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4 sigma event transpiring over the past few days. One can hope the recent Flash developments have nothing to do with this drop.
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TD - Forgive the question.. Do you think the neutrals might be headed for the sidelines?
i assume that is rhetorical. and guess who ends up benefitting...
I heard chatter it was "R"
Their PBs sure were busy this week.
What does prime broker action have to do with it? There are only so many prime brokers out there... its not like they just have quant-related clients. Plus, just because a quant fund uses a prime broker, that doesn't mean they trade with them.
"R"=?
My guess would be Renaissance Technologies Medallion.
Commitment of energy = discernment of intent.
Thanks.
North Korea?...No wait...the R' word?.
I remember well reading your "Shrinking Market Liquidity, or the Soon to Appear Black Swan of Black Swans" in early April. At that time, you thought it would be weeks if not days that we could see a major liquidity event.
Well, they've managed to keep it going another four months, the wizards. At one point today, USD, VIX, stocks and bonds were all rising simultaneously. Remarkable.
Timing is a very difficult one; I still believe that you will be proven correct, TD.
Carry on.
Ray, pretend for a moment that I don't know anything about finance, accounting, or hskax, and just tell me what the hell is going on.
A high-priced mutual fund with outrageous management fees and an insane front load can't be a Vanguard Index Fund in performance.
Is this one of the situations where the market goes up, but your particular basket of carefully-picked shares goes down...
You read my mind. Thanks!
Waterdog
What are the two graphs about?
first rule of proj mayhem = do not ask questions
Sorry, the above question was from me. In ten words or less, what do the graphs shown above represent?
Last time Tyler pointed to a liquidity event was April 10. Nothing happened then, the market just kept going up.
So who cares if there is a liquidity event? The Fed prints money and it goes away, and stock prices go up.
Read about Icarus.
Icarus's liquidity event was the melting of wax. He was soaring on vapors too.
I remember he suggested a liquidity event was possible, and he was right. The market has been on a tear to the upside on low volume since then. Liquidity events don't have to mean the market goes down. it just means the move in either direction is more dramatic.
Volatility can be a +/-. It all depends on perspective...
I've been waiting to hear the stock loan pools at the custodian banks have been shut down or shrunk dramatically, due to either client withdrawals or undesireable business risk. Then it will be safe to short again. This would be your upside liquidity event.
Dread,
The stock loan pools have shrunk dramatically since the Lehman bankruptcy - which has made it dreadfully unsafe to be short - thereby driving the upside liquidity event from the March low.
What are you trying to say here?
loan pools still out there I think.
I've been concerned about it but the data doesn't suggest this was behind the recent market rise yet. Filings for JPM, STT, BK and NTRS are not all in for the latest quarter, but a review of what has been filed suggests the bulk of the reduction you are talking about occurred late last year, into the market drop. Some of these firms marginally increased lending from Dec to Mar or Mar to June, depending on the filing.
The disclosure is limited, but we can infer in some cases through reported collateral held for such activities. Historically, they overcollateralize by a sliver - a few percent, so the face value of collateral reported should be close to the securities lent, and stay correlated.
NTRS, for instance, increased lending between Mar and June.
BK reported only a fractional contraction in the June qtr.
STT reports on their latest conference call (no Q filed yet) that they've had about half their customers return to the program, and describe it as 'firming' - so I don't think you'll find support for the notion their lending balances contracted significantly in the Jun qtr.
I think this iceberg is still out there waiting for the next bank run.
Personally, I think this 'liquidity event' you describe from Mar is simply the greatest insider trade in history- the Primary Dealers (led by Government Sachs) trading ahead of and on top of their free money drop - if you knew you were about to get free money to bail you out of insolvency due to all your customers who had gone insolvent after taking loans from you, what would you do? You'd take the free money, run out and buy the paper of these firms at $.20 on the dollar (bonds and even equities), which are trading there because no one thinks they can ever re-fi and THEN YOU RE-FI THEM. Then you keep going and jam them as high as you can. The government cheers you on. nice capital gains on the mark ups. Then you just try to get to the end of the year quietly, collect your bonus and flee the country before the whole thing collapses again. No wonder goldie suddenly turned on PT again in March. and the exchange promptly quashed DPTR.
yep, printfaster. yep. from the presses to the pit.
HSKAX is a market neutral fund and cannot be easily manipulated. If HSKAX is dropping like a stone and the S&P 500 is on a moonshot, Houston, we've got a problem.
Well that's not really the point. If market neutral funds are getting creamed that means quant factors aren't working, which means a possible market inflection point, which means quants move to the sidelines until the models are working again. This could be bad for the market if the market reverses hard at the same time we have reduced liqudity.
This doesn't mean the market is going to crash. The last few times this happened, the market kept going up and the quants just got back long with no hiccups. Pays to momomo.
no, here is a point for you.
It means inflection point. This could be bad.
But this does not mean it will be bad. Actually, last few times this was not bad at all.
Got it? If no, do not get upset, even i do not k nwo what the sh*t i am spewing out.
Jeff Macke?
LOL... that was really funny...
Can anyone answer this question: Are the algos focused mainly on one factor such as momentum, value, or balance sheet... or are they an amalgam of many factors... and how quickly can they come with new algos and code when the market significantly shifts its focus... in other words how come they would need to move to the sidelines... how come they do not have some type of fall back algos (and potentially new code) anticipating market temperament?
A robust market neutral quant strategy takes into account many factors at once. Market neutral quants are different from high frequency strategies, which usually focus on one or a few factors (momentum, reversion, correlation, etc) at a time. In high volatility environments high frequency tends to thrive, while market neutral quants get killed.
Thank you...
Here's a really cool post on ZH from a while back that should help. http://zerohedge.blogspot.com/2009/04/do-quant-factors-persist-anymore.html
HSKAX, yeah, right.
Description
The investment seeks to provide long-term positive return. The fund invests in the equity securities that are undervalued and sells short securities that it believes are overvalued. It takes long and short positions selected from a universe of mid- to large-capitalization stocks with characteristics similar to those of the Russell 1000 index. It may also invest in shares of exchange-traded funds.
Asset managers:
Evan Dick (Started: Nov 30, 2005)
Alain Sunier (Started: Nov 30, 2005)
Jerome Benveniste (Started: Nov 30, 2005)
Peter Beebee (Started: Feb 29, 2008)
Advisor Company:
J.P. Morgan Investment Management Inc.
C/O Jpmorgan Distribution Services, Inc., 1111 Polaris Parkway, Ste. 2-j, Columbus OH 43240, USA
http://www.jpmorganfunds.com/
Oh, thanks
The investment seeks to provide long-term positive return. The fund invests in the equity securities that are undervalued and sells short securities that it believes are overvalued. It takes long and short positions selected from a universe of mid- to large-capitalization stocks with characteristics similar to those of the Russell 1000 index. It may also invest in shares of exchange-traded funds.
--
My guess is they shorted "overvalued" securities this week and got burned.
Nothing new under the sun.
Goldman's Prop Desks are deliberately creating chaos in order to catch is biggest clients offsides so they can profit from their blowups.
Note how a rising dollar is suddenly positive for stocks. No doubt, many Robot programs short-circuited today on that change.
Individual stocks are also getting manhandled by the Prop Desks.
Here are some examples:
Check out DWSN, a geographic seismic company for the oil service industry.
It broke out of a flat base, therefore millions of fund managers saw it and chased the breakout expecting a huge run.
Then somebody slammed it huge, and all the mo-mo quants who chased this one up the stripper pole were shanked.
Now lets look at Hansen's (maker of Monster Energy drinks, consumed by the 19-year old daytraders employed by Harvard Endowment Fund, TIAA-CREF, etc.)
Goldman sold it hard the last two days, knowing that earnings were going to be a blowout since so many Fembots have been purchasing these drinks lately.
Short sellers were clotheslined today:
Just the normal trickery and skullduggery that goes on every day on Cheat Street.
you're good robo.
i still think you and td are either the same, or clones, or twins, or close.
doesn't matter though, what counts is the smarts and the content. and, you both make me laugh like hell.
thanks to both of you for your efforts and willingness to share.
I'm with my fellow deadhead, deadhead on this RT. Your writing style and content are simply sublime.
I don't think that but a fraction of trades, say 10 to 15 percent hit the markets anymore. The ones that do are just misdirection. Most is traded off-line just like the derivatives. (CFTC said that there was no increase in specuslation in oil prices in spring 2008; that's because it never hit the tape.) Nobody but Bernanke, Geithner and GS and JPM trading desks really know what is going on. Geithner is getting real worried. The FDIC knows that the Alt-A's and commercial office and land loans are going to decimate many, many banks. Need Congress to raise the national debt level. What will the dollar trade at when Bernanke's backstops are 2xGNP?
Robo, you are absolutely delicious.
Thank you.
Even though I am not a fan of GS - I really don`t think they will purposely harm their biggest customers. They are much smarter than that. GS is no 1 because their customers make money with them because of their insight.
GS`s game is to try to take money from their non-customers and make it for their customers and themselves.
thanks lloyd
Makes GS sound almost philanthropic
"But I thought you were my friend."
"That shows how stupid you are."
Hard data does not support what you think is correct. In fact godlam does th eopposite very often, but gets away with it because they are the big dog.
Hahahahahahaha! ROFLMAO !!! HAHAHAHAHAHAHAHA!
It a 2% or so move in the last few days.
They probably had a few shorts that got squeezed recently (perhaps AIG?).
The fund itself seems like a very good way to lose 3% or so per years in fees, while basically remaining market neutral. You could certainly do worse, but I'd rather be holding treasuries.
Heh..
I have an ex-girlfriend who works for Aecom.
She told me the company was laying off tons of architects.
Told her that was strange, the stock was near 52-week highs, ready to break out.
Here's the stock two days ago:
No doubt, many hedge funds were eyeballing this chart.
Of course Goldman's Prop Desk is also looking at the same chart, and decided to take a bunch of guys to the cleaners the last two days:
Since ya'll so smart, why has no one mentioned the gaming in AIG the last two days. The 2.5 points in 5 microsecond sell down late in the day on 3.5 million shares DUMPED into the laps of retarded momo bots.
You know nothing.
we have a ZH insider group that coordinated the aforementioned sell down.
you just blew your chance to be invited.
This shit is much worse than insider trading, and much easier to prove. It is collusive, manipulative , and fraudulent. This isn't king of the hill, it's about free markets working efficiently to build business. Of course big players have to be reined in. A "controlling interest" in volume trading is not a license to steal.
i saw that happen. it was quite interesting.. odd things going on.. just a big sell order. it was huge. and silent.
yeah GS took down that Tulsa Oil Hedge company last year and they were a customer of them!
Why is there a regression line fitted to a non-stationary series? Its a stochastic not deterministic trend. If you dont know what that means, stop drawing such pictures.
If you are stupid enough to use stoch's with trading, then you're asking to get your ass creamed. Just shows how stupid retail traders really are!
Not everyone can be as smart as 20-year-old Full Throttle crackhead momo monkey trigger finger buy driods.
market is going to crash... without the shorts as natural buyers into dips the vacuum lower is pretty deep. Also with Obama saying he saved the economy, financial system - he's Mooked himself... big time.
From Wiki: A stochastic process is one whose behavior is non-deterministic in that a system's subsequent state is determined both by the process's predictable actions and by a random element. Stochastic crafts are complex systems whose practitioners, even if experts, acknowledge that outcomes result from both known and unknown causes. Examples are warfare, meteorology, and rhetoric, where success and failure are so difficult to predict that explicit allowances are made for uncertainty.....meteorology, interesting....The Weather Channel maybe a better market trend source than CNBC.
"Then somebody slammed it huge, and all the mo-mo quants who chased this one up the stripper pole were shanked"
Do you MBA clowns learn these clinches in B-School or do you pick them up on team building trips to Scores?
LOL
"Then somebody slammed it huge, and all the mo-mo quants who chased this one up the stripper pole were shanked"
A magnificent string of words such as the above cannot be taught in MBA classes....
Such beautiful use of the English language...this old wordsmith (at least I'd like to think that of myself) is delighted to see that the younger group like Robo has not abandoned the language like so many others...
very effective
Sadly socres no longer exists.
Team building via lap dancing is currently being undertaken at a whole new location.
Perhaps if you registered marla might send you a VIP invite.
Done
This blog lets me get a glimpse of Wall St's underbelly, in a way most retail investors never see and never want to see.
I'm not a trader, but manage my own money, and have been able to hold my own and make money since '07. The info here is really useful in helping me to move the money around.
Thanks to all here, including informed commenters.
Yeah, but don't announce you made money on a trade. They get in-your-face "sure ya did buddy". What jokers.
For the record, I did not make money: however, my losses were "better than expected." (So, I'm feeling pretty fetch.)
Who would invest/trade stocks today? why participate in a corrupt criminal enterprise. Rational Expectations Schools already taught you that you cant make money in stocks. Goldman knows this; heck it was proven 25 years ago mathematically, philosophically, practically. Of course, if you turn yourself into a criminal enterprise (harvey blankfein,et al) then you have a chance. Otherwise, forget it.
So if this is a bear marktet rally and it rolls over, what is the best bet on the way down? Double SPX negative?
Once more the blog maesk the mistake of putting up a picture without any writing and assums the reader can determine what the writer intends without background. a regular fault with the site. If the goal is to inform people it fails, and I won't send things to my fiends to show them the games going on whrn it can't be understood. You've moved up from blogspot to dotcom. Please correct this easily fixed frequent error
Just because you do not understand something does not mean people who do must take the time to explain it to you.
If you step into a college calculus class without the requisite primer courses, do you really expect the teacher to stop and explain all the underlying assumptions, jargon, fundamentals, etc. to you?
Your thinking really is one of selfishness and laziness.
I forgot to add... you must be a baby boomer.
Those are tough words from someone who posts:
"So if this is a bear marktet rally and it rolls over, what is the best bet on the way down? Double SPX negative?"
Are you really asking for investment advice from anonymous posters on a blog? Sure sounds like you're the one who doesn't understand.
Looking for opinions yes.
Look at the books and find the weak corps in the pack, for whatever index you follow, that have been buoyed on the feds liquidity pump. Short / buy puts and you should catch the most bang for your buck. Blah blah not a registered investment advisor, can lose your shirt, your dog, your car (insert country song here).
I'm long 1:18th scale die-cast Formula 1 racecars.
While we're talking about chatter , has anyone heard any chatter about GS buyin 30,000 sept 26 strike puts on WFC ? BTW , when is there 10 Q supposed to be released next week ? Thanks in advance
this is a good summary of what you are asking about. I happen to think that WFC is an accounting piece of shit.
http://bankimplode.com/blog/2009/08/07/is-it-time-to-short-well/
Isn't one of the intended implications of showing HSKAX to show that normal valuation sanity is at a monthly low? If a market neutral fund that tracks traditional sane valuation tanks, doesn't that imply chasing overbuy? I presume WOPR is getting its instructions from the POMO-effect houses, who continue to confound the shorts. Has anyone noticed that the short-sellers the last two weeks tend mostly to be value traders dismayed by the rally? I read TD's post of HSKAX as a sanity proxy, and it is pointing down. As sanity declines, the rally continues another day, yes? Attempts to find under-valued stocks as of 8/7 eve support this, no?
Deadhead... when is the 10 Q supposed to be released ? I had seen the article you referenced to , however , there wasn't a precise date for the 10 Q date. Thanks for responding....
https://www.wellsfargo.com/downloads/pdf/invest_relations/2Q0910Q.pdf
10 Q looks to have been filed yesterday.
from the Q...The provisions of FSP FAS 157-4 are effective for second quarter 2009; however, as permitted under the pronouncement, we early adopted in first quarter 2009. Adoption of this pronouncement resulted in an increase in the valuation of securities available for sale in first quarter 2009 of $4.5 billion ($2.8 billion after tax)
I believe this is old info as I recall, but that mark to market change, which WFC used in the FASB approved backdate to March 31, seems to have made a little bit of a difference in WFC's record breaking first Q profit of 3.2 billion, eh?
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Thanks deadhead , the larger issues with WFC , as I understand the concerns , deal with accounting treatment ( as your note # 30587 pointed out one example ) and goodwill treatment regarding Wachovia. My recollection is second liens should be a bigger issue than currently presented by WFC and of course there is the Golden State portfolio to ponder. Guess we will see what the take is next week as the 10 Q gets further scrutiny. Thanks for your responses !
Correction ... Golden West sale to Wachovia ( instead of Golden State ) and value of that portfolio was my prior point. Sorry for any misinformation there.
i think second liens are a problem for just about every bank. there were tons of those crappy piggybacks....
golden west had a pretty shitty portfolio as i recall, though i could be thinking of someone else.... i have read conflicting opinions on the wfc takeover of wachovia, i.e one side seems to say there is a lot of crap to write down and I specifically remember articles suggesting wfc wrote a ton of stuff down when the merger happened.
whatever the case, i would not be surprised to see wfc end up being the worst of the bunch.