program trading

program trading

The Race For The Door

So, apparently, according to Jon Hilsenrath, "QE to Infinity" is actually "finite" after all. There is no doubt that the Federal Reserve will do everything in its power to try and "talk" the markets down and "signal" policy changes well in advance of actual action.  However, that is unlikely to matter.  The problem with the financial markets today is the speed at which things occur.   High frequency trading, algorithmic programs, program trading combined with market participant's "herd mentality" is not influenced by actions but rather by perception. As stated above, with margin debt at historically high levels when the "herd" begins to turn it will not be a slow and methodical process but rather a stampede with little regard to valuation or fundamental measures. The reality is that the stock market is extremely vulnerable to a sharp correction.   Currently, complacency is near record levels and no one sees a severe market retracement as a possibility.  The common belief is that there is "no bubble" in assets and the Federal Reserve has everything under control. Of course, that is what we heard at the peak of the markets in 2000 and 2008 just before the "race for the door." This time will be no different.

Guest Post: Heads Or Tails - The 2013 Coin Toss

In money management long term success lies not in garnering short term returns but avoiding the pitfalls that lead to large losses of invested capital.  While it is not popular in the media to point out the headwinds that face investors in the months ahead - it is also naive to only focus on the positives.  While it is true that markets rise more often than not, unfortunately, it is when markets don't that investors are critically set back from their long term goals.  It is not just the loss of capital that is devastating to the compounding effect of returns but, more importantly, it is the loss of "time" which is truly limited and never recoverable. Therefore, as we look forward into 2013, we want to review three reasons to be bullish about investing in the months to come but also review three risks that could derail the markets along the way. The reality is that no one knows for sure where the markets will end this year; and while it is true that "bull markets are more fun than bear markets" the damage to investment portfolios by not managing the risks can be catastrophic.

Art Cashin On Wall Street's Eras Of Error

In the aftermath of Knight's crushing algo-driven error and subsequent cash loss, which may well prove terminal for the business - an artifact of a broken market we have been warning and writing about since 2009 - we present some informative insights into the various eras of Wall Street trading errors courtesy of that grizzled trading veteran, the Chairman of the Fermentation Committee, Art Cashin.

Art Cashin On The Clash Of Market Reality With Post-Summit H[o/y]pe

It is always amsuing to listen to market narratives, however goal seeked they may be, when presented by market veterans such as Art Cashin, who in this case deconstructs the violent clash between reality and post-summit hype as represented by yesterday's amusing market action.

Bank Of Countrywide Lynch On The Top Ten Macro Themes For 2012

As we head into the artificial investing horizon of year-end, sell-side research is compelled to offer its best-guess at what will be key for the year ahead. We certainly head into 2012 with considerable potential downside risks - US recession?, breakup of the Euro?, hard-landing in China? - and BofA Merrill Lynch's RIC Report bears these in mind as it suggests investors position for these ten key macro themes (some positive, some negative) from slower global growth to a weakening US consumer and QE in US and Europe. Starting from a neutral equities, long gold, long US corporate bonds, they favor growth, quality, and yield in one of the more complete summaries of expectations we have read.

Who Is 'Latour Trading' And How Dare They Upstage Goldman?

As long-term readers recall, the observation of Goldman's dominant presence in the NYSE's weekly program trading reports by Zero Hedge back in early 2009 was one of the key drivers that set in motion the backlash against algorithmic trading and HFT which back in 2009 was the pinnacle of fringe topics and has since become a daily talking point and market scapegoat du jour on days when stocks are down (but never up). It also drew attention to Goldman's prop trading division which Zero Hedge was the first and only vocal opponent of, and has since been demolished courtesy of the Volcker Rule, an event which both Moody's and Alliance Bernstein now say could cost the bank dearly in top and bottom line, yet which Goldman told us on the record "represents approximately 10% of this year’s reported net revenue." Guess it was more, huh... Yet the same NYSE weekly program trading update indicates that Goldman, up until now a monolith in NYSE program trading, has just lost its crown in that field as well. The new king. A firm called Latour Trading, which in the last week traded 484.6 million shares in principal strategies. Which begs the question: just who is this Latour Trading which dares to upstage the firm that does god's work on earth. Alas, their website has been less than forthright. Inquiring minds certainly want to know.

Prominent Deflationist Schilling Sees Deflation, A China Hard Landing And 800 On The S&P

When one compiles the annals of the great deflationists of the early 21st century, they will be hard pressed to decide who is deserving of the title most ferocious deflationist in a runoff between David Rosenberg and Gary Schilling. And while David did not have much notable to say today, despite his daily release of interesting and insightful commentary from his perch atop Gluskin Sheff, Gary Schilling took advantage of the media vacuum to appear on Bloomberg TV and preach, what else, deflation. Among the topics touched upon were the #1 issue du jour - the Chinese hard landing, presented earlier here, and the resulting collapse in copper, on bond market volatility, on investing and speculation, and lastly on the S&P, which just like Rosenberg, he see as deserving of a 10x multiple applied to a soon to be revised S&P 500 EPS of 80 (do the math). All in all sensible stuff except for one thing: his statement "Inflating away is an excess supply world is almost impossible, even for the Fed" leaves a little to be desired. While he may be spot on, it does not mean the Fed will not try. And try it will: we expect rumblings for full blown LSAP to commence in a few days, and QE4 in which the Fed will pull a BOJ and buy ETFs, REITs (in addition to MBS and Agency bonds) early in 2012, after which it will be time to quietly depart from these continental US, or else load up on lead, spam and precious metals.

Europe Opens With A Mini Flash Crash

No volume, deranged computers, and a rate hike: Europe's mini flash crash refutes the market's "welcoming"
of liquidity withdrawal to Goldman's now traditional embarrassment.