Without Much Fanfare, The HSKAX Is Back To August 2007 "Quant Implosion" Levels

Tyler Durden's picture

While everyone knows that it was two and a half decades of imbecilic monetary policy courtesy of the Monstro [sic] that caused the credit bubble, few things were as much of a direct proximal cause of the market crash as the August 2007 quant collapse. And few indices tracked the obliteration of the M/N quant landscape that followed as well as the HSKAX (below). Well, after two years of painful grinding (for the market neutrals), the HSKAX is back to the same level to which it plunged in that week in early August 2007. What does it mean? Who knows, suffice to say that the market not only stopped working when the quants were all briefly destroyed back in 2007, but it marked the all time high in the S&P. We are now back to those same levels.Only this time instead ot the Market Neutrals providing the traditional market liquidity it is the HFTs, the NYSE DMMs, and the New York Fed. What happens next is anyone's guess.


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johngaltfla's picture

Thanks Tyler. There appears to be a new page in the financial crisis developing and I do not think the Fed is prepared to deal with it.

Let's call it Calillinoisfloridanewyorkmichiganstan so we can just avoid listing each of them individually....

squexx's picture

The sooner we start rounding these bastards up and string them up, the better!


chopper read's picture

please, keep perpetuating this meme.  

ebworthen's picture

O.K., I had to look it up "Highbridge Statistical Mkt Neutral A (HSKAX)"

"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."

Hmmm...market neutral investing in ETF's and mid- to large-cap stocks.


Either they changed the formula, the fundamentals have changed, or this is the barometer hitting a storm low on the evening of a sunny sunset.

Dingleberry Jones's picture

Yeah, this article is pretty much gibberish to me. Your research helps a little, but I'm out of my depth on this one.

bob_dabolina's picture

The liquidity providers stopped providing liquidity and the market plunged.

However, now we have the FED tinkering here and there, so what proved to be a good indicator in 2007 might not mean shit now.


tmftdoyle's picture

bob, you nailed the problem, but it is not just limited to a comparison to 2007; the indicators that have worked for decades mean shit right now given the level of government intervention.

scatterbrains's picture

FED stops tinkering if the wikileak bank data implicate the Bernank, Giethner, nutsack etc. my oh my could you imagine all this shit coming to a halt as these crooks are dragged out in handcuffs ?   I know I know I'm dreaming

TrafficNotHere's picture

I think the wiki leaks bank release has the potential to be very damning. Planning on going into FAZ prior to the release.

Tyler Durden's picture

Read the first hyperlink for a detailed explanation of HSKAX. The sad truth is we need to reference prior material constantly (and often rely on our readers' googling skills) or there would be no forward progress.

chopper read's picture

note: i did not junk you.


i very much appreciate the "when in doubt, post it" policy.  as always, we can work together to connect the dots.  thank you.

dnarby's picture

Those too lazy to read the whole thing, check the second paragraph of the conclusion (PDF).

Dingleberry Jones's picture

Thanks for the heads up. Just too much info out there and not enough time for me to figure all of this stuff out. 

This is where "trusting your sources" wins out :)

cossack55's picture

Ah, the good ole days where you invested in an honest company that you believed held ethics similar to your own and either won or lost.  Some say even the market was relatively honest and above board.  Please, refresh my memory. When did that world die? I'm guessing 1971.

Lux Fiat's picture

Please tell me that you haven't read LeFebrve's "Reminisceces of a Stock Market Operator" or Loeb's "The Battle for Investment Survival".  Same stuff, more or less, different century.  Honest markets are those where the operators know how to be subtle.

TheWord's picture


I thought this was also relevant:

"Finally, we conjecture that liquidations of a number of strategies and asset classes may
have started earlier. For example, other liquid investment categories such as global macro, managed futures, and currency strategies seem to have experienced similar unwinds earlier in 2007 as problems in the subprime mortgage markets became more prominent in the minds of managers and investors. The so-called “carry trade” among currencies was supposedly unwound to some extent in July and August 2007, generating losses for a number of global macro and currency-trading funds."

I am a Man I am Forty's picture

"What does it mean" - absolutely nothing

ebworthen's picture

This link should work if the above one doesn't:  http://finance.yahoo.com/q/pr?s=HSKAX+Profile

The fund manager has a BS in Computer Science and Applied Math from Cornell University in 1993.

The fund has an annual holdings turnover (as of Oct 6, 2010) of 638%.

What this means to me is that they are having a hard time finding anything worth chasing as far as return or profit.

Or, as Tyler noted, they may be engaging in the HFT game (and perhaps not doing so well).

Or, they know the gig is up for the time being, and have shorted their own stock and sold their own positions (1.95% expense ratio for investors so...).


cossack55's picture

Great. Folks with a background in finance or just good street smarts have been replaced by geeks and math freaks.  This should end well.

monopoly's picture

How does he do this? Tyler, you and staff are beyond amazing. It would be difficult if not impossible to find another site such as this, that while possibly not always right, is always truthful. I gladly give ZeroHedge my financial support as often as I can.


thank you.

TheGreatPonzi's picture

Same here. ZH, first on financial news, far before CNBS and Bloomberk.

cossack55's picture

CNBS and Bloombunk provide financial news.  When did that start?

alpds's picture


Could someone pls further elaborate on the significance of HSKAX and also provide a  bit of a background for the rookies. Thanks in advanced.


alpds's picture

thnx, i did check the links after i posted my comment...

Hephasteus's picture

I would think the short term moving averages would have to be flipped a lot harder than these show to mark any significant quant meltdown. Think of it like a lake. Roting vegetable matter builds up on the bottom of it and then the lake "turns" or releases massive amounts of CO2. The 15 day moving averages don't look flippy to me.

mcguire's picture

so.  the quant fund strategy is losing.  i suppose this goes along with record high correlations among stocks.. and it is a set up for black swan events because of the same reason..

here is my question.  suppose just like any arb, the quant fund strategy was making money, and would continue to make money until the arb was closed, and what that would look like is a universe with high stock correlations..

combine this with robot traders, you get the recipe for an across the board flash crash???



Hedge Jobs's picture

has HarryWanker's latest stupid comment been removed?

i hope ZH bar that dipshit permanently. everyweek i am amazed at how stupid someone can be. this week it was the black monday sales pushing the market higher but market goes down. Last week it was the market over reating to the EY debt crisis and the market would "close in the green" 2 weeks ago it was  market over reating to the CSCO result and the market would go higher but market goes down.

he refuses to learn and contributes nothing but nonsense in the comments section of this site and even worse he uses the american flag as his avatar which is just another insult!

im starting a petition to have him removed permanently. Junks will be interpreted as support for this motion.

qussl3's picture

Just because you disagree with him doesnt give you the right to try to shut him up.

The ZH comment section is fast becoming a venue for self reinforcing biases, willing only to listen to what it wants to hear.

There is value in what Robotrader and HarryWanger posts, sure it may be jarring and dissonant to your reality, but to stick your head in the sand is even sillier.

ZH prides itself on cutting through the BS that the MSM spews, it will be a sad day when it cant smell its own shit.

Spalding_Smailes's picture

I bet if you go back over robo's post over the last 16 weeks took all 40 stocks you would be up 50%.


He called 8-10 stocks in early august they all blew upward.... He bust on gold sure but his picks have been on 3 month bull run.

Hedge Jobs's picture

qussl3 its not that i disagree with him it is that what he posts is consistenly just plain wrong. im more than happy to hear opposing veiws, its what makes a market and i actively seek them out and agree with you about the self reinforcing biases here on ZH. but i dont think its to much to ask that if you are going to post an opinion as a bear minimum requirement it must at least be based on a slither of reality.


i like robo, Leo and a heap of others here that i dont always agree with but harry has absolutely nothing to offer.

qussl3's picture

Perhaps, he is good for laugh tho.

At the very least his rose tinted lenses reminds me to trade what I see not what think.

HarryWanger's picture

Nothing to offer? Really? I'm out here in real life, owning a real business that sell consumer discretionary. It would seem what I'm seeing and those I'm meeting with would have an insight that others don't get to see on the front lines.  I see it daily.

What I'm posting is the reality of my world of retail and my suppliers and retailers. We're seeing strength. Why you would want to censor a real life small business but post bunker guys like Martenson et. al who have no real connection with Joe and Jane America but theorize about the economy is beyond me.

I see sales and strength in those sales growing, and growing steadily. If that doesn't fit your anecdotal opinions, that's just plain denial and that's not good for any discussion.

Mr Lennon Hendrix's picture

Harry you were starting a journal:  "What I say I did today in MPLS".  Nobody cares!

ebworthen's picture


Income of your customers?


U.S., North America, International?

If you are selling Rolexes to Wall Street and Chinese PLA members that is a lot different than denim and coffee to WalMart.

HarryWanger's picture

Industry? Consumer discretionary home decor.

Region? Right now nationally.

International? Licensing agreement tomorrow is aimed at international growth.

Customers range from blue collar to high income execs. 

Ok. that's really all. Can't keep my eyes open.

ebworthen's picture

O.K., thanks.

Cautionary note:  home decor tends to be Upper Class high income.  The blue collars that go deep into it are often blowing the college fund on trying to save the marriage/mid-life crisis for Wifey.

People trying to make mortgage and health insurance and tax payments don't tend to blow money on home decor unless they are shooting the moon (Queen of Spades and all the Hearts in the deck). 

Often, this kind of spending is foolish spending, more foolish than home entertainment or cars even.

Best of luck.

razorthin's picture

Good for you, Harry.  I don't doubt what you think you are seeing.  I just say enjoy it now while there is still such a thing as credit and a discretionary consumer.

gulf breeze's picture

Home decor is terrible Harry.  I have imported from China and Korea for 13 years.  This year alone  I have had 4 stores with a avgerage life of 65 years liquidate and 2 owned their buildings.  All home decor shows are in the toliet from High Point, Atlanta, Dallas and poor Las Vegas.

Cursive's picture


You are a well known troll.  The veterans here know it.  The remnants from TBP and MarketWatch know it.  If you weren't a troll, why do you have that ridiculously British pejorative for a userid?  Possibly the only userid I could take less seriously would be "Harry Faggot."  So, anyway, why don't you enlighten all of your fans here with some basics like what small business segment you are serving and some y/o/y and m/o/m comps?  Who knows, you might actually find some whale on here who would love to partner with you or just buy you out like Google gobbling up Groupon.  What say, old boy?  You could even submit it as a story for TD and company.  I'd say it's about high time we had a guest post from the retail front lines from our very own Harry Wanger. Have yourself a pint and spill the beans, as it were!  Don't be a wanker old boy!

chopper read's picture


HW is a monkey trading trinkets.  no value added. 

Mr Lennon Hendrix's picture

Remember Harry back after the April 21st turn around?  He capitulated all his calls and began to panic.  It stunned the audience here, Cog Dis did a psycho analysis of him.  Harry merely goes with the flow.  He is the perfect indicator of dumb monie.

Ese Pinche's picture

I think you are a personification of this entire post.  The strong are continuing to get much stronger (via Fed help of course..) and the weak are continuing to get much much weaker.  So the HSKAX model is getting crushed.  There are no inflections.  Harry and his business seem to embody a portion this dichotomy.  I dont know what biz Harry is in but going by what he says, it's a strong business with potential to grow.  Probably, one of the "strong getting stronger".  Then you have the flailing, drowning, and otherwise dying housing markets, traditional banking, etc; businesses that are going away/should go away if the govt would stay the hell out.  So where does that leave us?  Somewhere in the middle, IMO.  We are not headed to ABSOLUTE destruction... but we are not growing enough to sustain/create any real wealth right now either.  We are caught between a tug-o-war of the strong and the weak sectors of the economy.  But this is now... Where are in a couple years depends on who wins the tug-o-war.

alpds's picture

"even worse he uses the american flag as his avatar which is just another insult!"

Care to expound? American flag was inspired by the flag of East India Company. The country is one of the biggest lies/hypocrisies this earth has known. 


Hedge Jobs's picture

i disagree, under the american flag, americans have died for and given the world far more great things than any other country ever has. At one time it represented everything that was good in western european culture.

"the country is one of the biggest hypocrisies this earth has known" In recent times, yes it has been. but its been hijacked and needs to be taken back. thats what places like ZH are all about.

"Luckily, the empire will soon fall apart" be careful what you wish for, i doubt very much you actually appreciate what this would entail.




alpds's picture

"under the american flag, americans have died for and given the world far more great things than any other country ever has." 

When/where? are you referring to all the indians that were slaughtered, or atrocities & coupes in south america, or sales of arms during genocide in East Timor, or american corporation that supported and still support the likes of Mussolini and Hitler?

Misleading ya"