We Americans have had a knack for self-inflicted wounds in recent years. Despite having capital markets and credit standing that are the envy of the world, we came ridiculously close to at least a technical default on our national debt. Then we almost did it again. We’ve argued for the sake of arguing. Many of our leaders, and leader wannabes, have spoken out loud with remarkable ignorance. What’s more, they’ve failed to move overseas (or at least to Canada) after threatening, or promising, to do so pending certain votes and decisions. Some of our new-age stock exchanges have crashed and burned at the very moment they most wanted to show how robust they were. We stuffed the channel with our biggest initial public offering in years, past the point of good taste or common sense. We watch “The Real Housewives of Topeka.” We let our friends buy Shake Shack stock at more than four times the IPO price. And so on.
Yet, it seems like compared with the rest of the world, in spite of all our flaws and foibles, we’re doing pretty well. We’ve pulled some fast ones on our markets—banning short selling in financial stocks and fooling nobody, and more debatably, keeping interest rates at least a bit lower than would seem appropriate. But we’re not being dragged around by our smallest and weakest region, and we’re not telling major stockholders to stop selling for six months to avoid a possible revolution.
If we were going to get our government more involved in the markets, though, we could start by mandating convertible-bond issuance by companies with certain profiles—like price/earnings ratios over 100, implied option volatilities in the 40’s, and market capitalizations over $40 billion.
That’s right. If I were president, or czar, or something, I would make a law that Netflix has to issue a convertible bond. I’m not saying my intervention would end there. But it would be a great place to start.
(This is the cover letter for the subscription-based weekly Hillside's Hybrid Vigor newsletter. For a complete copy, please contact John Anderson at + 1 (646) 712-9289 x 107).