Monday, September 26, 2011

Pennies From Many

AS Congress considers President Obama’s job package, one measure seems to have rare bipartisan support: a proposal to loosen some of the outdated securities regulations that hamper small businesses in raising capital.

The Obama administration, not surprisingly considering its own success in gathering small donations during his campaign for the presidency, is supporting crowdfunding, a financing model that relies on collecting small sums of money from many people over the Internet.

Read the rest of my op-ed in today's New York Times here

Saturday, September 24, 2011

A Grassroots Stimulus Program

In a deeply divided nation, the one thing we can agree upon is the need for jobs. The economy cannot recover until millions of people are put back to work and consumer spending once again flows. But it’s doubtful that any meaningful job-spurring policy will surmount the political gridlock in Washington.

Don’t look to Corporate America for salvation either: our biggest and most profitable corporations are sitting on piles of cash pile while focusing their investments overseas. And Wall Street is too busy chasing trading profits to engage in the kind of productive capital-raising that was once its mainstay.

So how are we going to begin rebuilding the broken economy and creating jobs? Where is the investment going to come from? One answer is taking shape in dozens of towns and neighborhoods across the country, as citizens from Brooklyn, NY to Port Townsend, WA are figuring out ways to invest in the local businesses that create jobs and help build strong local economies.

Read the rest of my guest blog post on CNBC's Bullish on Books. 

Monday, September 12, 2011

Extreme Financial Markets are the New Climate Change

The front page NY Times story today, Market Swings are Becoming the New Standard, wasn't exactly a revelation—anyone who has watched their life savings whipsawed by global macro trends and speculation over the past few years knows that the markets have become unnervingly volatile. But what struck me about this article was the similarity to global climate change. 

Listen to Andrew Lo, professor of finance at the M.I.T. Sloan School of Management: 
“The last few years have been the most volatile for all of recorded history,” noted Lo. For evidence, he says that 10 of the biggest 20 daily upswings and 11 of the largest 20 daily drops since the beginning of 1980 to the end of last month have occurred in just the last three years.
Similarly, the past decade has included 9 out of the 10 hottest years on record, going back to 1880 when global temperatures were first tracked.  As wild fires rage in Texas and the northeast recovers from epic flooding, extreme weather has become the norm. Now, it seems, we can add extreme markets to the new normal.  

Certainly some traders are profiting richly off the volatility, but for most individual investors, it is stomach churning to watch their investments swing so wildly (and mostly downward). As the Times points out, volatility is a problem because it scares investors and companies alike from the markets and undermines confidence, which can reinforce negativity. Global events—from Europe's debt crisis to U.S. political dysfunction—have contributed to the volatility. So have high frequency trades fired off by computer algorithms and exchange-traded funds that can be flipped like pancakes. In other words, global financial change has manmade causes, just like climate change. And the perpetrators, whether polluters or high frequency traders, foist their external costs onto society at large. 

Against this backdrop are increasing calls for market reforms. Some observers are even suggesting the creation of a safe market for long term investors that would be walled off from high frequency traders and market manipulators. As I detail in my book, Locavesting, one way to do that is through the reintroduction of local stock markets like the ones that used to flourish across the country until technology and globalization made them obsolete. There are efforts to launch local exchanges in Lancaster, PA, Hawaii, and Toronto, among other places. They all seek to bring together a region's long term investors with its small businesses and entrepreneurs to create strong local economies.  Think of them as little bastions of productive calm amid a raging global storm.