Dispassionate discussion of the investment climate.
A look at the technical condition of the foreign exchange market.
Confirming and continuing a trend we first described a year ago, overnight RealtyTrac reported, as part of its Q1 institutional investor and cash sales report, that the percentage of all-cash buyers has soared in the past year with "42.7% of all U.S. residential property sales in the first quarter were all-cash purchases, up from 37.8% in the previous quarter and up from 19.1% in the first quarter of 2013 to the highest level since RealtyTrac began tracking all-cash purchases in the first quarter of 2011."
Based on Markets revenue results to date, which reflect a continued challenging environment and lower client activity levels, expect 2Q14 Markets revenue to be down approximately 20%+/- versus 2Q13.
Higher levels of mortgage interest rates are expected to continue to have a negative impact on volumes
Expect pretax production loss of approximately $100–$150 million in 2Q14 and pretax margins to be negative in 2H14
Expect net servicing revenue of $600–$650 million in 2Q14 and declining by approximately 10% (not annualized) per quarter for 2H14
Journalism and investment research have a lot in common, notes ConvergEx's Nick Colas; after all, both essentially ask the customer to freely part with three scarce resources: time, attention and money. It’s been a tough decade or two for both the newsroom and the research department in that effort, but at least one prominent venture capitalist, Marc Andreessen, thinks there is a future for the news business, however, due to a rising middle class in emerging markets and mobile Internet distribution. While this audience may not (yet/ever) be hankering to read Buy-Sell-Hold reports on their smartphones, Andreessen’s recently published 8-fold strategy for journalism has lessons for investment research as well. The big takeaway: sell-side research needs to change a lot – and quickly - to survive as anything more than an advertising vehicle for brokerage firms.
With the repeated caveat that prudent investors should invest exclusively or nearly exclusively on a multi-year value forecast, my guesses are:
- That this year should continue to be difficult with the February 1 to October 1 period being just as likely to be down as up, perhaps a little more so.
- But after October 1, the market is likely to be strong, especially through April and by then or in the following 18 months up to the next election (or, horrible possibility, even longer) will have rallied past 2,250, perhaps by a decent margin.
- And then around the election or soon after, the market bubble will burst, as bubbles always do, and will revert to its trend value, around half of its peak or worse, depending on what new ammunition the Fed can dig up.
Deja Vu All Over Again: Fannie, Freddie Would Need Another $190 Billion Bailout When Things Go SouthSubmitted by Tyler Durden on 04/30/2014 10:43 -0500
While it will come as a surprise to exactly nobody, certainly nobody who understand that the US financial system is no better financial shape than just before the Lehman crash as nothing has been fixed and everything that is broken has been merely swept under the rug (for details see Paul Singer's explanation posted last night) of epic-er leverage, the news that when (not if) the US economy succumbs to a severe economic downturn Fannie and Freddie would require another taxpayer funded bailout, one of $190 billion or even more than the first $187.5 billion-funded nationalization of the GSEs, can only bring a smile to one's face.
While institutional investors and money managers have a very specific list of worries when it comes to their "financial concerns" such as Fear Of Missing Out (FOMO), monthly/quarterly performance and redemption requests, losing top traders, what the year end bonus will be, order fill slippage, being frontrun by HFT algos, what the Fed chairwoman may say any given day, whether it is 3:30pm or if it is a Tuesday, ordinary Americans have a far simpler list of concerns. According to a recent Gallup poll, the one thing that has most Americans very/moderately worried is "whether or not they have enough money for retirement."
On the subject of High Frequency Trading, our respondents are thus far unimpressed with the argument that HFT helps U.S. equity market participants. Fully half answered that it is “Harmful” or “Very Harmful”. Only 19% said it was “Helpful” or “Very Helpful” to participants. ... In short, the survey seems to tell a very clear story. Most professional investors and institutional brokers do not feel that markets treat all participants fairly. They worry about how fragile markets might become during periods of abnormally high volume. At the same time, they are cautiously picking their way through the minefield in which they find themselves and are unsure what role regulators should play. How the landscape will change as a result of their unease is still unclear. What is certain is that change is coming.
Back in August of last year, we first reported data that not even believed at first, but has since been proven correct using existing home sales data, namely that a whopping 60% of all home purchases are "cash only." However, not even that data could prepare us for what we learned today courtesy of CoreLogic, which narrowed down the range from the broader "housing" segment just to the most appetizing (especially for investors and flippers) condo market. What it found was stunning: not less than 80% of all condos in key markets such as Florida, Nevada And New York are all cash.
- Ukraine forces kill up to five rebels, Putin warns of consequences (Reuters)
- Obama to Russia: More sanctions are 'teed up' (AP)
- Vienna Banks Bemoan Russia Sanctions Testing Cold War Neutrality (BBG)
- GE’s $57 Billion Cash Overseas Said to Fuel Alstom Deal (BBG)
- GM posts lower first-quarter profit after recall costs (Reuters)
- Apple Stock Split Removes Obstacle to Inclusion in Dow (BBG)
- U.S. regulators to propose new net neutrality rules in May (Reuters)
Ultimately, I think the problem for HFT liquidity providers is not that they are skinning investors, but that they are outsiders. They're doing what the keepers of the market infrastructure keys have always done - skin investors, retail and institutional alike, to the outer limits of what technology and the law allows. But while their outward behavior and appearance may be familiar, they are clearly an alien species on the inside, without so much as a microgram of Wall Street DNA. They are Rakshasa's. HFT liquidity providers are technology companies disguised as financial intermediaries. They hijacked the market infrastructure in the aftermath of the Great Recession, stealing it away from under the noses of the big financial firms who had come to see control over market structure as their birthright, and they had a good run. But now the big boys want their market infrastructure back, and they're going to get it.
The majority of global growth in the next decade will instead be generated by "frontier markets". in fact, over the past five years, 43 of the 47 highest-growth economies have come from the frontier.
We believe Fed’s actions would be more appropriately described as permitted cancerous beliefs to spread throughout the financial system, thereby killing Democratic Capitalism which is the basis of the capital markets.
In what the firm believes will be an improvement over other so-called dark pools because it will be a collaboration among big mutual-fund firms, WSJ reports that the giant fund manager is quietly building a new trading venue designed to let big money managers sidestep many of the problems that they argue lead to unfair or costly trading - i.e. avoid the HFT predation. Fidelity, with $1.95 trillion of assets under management, is in the initial stages of planning the trading venue and has just begun to pitch the idea to other large asset managers. It seems 5 years of vociferous exposure and a Michael Lewis book may be beginning to starve the HFTs of their prey.