One day on and still nothing from the property spruikers on the claimed relationship between population growth and house prices.
Not a sausage.
We expected to receive at least one piece of evidence to support their case. Instead we’ve received more information from Money Morning readers that supports the argument that population increases and house prices are not necessarily correlated.
As always, we’re happy to be proved wrong.
But onto something different for today. And it’s just a brief Money Morning as we’re on a tight schedule to complete a couple of reports for our paid subscribers.
We were amused to see the report of comments from the ASX chairman David Gonski who claimed that the government should not allow a competing exchange to operate in Australia.
Obviously it’s only right that he should try and look after the interests of his shareholders. But it’s still amusing to hear him claim that introducing exchange competition would be bad for investors.
He said, “Internationally, including in some of the markets that are much bigger than ours, increasing discussion by commentators and regulators alike is taking place about whether multiple market operators produce beneficial results for retail and traditional long-only investors, or whether in fact the opposite occurs, to the benefit, for example, of statistical arbitrageurs.”
What he fails to acknowledge is that even if “statistical arbitrageurs” did benefit, it would be because of this that other investors would also benefit.
You see, in simple terms, what an arbitrageur does is take advantage of small price discrepancies between the same instrument trading in different markets.
If differences do appear, the arbitrageurs fancy computer systems recognize this and move in to take advantage of the difference. This very action causes the difference in prices to disappear.
Theoretically, and practically, these differences should only appear in the market for a short term before the arbitrageurs move in.
As soon as they do, all investors benefit.
So in fact, what you’re likely to see is an improvement in the spreads between the buy and the sell price on securities, if competition is introduced to exchanges.
As exchanges will be keen to attract traders to their exchange each exchange (including the ASX) will make every effort to ensure that prices quoted on its exchange are as competitive as possible.
Is it really possible that an exchange would encourage wide spreads between the buy and the sell price? We wouldn’t have thought so. If that happens brokers wouldn’t direct trade to that exchange.
No, it’s typical for an monopoly company to try and frighten investors with the fear of worse prices under a competitive environment. All monopolies try the same trick. The ASX is no different.
With any luck ASIC and the government will see through the ASXs ruse and ensure new exchanges are allowed to open for business on the Aussie market.
As in every industry and every market, increased competition produces only benefits for the consumer, and does not worsen it as the ASX is falsely trying to claim.
Other Stuff on the Markets
The S&P/ASX200 eased off 0.20% yesterday, while overnight on Wall Street the Dow Jones Industrial Average slipped 29 points. In Europe the FTSE100 dropped 0.50% and the CAC40 fell 0.49%.
The price of gold in Australian dollars is trading at $1,143.16, while in US Dollars it is trading at $1,009.71. And the price of silver in Aussie dollars is $18.96 and in US Dollars it is $16.74.
The Aussie dollar remained steady versus the US dollar and Japanese Yen, trading at USD$0.8835, and JPY79.27.
Crude oil closed overnight at USD$70.34.
For the biggest movers on the market yesterday click here…
{ 27 comments… read them below or add one }
← Previous Comments
spot on, PF. RR’s job does not depend on keeping any particular boom or bubble alive, but on the overall accuracy of his calls and the soundness of the justificantions he brings in support of them. His motivational structure is quite different from a real estats and politicians with whom he is being lumped together by Sayce and Co.
darn these typos, ‘real estate agents’, I meant to say, of course.
Kris Sayce, discussing the main theme of this article, I’m not against creating competition for the asx, but remember we had a number of state stockmarkets that amalgamated because each one was not really viable as an efficient organisation on its own.
If you look at recent history when Keating let in foreign banks, we did have about twenty at one point, and now we are back to the same big four with a few minor players.
Telecommunications ia another area where we tried to instil competition, and after the fall of One Tel and co we really only have two, and one of them can’t supply decent coverage.
Therefore before we just create another exchange, do we have any research or due diligence that lends support to two viable healthy exchanges. If one is just a poor cousin struggling to survive, it will not be competition but just be a distraction in the market, and will impede growth for companies that list with it.
If the US can only support two real alternatives, can we?
I’m not against the idea, but do you have any real argument to support this idea other than a general warm feeling about creating competition?
Ohooh, PF, won’t such practicalities once again spoil an otherwise good yarn?
Yes your spot on with ASX playing the game trying to protect their monopoly, it was the same deal with the NYSE specialists when they owned the market. In 1996 the average spread of a listed stock was 0.28 then came decimalization, de-regulation and a fair level playing field for other exchanges to compete, now the high frequency traders make markets and as a result the average spread on listed stocks has gone down to 0.016 purely as a result from arbitrage, so the ASX is speaking pure bullshit and I say bring on a competing exchange, I will definitely be providing liquidity on it, and we should all get lower commissions plus tighter spreads and more accurate asset pricing.
Well said Jared
(finally a real mann …
Interestingly, the futures exchange was absorbed by the ASX not that long ago. But, hey, the failure of Ansett did not preclude the subsequent success of Virgin in this country, did it? So, let there be competition, I say, and let those spoiling for a fight, have it.
← Previous Comments