Oct

14

1. The hft boys play exactly the same role that insider traders do. They get there first with better information. They take out many billions of dollars from the market. The argument exists that insider trading and hft is good because they move prices to where they should be faster. I don't buy it. The hft compete against those with short term horizons as do the insider traders. There is only a certain amount of chips to go around. The special hft and insider traders take those chips away and make it impossible for the average person to profit and for everyone else to get a fair deal. This stuff about liquidity provision is a canard. Yes, they get in and out ahead of you. They provide liquidity to other people, not the short term traders under consideration.

2. The bond stock ratio has moved about 10 percentage points back to where it should have been from the exacerbated levels it was at with bonds [futures] at 144 and stocks [S&P futures] at 1100.

3. The holidays are the worst time to trade as the markets move to create margin calls and wipeouts only to reverse as soon as the normal volume gets back.

4. The snakes have two main ways of killing. One is by constriction like the boa and the other by sharp fast thrusts from out of the blue like the viper. Which way do you generally die on your trades? A visit to the Bronx Zoo reptile house might be in order.

5. I loved when the reason given for the crony bank to receive 100% of the amount due on its trade with the insurance company was that the French banks insisted on 100% payment or else they would have violated a mandate. I am reminded of that by the Fed minutes which say that the reason that the Fed can't lower the 1/4% they pay on reserves is that it would upset the equilibrium of monetary affairs. The entire minutes seem like an exercise in euphemism and reaching out to the public to seem omniscient, judicious, equipoised, and at the same time benevolent. Much better to think of it as Nock did I think —- flagitious et al.

6. The market went from 1200 to 1000 without a break and then back again in true Lobogola fashion. When will a theory of lobogola moves be developed that is useful and predictive.

7. All the very predictive patterns of 2008 didn't work in 2009, and all the predictive patterns of 2008-2010 didn't work in 2011 until the "terrible" month of October.

8. My terminals like to go blank and disconnected so that I am rudderless whenever I have left in a big order that must be monitored on a second by second basis. How does it know ?

9. The intrade prob of a Obama win is steady at 48% and the moves above and below the magic number of 50 one predicts will correspond inversely to moves above and beyond the magic number of 1200 in sp.

10. In addition to Patrick O Brian and Frederick Forsyth, David Mamet seems to be the only writer that appreciates business as our engine for improvements in material well being and personal freedom. Along those lines, it was amazing to see that Moneyball didn't contain all the hateful, supercilious, and envious stuff about the rich that characterizes all else of his work. One must credit Billy Beane as a great manager and human being. Who else do you know that gave up a 10 million increase in salary because he wanted to be with his family. Or could it be that he objected to trend following?

and just one more:

11. The sensibilities of those buying the refunding are always hurt by even a momentary loss, and like nite precedes the day the flexions let all the bad news out before the auctions so these sensibilities will not be offended. I always think of Enoch Powell railing against a price fixing board who were similarly offended by a recipe for Bernaise sauce that they didn't feel justified an increase during the English march to agrarianism and the EC.

Rocky Humbert comments: 

Firstly, I would like to compliment The Chair on his recent 10 thoughts list, which had some genuine pearls of wisdom. However, I cannot help but note that there was an "11" as well — which, along with his comment below is seemingly written in the key of D minor. Nigel Tufnel would note, "D minor is the saddest of all keys. People weep instantly when they hear it, and I don't know why." I think I know why. Because The Chair's writing (and the key of D-minor) triggers receptors in the anterior cingulate cortex, yet it does not pass muster from a rational analysis of the facts and history.

Back in the 1970's if you wanted to buy and sell 100 or 10,000 shares of IBM, you paid (fixed) commissions and bid/ask that amounted to 1% (or more!). And a great business (for the NYSE specialists) it was.Back in the 1980's and 1990's if you had a membership on the MERC or the CME, and you stood in the pit, you earned the bid/ask spread, and front-run your customers and made a great living sucking the blood out of your customers. (Until the occasional customer blew up and bankrupted you.) And if you were willing to make a tighter bid/ask in the pit, you could take all of the business/flow that your heart desired.And now, the game has changed again, and the competition grows fiercer to earn the bid/ask spread, and it's delicious irony that a libertarian claims "foul" because someone has innovated and made his approach obsolete. Somewhere missing from this is the obvious point is that the raison d'etre for capital markets is not as a gambling casino — but rather to move capital to where it's most needed.

Hence, if I want to buy a quantity (Q) of an asset at a price of P, I will bid P for Q shares — and if there is a willing seller of enough quantity at P, I will get filled. Whether it's on the bid or the offer should be entirely irrelevant if the bid/ask is tight. What matters is buying Q at P. Remember that the HFT/market maker/specialist needs to find a home for Q — and if he's paid P.001, and I (and my breathren) stay firm at P, we will get filled. And the fact that the HFT stepped in front of me is completely and totally irrelevant UNLESS I fold, and play his game, and lift the offer.

The HFT people make money ONLY because other market participants choose to allow them to do so. If the real money in the markets go on strike and never pay the offer or hit the bid, the HFT people don't make a dime. (Duh.) Yet, I am quite content to pay that extra .005 cents if and when the offer is P and the size is Q. The same libertarian who claims foul about how technology has given an "unfair" advantage to others and left him wanting, would be advised to consider whether the game is rigged or whether he's still driving a Studebaker and was just passed by a McLaren F1. When I see tearful laments in the future, I'll spare the verbosity and just type: D-Minor. 


Comments

WordPress database error: [Table './dailyspeculations_com_@002d_dailywordpress/wp_comments' is marked as crashed and last (automatic?) repair failed]
SELECT * FROM wp_comments WHERE comment_post_ID = '6860' AND comment_approved = '1' ORDER BY comment_date

Name

Email

Website

Speak your mind

Archives

Resources & Links

Search