7 ms·

I'm starting to agree with the editorial linked from the article [0] that laws against insider trading are pointless. People find ways to do it anyway, but bec

I'm starting to agree with the editorial linked from the article [0] that laws against insider trading are pointless. People find ways to do it anyway, but because the laws exist, the general public thinks it's rare. It might be better for everyone to know what shark tank they're jumping into. [0] http://www.wsj.com/articles/SB10001424052702304279904579516170211639290 http://www.wsj.com/articles/SB100014240527023042799045795161...

savanaly 12y ago
I find myself agreeing too, but tentatively. What exactly is the argument for insider trading laws in the first place? In the absence of such laws would managers have the wrong incentives?
- cma 12y ago
  The money insiders make would otherwise go to other parties/counterparties when the news became public. Insiders charge a rent on everyone else. So do non-insiders doing above-board sales research, but they are subject to competition, keeping the rent/tax down. In addition to the rent, there is also a benefit provided in accurately pricing securities, but there is no law of economics saying this benefit will exactly cancel out the rent or anything of the sort. There are fundamental things (like limited number of sufficiently high-level insiders) restricting competition in conventional insider trading to minimize the rent charged from insider "research".
  - savanaly 12y ago
    Is it a transfer of income, or a genuine loss of resources? It seems like the losses to everyone else are offset one to one by the gains to the insider traders.
    - notahacker 12y ago
      It's not a zero-sum game if the effects are a disincentive to invest on the part of parties without strong connections to insiders.
    - cma 12y ago
      Yes, a transfer. What I meant by other parties/counterparties is that a sale that went to an insider might instead go to the next highest bidder, and the gains once the good earnings news was released would go to him or her. Or the absence of the insider might mean the bid never goes high enough and the seller stays with the shares, to later make the gain. Zero sum, but basically all the normal market participants are avoiding a "presence of an insider" tax when insider trading can be curtailed.
  - notahacker 12y ago
    Non-insiders doing above-board research also don't have perverse incentives; they can't profit from selling intelligence on their own screwups (accidental or otherwise)
- pash 12y ago
  Insider trading was first outlawed in the United States by the Securities and Exchange Act of 1934. The major motivation for the ban was to increase the public's confidence that they could invest in financial securities without being taken to the cleaners by insiders who had a major informational advantage. [0] Economic theory does lend some support for the idea that markets will perform better when the public is confident enough to participate in them broadly, and broad participation should drive valuations higher. (The latter is a dubious benefit.) But there is likewise plenty of theoretical justification for the harm done to markets by insider-trading laws. Markets are basically mechanisms for aggregating and analyzing information, and insider trading laws restrict the supply of basic facts. Mispricing ensues. There are other justifications for banning insider trading, albeit all rationalizations post facto, as far as the legal history goes. Allowing a manager to trade her company's shares (particularly to short them) can put her incentives out of step with those of the company's other shareholders. But the managerial misbehavior that could provoke is already illegal under various other regimes. And the principal-agent problem is no argument at all for setting up a system like we have, one which bans trading by knowledgeable people who are in no position to influence corporate decisions. But the economics are almost beside the point. The promise made by insider trading laws is that any Joe Schmoe can trade on the same footing as sophisticated professional investors, and that promise is a farce. It's a farce not only because the incentives will always drive some people to break insider trading laws, but because ordinary people do not have ready access to all of the legally "public" facts anyway; many of them are locked up in obscure or expensive databases. And if Joe Schmoe did have all the public facts, he would still lack the other big piece of the informational puzzle, which is the ability to interpret the facts properly. That more than anything requires real expertise. In my opinion, the public-confidence angle is the strongest component of the case for outlawing insider trading, but I think it's a rather weak case in the end. The perverse truth is that if insider trading laws inspire the public to think they can play the markets on equal footing with sophisticated investors, then insider trading laws have succeeded in installing a false confidence; they have hoodwinked the public. ---- 0. This has remained a main justification (at least rhetorically) for maintaining and strengthening insider trader laws over the past eight decades. For example, an act amending the rules in 1984 has this preamble: "Insider trading threatens ... markets by undermining the public’s expectations of honest and fair securities markets where all participants play by the same rules."
- RobinL 12y ago
  The size of the pie is basically fixed. Companies are worth only a certain amount (under big assumptions, the net present value of future dividends). The more insider traders make, the less everyone else makes.
mayukh 12y ago
I'm with you. At this point the extremely open-ended, poorly written and understood laws exist to serve the uber-ambitious career-building prosecutors seeking the limelight.
- shit_parade 12y ago
  Insider trading laws also practically do not apply to members of congress -- prior to 2013 congress was exempt to insider trading restrictions and they have since scaled back reporting requirements. As a class, congress magically out performs the market every year, yet I don't know of any instances a sitting member of congress being charged with any insider trading charges.
  - rayiner 12y ago
    Maybe not: http://www.yale.edu/leitner/resources/papers/Eggmueller_2011-02.pdf http://www.yale.edu/leitner/resources/papers/Eggmueller_2011... ("The average investor in Congress underperformed the market by 2-3% annually during this period, a finding that contrasts with earlier research showing uncanny timing in Congressional trades during the 1990s. Members in- vested disproportionately in local companies and campaign contributors, and these political" investments outperformed the rest of their portfolios (local investments beat the market by 4% annually). Our findings suggest that informational advantages enjoyed by Congressmen as investors arise primarily from their relationships with local companies, and that widespread concerns about corrupt and self-serving investing behavior in Congress have been misplaced.")
rwmj 12y ago
I wonder if it would be possible to create a parallel stock market where insider trading is permitted? People could then choose to trade shares (the same shares?) on the normal stock market, or the new free-for-all stock market.
- patcon 12y ago
  http://www.augur.net/#what-we-do http://www.augur.net/#what-we-do http://www.truthcoin.info/ http://www.truthcoin.info/ :)
- dmurray 12y ago
  It would be possible, but it's illegal to do so in the US with stocks.
- encoderer 12y ago
  It's called the bond market :)
- jleahy 12y ago
  People would just look at how the prices move on the 'free for all' market and then trade the real stock market using that information, thus insider trading on the real stock market would ensue. You can't have it both ways, you either allow people to trade on private information (thus indirectly making the information public by moving the stock price) or you don't.
yuhong 12y ago
I also don't like anti discrimination laws. I think they should be killed, but with an exception allowing the EEOC, anti-trust or similar to order particular sets of companies to stop discrimination for a period of time if necessary.
pilsetnieks 12y ago
Impractical, maybe, but not pointless. As someone else mentioned, insider trading creates perverse incentives for acting on undisclosed information, however, also some of those insiders have a possibility to directly influence those events, which make the perverse incentives even more perverse. Imagine a greedy CEO intentionally causing massive screwups and shorting his company's stocks, for example. At least afterwards it's much easier to prove insider trading than breach of fiduciary trust (also, the former is criminal, and the latter is civil.)
- ghayes 12y ago
  This is the primary concern of insider trading, and why insider trading laws don't exist for commodities markets (which are much less susceptible to willful manipulation).
  - avn2109 12y ago
    Really? I have been under the assumption for many years the the commodities markets are thoroughly rigged. See for example (among many others) the Goldman aluminum warehousing case [0-1]. [0] http://www.nytimes.com/2013/07/21/business/a-shuffle-of-aluminum-but-to-banks-pure-gold.html?pagewanted=all http://www.nytimes.com/2013/07/21/business/a-shuffle-of-alum... [1] http://money.cnn.com/2014/11/20/investing/goldman-commodity-manipulation-wall-street/ http://money.cnn.com/2014/11/20/investing/goldman-commodity-... etc...
    - darkr 12y ago
      As have I, ever since watching the insightful documentary 'Trading Places'.
keithpeter 12y ago
Or perhaps we could put a few holes in the shark tank by releasing appropriately anonymous aggregate data hourly on all transactions? Seriously, why not?
- pbhjpbhj 12y ago
  Wouldn't that just mean that the stock price would jump hourly to the corrected price instead of jumping quarterly. Those with insider information would have to work harder but they'd just extract the value from the system in smaller increments? It's possible that releasing hourly negates the effect of the information withholding; but I don't think it's necessarily a foregone conclusion. Instead of trading on longer term signals you're trading on "did company X sell as much this morning as expected" - which I'll grant you is a ludicrous thing to base that companies worth on. Perhaps it means people who have less effect on long-term signals get to take part in insider trading though - if you know there's a new advert or offer coming out you can predict a revenue shift.
joe_the_user 12y ago
In the end, the laws against insider are simply extensions of the condition that any firm demands from employees and contractors - ie, don't take our take stuff, don't take our delivery van for a joy and don't trade our stock based on secrets we give or leave lying around, ie, The information belongs to the company or its agents and given out to be used for particular purpose. If there weren't laws against people taking their employer's or contractee's stuff, employers would be hire hit squads to prevent it from happening. Despite vision of libertarian utopias, that wouldn't be an improvement.
alexqgb 12y ago
It's not true the "people do it anyway". It is true that some people do it anyway. Big, big difference. Also, it makes no sense to base judgement of the law on the impossibly high standard of 100% compliance. Indeed, any law that does achieve a compliance level that approaches 100% will almost certainly be accompanied by an enforcement regime so terrifyingly intrusive that it's hard to imagine a threat to civil society that could be greater. What does make sense is widespread use of the kind of statistical analysis that makes patterns of insider trading very hard to conceal, along with enforcement that includes far-reaching chains of disgorgement in cases where convictions do stick. Basically, if you're you're foolish enough to do business with a fund that is producing returns that are inexplicable absent reliance on insider trading, you could find yourself loosing large sums to the government if and when the fund's operators are taken down.
femto113 12y ago
Perhaps we should invert the law and make it criminal for publicly traded companies to keep material information secret. Having an unexpectedly good or bad quarter? Give us updates every week.
- TTPrograms 12y ago
  This might be extremely disadvantageous when competing in an international market where those laws don't apply.
  - thanksgiving 12y ago
    If this is a major concern, a corporation can go private like Dell has successfully shown to be possible.
- dsl 12y ago
  Why weekly? Why not daily? Or hourly? I'll tell you why... In big business, quarterly is often as close to "frequent" as one can get. Contracts take weeks if not months to negotiate, net 60 or 90 payment terms, hold backs, terms on goods in transit, etc. For some complex businesses, teams work on nothing but figuring out quarterly filings.
  - harperlee 12y ago
    But businesses work on an accrual basis: once the contract is closed, and you can reasonably assume that some influx of capital is real, you put it in the accounting system. And then: if I am a shareholder, and I own part of the company, why can't I have access to the internal not-yet-audited general ledger status? It's my company, right? It should be feasible to give me access to a secure site where I can get the information... I believe the real reasons, rather than technical infeasibility, are mainly two: - Extreme "corporate governance": If shareholders can react on every minute transaction that you do, and they effectively micromanage the company, there is still more incentive for short-term thinking (a problem that a lot of listed companies are already very familiar with). - Strategy: If competitors can buy one of your shares, they would get access to all your information. You can still do the same, though: on public companies, information is either public, or private. But who is going to start? Who is going to rush to be open to the competitor?
nrao123 12y ago
I am not sure if what the Huangs did is considered Insider trading. Majestic Research (Bought by ITG Research) provides anonymized credit card data to Hedge Funds to make investing decisions. Check out: http://www.itg.com/intelligence/itg-investment-research/coverage/ http://www.itg.com/intelligence/itg-investment-research/cove... Also check out this article from the WSJ from June 2010 on Majestic Research: http://blogs.wsj.com/economics/2010/06/30/using-starbucks-dunkin-donuts-to-track-economy/ http://blogs.wsj.com/economics/2010/06/30/using-starbucks-du... Using Starbucks, Dunkin’ Donuts to Track Economy As economists look for clues on the direction of consumer spending, they may want to look into how much Americans are willing to spend on their coffee. Consumers have been more willing to spend since the lows of the recession, but recent declines in retail sales and confidence have sparked worries over whether spending can continue to grow in the second half of the year. Enter the coffee indicator. A “tell-tale sign of how consumers feel about employment, income and the future is where they buy their coffee and whether they step up for the more expensive concoction,” wrote Majestic Research economist Steve Blitz in a recent research note. Majestic Research tracks anonymous credit-card data, and can see how much consumers spend by category and store. Blitz broke out the average dollar transactions at Starbucks and Dunkin’ Donuts. The data show that during the worst of the recession consumers spent less at the two coffee outlets, but as the employment picture started to improve people were willing to spend more per transaction. AFP/Getty Images Starbucks may hold a key to consumer spending. The trend reversed at the beginning of April when transaction size turned down. To be sure, much of that change is likely seasonal. Transaction size at Starbucks, especially, takes a big spike around the holidays as shoppers buy coffee baskets and mugs for those caffeine addicts on their lists. In the last two years, it has bounced back a bit through the late winter, turning down in April and then moving back up in the late summer/early fall. So far, this year’s transactions at Starbucks and Dunkin’ Donuts is following the pattern. If that bounce back materializes in the late summer, it could indicate that consumers are still willing to open their wallets. But if the average transaction size levels off or continues to decline, it could indicate a more thrifty consumer will dominate the second half of this year.

savanaly 12y ago

I find myself agreeing too, but tentatively. What exactly is the argument for insider trading laws in the first place? In the absence of such laws would managers have the wrong incentives?

cma 12y ago
The money insiders make would otherwise go to other parties/counterparties when the news became public. Insiders charge a rent on everyone else. So do non-insiders doing above-board sales research, but they are subject to competition, keeping the rent/tax down. In addition to the rent, there is also a benefit provided in accurately pricing securities, but there is no law of economics saying this benefit will exactly cancel out the rent or anything of the sort. There are fundamental things (like limited number of sufficiently high-level insiders) restricting competition in conventional insider trading to minimize the rent charged from insider "research".
- savanaly 12y ago
  Is it a transfer of income, or a genuine loss of resources? It seems like the losses to everyone else are offset one to one by the gains to the insider traders.
  - notahacker 12y ago
    It's not a zero-sum game if the effects are a disincentive to invest on the part of parties without strong connections to insiders.
  - cma 12y ago
    Yes, a transfer. What I meant by other parties/counterparties is that a sale that went to an insider might instead go to the next highest bidder, and the gains once the good earnings news was released would go to him or her. Or the absence of the insider might mean the bid never goes high enough and the seller stays with the shares, to later make the gain. Zero sum, but basically all the normal market participants are avoiding a "presence of an insider" tax when insider trading can be curtailed.
- notahacker 12y ago
  Non-insiders doing above-board research also don't have perverse incentives; they can't profit from selling intelligence on their own screwups (accidental or otherwise)
pash 12y ago
Insider trading was first outlawed in the United States by the Securities and Exchange Act of 1934. The major motivation for the ban was to increase the public's confidence that they could invest in financial securities without being taken to the cleaners by insiders who had a major informational advantage. [0] Economic theory does lend some support for the idea that markets will perform better when the public is confident enough to participate in them broadly, and broad participation should drive valuations higher. (The latter is a dubious benefit.) But there is likewise plenty of theoretical justification for the harm done to markets by insider-trading laws. Markets are basically mechanisms for aggregating and analyzing information, and insider trading laws restrict the supply of basic facts. Mispricing ensues. There are other justifications for banning insider trading, albeit all rationalizations post facto, as far as the legal history goes. Allowing a manager to trade her company's shares (particularly to short them) can put her incentives out of step with those of the company's other shareholders. But the managerial misbehavior that could provoke is already illegal under various other regimes. And the principal-agent problem is no argument at all for setting up a system like we have, one which bans trading by knowledgeable people who are in no position to influence corporate decisions. But the economics are almost beside the point. The promise made by insider trading laws is that any Joe Schmoe can trade on the same footing as sophisticated professional investors, and that promise is a farce. It's a farce not only because the incentives will always drive some people to break insider trading laws, but because ordinary people do not have ready access to all of the legally "public" facts anyway; many of them are locked up in obscure or expensive databases. And if Joe Schmoe did have all the public facts, he would still lack the other big piece of the informational puzzle, which is the ability to interpret the facts properly. That more than anything requires real expertise. In my opinion, the public-confidence angle is the strongest component of the case for outlawing insider trading, but I think it's a rather weak case in the end. The perverse truth is that if insider trading laws inspire the public to think they can play the markets on equal footing with sophisticated investors, then insider trading laws have succeeded in installing a false confidence; they have hoodwinked the public. ---- 0. This has remained a main justification (at least rhetorically) for maintaining and strengthening insider trader laws over the past eight decades. For example, an act amending the rules in 1984 has this preamble: "Insider trading threatens ... markets by undermining the public’s expectations of honest and fair securities markets where all participants play by the same rules."
RobinL 12y ago
The size of the pie is basically fixed. Companies are worth only a certain amount (under big assumptions, the net present value of future dividends). The more insider traders make, the less everyone else makes.

mayukh 12y ago

I'm with you. At this point the extremely open-ended, poorly written and understood laws exist to serve the uber-ambitious career-building prosecutors seeking the limelight.

shit_parade 12y ago
Insider trading laws also practically do not apply to members of congress -- prior to 2013 congress was exempt to insider trading restrictions and they have since scaled back reporting requirements. As a class, congress magically out performs the market every year, yet I don't know of any instances a sitting member of congress being charged with any insider trading charges.
- rayiner 12y ago
  Maybe not: http://www.yale.edu/leitner/resources/papers/Eggmueller_2011-02.pdf http://www.yale.edu/leitner/resources/papers/Eggmueller_2011... ("The average investor in Congress underperformed the market by 2-3% annually during this period, a finding that contrasts with earlier research showing uncanny timing in Congressional trades during the 1990s. Members in- vested disproportionately in local companies and campaign contributors, and these political" investments outperformed the rest of their portfolios (local investments beat the market by 4% annually). Our findings suggest that informational advantages enjoyed by Congressmen as investors arise primarily from their relationships with local companies, and that widespread concerns about corrupt and self-serving investing behavior in Congress have been misplaced.")

rwmj 12y ago

I wonder if it would be possible to create a parallel stock market where insider trading is permitted? People could then choose to trade shares (the same shares?) on the normal stock market, or the new free-for-all stock market.

patcon 12y ago
http://www.augur.net/#what-we-do http://www.augur.net/#what-we-do http://www.truthcoin.info/ http://www.truthcoin.info/ :)
dmurray 12y ago
It would be possible, but it's illegal to do so in the US with stocks.
encoderer 12y ago
It's called the bond market :)
jleahy 12y ago
People would just look at how the prices move on the 'free for all' market and then trade the real stock market using that information, thus insider trading on the real stock market would ensue. You can't have it both ways, you either allow people to trade on private information (thus indirectly making the information public by moving the stock price) or you don't.

yuhong 12y ago

I also don't like anti discrimination laws. I think they should be killed, but with an exception allowing the EEOC, anti-trust or similar to order particular sets of companies to stop discrimination for a period of time if necessary.

pilsetnieks 12y ago

Impractical, maybe, but not pointless. As someone else mentioned, insider trading creates perverse incentives for acting on undisclosed information, however, also some of those insiders have a possibility to directly influence those events, which make the perverse incentives even more perverse. Imagine a greedy CEO intentionally causing massive screwups and shorting his company's stocks, for example. At least afterwards it's much easier to prove insider trading than breach of fiduciary trust (also, the former is criminal, and the latter is civil.)

ghayes 12y ago
This is the primary concern of insider trading, and why insider trading laws don't exist for commodities markets (which are much less susceptible to willful manipulation).
- avn2109 12y ago
  Really? I have been under the assumption for many years the the commodities markets are thoroughly rigged. See for example (among many others) the Goldman aluminum warehousing case [0-1]. [0] http://www.nytimes.com/2013/07/21/business/a-shuffle-of-aluminum-but-to-banks-pure-gold.html?pagewanted=all http://www.nytimes.com/2013/07/21/business/a-shuffle-of-alum... [1] http://money.cnn.com/2014/11/20/investing/goldman-commodity-manipulation-wall-street/ http://money.cnn.com/2014/11/20/investing/goldman-commodity-... etc...
  - darkr 12y ago
    As have I, ever since watching the insightful documentary 'Trading Places'.

keithpeter 12y ago

Or perhaps we could put a few holes in the shark tank by releasing appropriately anonymous aggregate data hourly on all transactions? Seriously, why not?

pbhjpbhj 12y ago
Wouldn't that just mean that the stock price would jump hourly to the corrected price instead of jumping quarterly. Those with insider information would have to work harder but they'd just extract the value from the system in smaller increments? It's possible that releasing hourly negates the effect of the information withholding; but I don't think it's necessarily a foregone conclusion. Instead of trading on longer term signals you're trading on "did company X sell as much this morning as expected" - which I'll grant you is a ludicrous thing to base that companies worth on. Perhaps it means people who have less effect on long-term signals get to take part in insider trading though - if you know there's a new advert or offer coming out you can predict a revenue shift.

joe_the_user 12y ago

In the end, the laws against insider are simply extensions of the condition that any firm demands from employees and contractors - ie, don't take our take stuff, don't take our delivery van for a joy and don't trade our stock based on secrets we give or leave lying around, ie, The information belongs to the company or its agents and given out to be used for particular purpose. If there weren't laws against people taking their employer's or contractee's stuff, employers would be hire hit squads to prevent it from happening. Despite vision of libertarian utopias, that wouldn't be an improvement.

alexqgb 12y ago

It's not true the "people do it anyway". It is true that some people do it anyway. Big, big difference. Also, it makes no sense to base judgement of the law on the impossibly high standard of 100% compliance. Indeed, any law that does achieve a compliance level that approaches 100% will almost certainly be accompanied by an enforcement regime so terrifyingly intrusive that it's hard to imagine a threat to civil society that could be greater. What does make sense is widespread use of the kind of statistical analysis that makes patterns of insider trading very hard to conceal, along with enforcement that includes far-reaching chains of disgorgement in cases where convictions do stick. Basically, if you're you're foolish enough to do business with a fund that is producing returns that are inexplicable absent reliance on insider trading, you could find yourself loosing large sums to the government if and when the fund's operators are taken down.

femto113 12y ago

Perhaps we should invert the law and make it criminal for publicly traded companies to keep material information secret. Having an unexpectedly good or bad quarter? Give us updates every week.

TTPrograms 12y ago
This might be extremely disadvantageous when competing in an international market where those laws don't apply.
- thanksgiving 12y ago
  If this is a major concern, a corporation can go private like Dell has successfully shown to be possible.
dsl 12y ago
Why weekly? Why not daily? Or hourly? I'll tell you why... In big business, quarterly is often as close to "frequent" as one can get. Contracts take weeks if not months to negotiate, net 60 or 90 payment terms, hold backs, terms on goods in transit, etc. For some complex businesses, teams work on nothing but figuring out quarterly filings.
- harperlee 12y ago
  But businesses work on an accrual basis: once the contract is closed, and you can reasonably assume that some influx of capital is real, you put it in the accounting system. And then: if I am a shareholder, and I own part of the company, why can't I have access to the internal not-yet-audited general ledger status? It's my company, right? It should be feasible to give me access to a secure site where I can get the information... I believe the real reasons, rather than technical infeasibility, are mainly two: - Extreme "corporate governance": If shareholders can react on every minute transaction that you do, and they effectively micromanage the company, there is still more incentive for short-term thinking (a problem that a lot of listed companies are already very familiar with). - Strategy: If competitors can buy one of your shares, they would get access to all your information. You can still do the same, though: on public companies, information is either public, or private. But who is going to start? Who is going to rush to be open to the competitor?

nrao123 12y ago

I am not sure if what the Huangs did is considered Insider trading. Majestic Research (Bought by ITG Research) provides anonymized credit card data to Hedge Funds to make investing decisions. Check out: http://www.itg.com/intelligence/itg-investment-research/coverage/ http://www.itg.com/intelligence/itg-investment-research/cove... Also check out this article from the WSJ from June 2010 on Majestic Research: http://blogs.wsj.com/economics/2010/06/30/using-starbucks-dunkin-donuts-to-track-economy/ http://blogs.wsj.com/economics/2010/06/30/using-starbucks-du... Using Starbucks, Dunkin’ Donuts to Track Economy As economists look for clues on the direction of consumer spending, they may want to look into how much Americans are willing to spend on their coffee. Consumers have been more willing to spend since the lows of the recession, but recent declines in retail sales and confidence have sparked worries over whether spending can continue to grow in the second half of the year. Enter the coffee indicator. A “tell-tale sign of how consumers feel about employment, income and the future is where they buy their coffee and whether they step up for the more expensive concoction,” wrote Majestic Research economist Steve Blitz in a recent research note. Majestic Research tracks anonymous credit-card data, and can see how much consumers spend by category and store. Blitz broke out the average dollar transactions at Starbucks and Dunkin’ Donuts. The data show that during the worst of the recession consumers spent less at the two coffee outlets, but as the employment picture started to improve people were willing to spend more per transaction. AFP/Getty Images Starbucks may hold a key to consumer spending. The trend reversed at the beginning of April when transaction size turned down. To be sure, much of that change is likely seasonal. Transaction size at Starbucks, especially, takes a big spike around the holidays as shoppers buy coffee baskets and mugs for those caffeine addicts on their lists. In the last two years, it has bounced back a bit through the late winter, turning down in April and then moving back up in the late summer/early fall. So far, this year’s transactions at Starbucks and Dunkin’ Donuts is following the pattern. If that bounce back materializes in the late summer, it could indicate that consumers are still willing to open their wallets. But if the average transaction size levels off or continues to decline, it could indicate a more thrifty consumer will dominate the second half of this year.