonuses, Goldman Sachs, regulation, stocks, Wall Street

Who does the jobless recovery hurt the most?

Posted by Barbara Kiviat

February 5, 2010 at 10:03 am

4 Comments

The stock market got very jittery in advance of this morning's unemployment report, lining up with many economists' expectations that the jobless rate would hold steady at 10% or tick upwards. Then it didn't.

The unemployment rate, which has been hovering around 10% for the past three months, instead ticked down in January, to 9.7%. More meaningfully, broader measures of unemployment also fell. The Bureau of Labor Statistics's "U-4" unemployment rate, which takes into account discouraged workers, fell from 10.5% to 10.3%. And the "U-6" series, which captures people marginally attached to the workforce including those working part-time even though they'd rather be working full-time, dropped from 17.3% to 16.5%. (All those numbers are seasonally adjusted.)

The good news, though, isn't being spread around evenly.

Stocks Drop Sharply: Reality Bites

Posted by John Curran

February 4, 2010 at 6:07 pm

6 Comments

The Dow Jones Industrial Average fell 268 points on Thursday as investors took full stock of the troubled world. The weaker members of the European Union are in financial crisis and talk of defaults fills the air. The fiscal problems and the stock market's weakness don't surprise me, but I must admit that this is coming earlier than many—including me— had expected.

My belief has been that the stock market would weaken in early spring as investors, large and small, got a full whiff of the economic weakness awaiting us in the second half of the year. The stock market is a discounting mechanism and, the thinking goes, would have discounted the earnings disappointments well before they appeared. In all that wisdom, here's the forgotten truth: The market discounts the future efficiently but rarely on schedule--and we are reminded of that this week.

Wall Street, bailouts, credit, economy, efficient market

Look Who's Beating The S&P 500

Posted by John Curran

February 3, 2010 at 11:05 am

2 Comments

As we look back on the 2009 stock market we'll likely long for more inflection points--those moments when the dark clouds let a ray of sunshine peek through and stocks take off. Some investors capitalized on this turn more than others. To see who played the back-from-the-brink rally best, take a look at the table below provided by Zacks Investment Research. Zachs monitors the recommended portfolios of each brokerage and tallies the performance each year. It then compares that performance to the S&P 500.

Wall Street, efficient market, shareholder value

Measuring the economy one credit-card swipe at a time

Posted by Barbara Kiviat

February 3, 2010 at 9:55 am

2 Comments

What does this chart tell us?

economy , Ceridian, economic indicator, UCLA Anderson

A Year Into Citi's Confused Breakup

Posted by Stephen Gandel

February 2, 2010 at 1:13 pm

4 Comments

Back in October, I wrote that Citi was basically a big garage sale, willing to sell any part of the bank that wasn't nailed down (they had already gotten rid of the nailed down stuff). At the time, the PR folk denied that most of Citi was up for sale. They said the bank had made a detailed and logical plan of what was for sale and what wasn't. You see all the sales were based on a well reasoned plan of what was strategic for the global bank and what wasn't.

Well, a little over a year later, Citi has made some progress in getting rid of businesses and raising capital. But the logic of Citi's sale process has turned positively wacky.

Citigroup, Wall Street

Out of work? A temp job might not be your best bet

Posted by Barbara Kiviat

February 2, 2010 at 11:22 am

1 Comment

While I was out of town I missed this new paper (PDF) from MIT economist David Autor, which shows that people who are out of work and take a temporary gig until a full-time position comes along might be doing damage to their long-term earnings power.

Autor and Susan Houseman of the W.E. Upjohn Institute for Employment Research studied a welfare-to-work program in Detroit that randomly assigned job seekers to either temporary or long-term positions. The researchers looked at 37,000 cases between 1999 and 2003, and calculated that people who got full-time jobs increased their earnings by about $2,000 a year (compared to their previous income), but that those who started out with temporary positions saw their earnings drop by about $1,000 per year.

Autor offers up the following explanation: