“Certain adjectives come to mind in describing the US stockmarket,” say Sarah Ponczek and Reade Pickert on Bloomberg. “Sprawling, resilient and diverse.” But another suitable one is “old”. The average age of firms listed in the US has been rising for three decades. It’s now 20 years, twice the figure seen in the 1990s dotcom craze.
The trend has developed for two main reasons. One is that these days firms stay private for longer before going public. Uber and Airbnb are about to float and are around four years older than the typical firm opting for an initial public offering 20 years ago. And once new firms list they “become prey”. In a market increasingly dominated by mega caps, the giants snap up competitors fast.
“Read James Buchanan’s and Richard Wagner’s 1978 monograph, published by the Institute of Economic Affairs… titled The Consequences of Mr Keynes… Buchanan and Wagner use straightforward economic logic to expose with crystal clarity a core political flaw of Keynesian economics –namely, even if Keynesianism is fully correct as a matter of theoretical economics, in practice democratic governments have poor incentives to implement it… politicians’ incentives to spend more than they bring in are dominant regardless of prevailing macroeconomic conditions. And so while democratic governments will eagerly heed Keynesians’ counsel to run budget deficits during economic slumps, these governments will, with equal eagerness, ignore Keynesians’ counsel to balance their budgets under conditions of full employment.”
Donald Boudreaux, Cafe Hayek