Blind faith in policymakers remains a bad trade that’s still widely held. Pressure builds everywhere we look. Not as a consequence of the Fed’s ineptitude (which is a constant in the equation, not a variable), but through the blind faith markets continuing to place bets on the very low probability outcome – that everything will turn out well this time around. And so the pressure keeps rising. Managers are under pressure to perform and missing more targets, levering up on hope. Without further delay we present our slightly unconventional annual list. Instead of the usual what you should do, we prefer the more helpful (for us at least) what we probably wouldn’t do. Five fresh new contenders for what could become some very bad trades in the coming year.
In its latest effort to counter financial instability - and show its commitment to maintaining order and support for the economy - Russia's Central Bank (CBR) has unveiled 7 new measures... Ranging from bank recaps to measures aimed at helping manage interest-rate and credit risks, the reaction in the Ruble is positive for now... as perhaps, taking a lesson from the US, The CBR removes Mark-to-Market accounting for various credit instruments.
It's a wonderful life on Wall Street, yet here is a holiday wish list to make it even better...
As an investor, it is simply your job to step away from your "emotions" for a moment and look objectively at the market around you. Is it currently dominated by "greed" or "fear?" Your long-term returns will depend greatly not only on how you answer that question, but to manage the inherent risk. “The investor’s chief problem – and even his worst enemy – is likely to be himself.” - Benjamin Graham
Because nothing says rational equity markets like a 16-year-old penny-stock-day-trader who turned $10,000 into $300,000 this year... Meet Connor Bruggermann - the new normal 'investor'
US Treasury Warns Investors Underestimate "Potential For A Market Reversal", Take "Low Volatility For Granted"Submitted by Tyler Durden on 12/04/2014 13:26 -0500
"Investors may have taken low volatility for granted and underestimated the potential for a reversal. While quantitative easing policies are intended to encourage investors to buy risky assets, there is also a risk that the perceived reversal of such policies will lead investors to turn the other way, triggering market instability.... Similarly, investors may have become too sanguine about the availability of market liquidity — the ability to transact in size without having a significant impact on price — during both good times and bad. Accommodative global monetary policy, coupled with the Federal Reserve’s purchases of large amounts of low-risk assets and changes in risk sentiment, helped to compress volatility and risk premiums. "
This is the first installment in a series of HFT War Stories, submitted anonymously by high frequency and algorithmic traders highlighting the perils of their profession. Today we look at a $2 Billion near miss that never made the news. The public only hears about these types of SNAFUs if they blow up a firm. Hundreds more go unnoticed by anyone but the traders who lived through them.
The dust has barely settled on the latest high profile banker suicide in which Deutsche Bank's associate general counsel, and former SEC regulator, Charlie Gambino was found dead, having hung himself by the neck from a stairway banister, and here comes the latest sad entrant in the dead banker chronicles of 2014 when earlier today, the Post reports, a Citigroup banker was found dead with his throat slashed in the bathtub "of his swanky downtown apartment, authorities said Wednesday."
Though, if history is anything to go by, it offers a potential for outsized returns
"Surprises like this are poison to the stock market, and this is one of the big surprises," exclaims the head of listing for Nasdaq's Copenhagen exchange as OW Bunker A/S - a marine fuel bunker company - went from $1 billion-plus IPO in April to bankruptcy today.
QE destroys societies, economies and financial systems, it doesn’t heal them. So maybe it’s a touch of genius that the great powers of global finance have first pushed Keynes into the academic world and then academics like Bernanke and Yellen into positions such as head of the Fed, making everyone blind to the fact that what they think is beneficial, including many who think they’re real smart, actually hurts them most. This whole thing is so broken and perverted it’s getting hard to understand why anybody would want to continue clinging on to it. But then, what does anybody know? 95%+ of people have been reduced to pawns in someone else’s game, and they have no idea whatsoever.
"as part of its continuous monitoring activities at JPMC, FRBNY effectively identified risks related to the CIO's trading activities, governance framework, risk appetite, and risk management practices in 2010. Additionally, a Federal Reserve System team conducting a horizontal examination at JPMC recommended a full-scope examination of the CIO in 2009. However, FRBNY did not discuss the risks that resulted in the planned or recommended activities... As a result, there was a missed opportunity for the consolidated supervisor and the primary supervisor to discuss risks related to the CIO."
Caution is advised.
"Global growth is really bad! Hooray!" That was the verdict of US markets yesterday, as the Fed minutes “revealed” (to use the breathless phrasing of mainstream financial media) a “growing concern” with the damaging impact of European torpor and a stronger dollar on US growth, and it’s a perfect example of why I’ve called a top in the Narrative of Central Bank Omnipotence. What’s interesting to us though is not this latest success of the Narrative of Fed Omnipotence. No, what’s interesting to me is this week’s failure of the Narrative of ECB Omnipotence.
For a long time, Fed printing via balance sheet expansion has been the key to understanding markets and the predominant driver that has trumped all other matters. Investors have been able to ignore significant global events, tensions, and economic conditions in faraway places, because a lower real and perceived risk premium from implicit Fed promises was the single most important aspect driving asset prices higher. This game is quickly coming to an end. As the Fed’s asset purchase program ends next month, global events and global economic fundamentals will have to be taken into account and priced accordingly.