This should really scare the crap out of anyone who has an interest in the continuing viability of our financial markets, which is to say… well everyone. Hat tip to Howard Lindzon for the link to this most awesome blog.
So what happens in a world where the very core of the capital markets system is gradually deleveraging to a point where maintaining a liquid and orderly market becomes impossible: large swings on low volume, massive bid-offer spreads, huge trading costs, inability to clear and numerous failed trades. When the quant deleveraging finally catches up with the market, the consequences will likely be unprecedented, with dramatic dislocations leading the market both higher and lower on record volatility. Furthermore, high convexity names such as double and triple negative ETFs, which are massively disbalanced with regard to underlying values after recent trading patterns, will see shifts which will make the November SRS jump to $250 seem like child’s play.
[From Zero Hedge: The Incredibly Shrinking Market Liquidity, Or The Upcoming Black Swan Of Black Swans]
We are back from a week in Sedona and it was fantastic. I highly recommend you visit this special part of the country, especially right now when the weather is just about perfect with 70+ degree days and cool nights.
Enchantment Resort is a wonderful place to stay featuring a staff that believes no detail is too small and located in a visually stunning canyon that offers plenty of reasons to not leave but you really should get out and visit the Sinaqua cliff dwellings from the 15th century. My wife also commented that this was the cleanest and meticulously maintained hotel we have ever stayed in.
Lastly, bring a good camera because this is about as picturesque a part of the country as you will find anywhere.
This is a great quote.
Biz Stone likes to think small. “Creativity,” he says, “comes from constraint.”
[From What is Biz Stone doing?]
Great because it is true. Companies with excessive resources rarely deliver the return on new product creation that companies constrained by cash do. When you don’t have anything to waste you tend to make better decisions because your filtering is more deliberate, but when you have “google money” you tend to spread it around on too many things that do not yield results because it’s easier to say yes than make hard decisions.
I realize that Stone was referring to Twitter’s imposed constraint on the number of characters per message but what he said really does apply very broadly to business strategy in general.