It seems the blatant unveiling of the HFT market's Holy Grail trading - Virtu (1 loss in 1238 days) - has raised some attention as Bloomberg reports, NY AG Eric Schneiderman has opened a broad investigation into whether U.S. stock exchanges and alternative venues provide high-frequency traders with improper advantages. As one European lawmaker noted, "the area of high-frequency trading is lacking suitable regulation," and Schneiderman warned "this new breed of predatory behavior gives a small segment of the industry an enormous advantage over all other competitors." We wonder how this will affect Virtu's IPO given regulation is risk factor #1!
Seth Klarman's comments on "The Truman Show" market and "born bulls" appeared to upset the status quo today on CNBC leaving none other than Joe Kernan and then later, Jim Cramer questioning Klarman's credentials with a passive-aggressive "when did Klarman turn negative? We should look into that..." question. We found it intriguing and wondered how much the investing public weights the differing views of these veritable titans of stock market wisdom. The answer - a market-based answer - lie in the purest measure of all... the cost of acquiring their knowledge...
With even Warren Buffett saying it's a bad idea, we can't wait to hear how President Obama will explain how his move to raise the minimum wage will create jobs and save the middle class....
Warren Buffet sees a different America than we do. We would wager he sees a different America than untold millions of people do too. And with due respect to the kind-hearted Mr. Buffet, who is undoubtedly an accomplished and savvy investor, the man has been a major beneficiary of the greatest monetary fraud ever pulled in the history of the world.
A few weeks ago, William White (former economist at the Bank of England, the Bank of Canada, and Bank of International Settlements) made a frank admission: "The analytical underpinnings of what we [mainstream economists] do are actually pretty shaky...I’m becoming more and more convinced that all of the models we use are basically useless... We’ve got the potential to do so much harm by not getting the creation of fiat credit and money right." Doctors at least have the Hippocratic Oath: first, do no harm. If only economists and central bankers had a similar ethic. But they don’t. So they continue ‘making it up as they go along’, as Mr. White suggests, applying failed ideas with impunity and continued authority to an unquestioning public.
"If you could have a minimum wage of $15 and it didn't hurt anything else, I would love it," Warren Buffet told CNBC this morning... "But clearly that isn't the case." And therein lies the rub that apparently the Democrats are incapable of comprehending. Hopefully, now that the Oracle of Omaha has spoken and explained that raising the minimum wage to $15 "wouldn't be a good idea," and suggested a different way to help the poor via the earned income tax credit. Buffett also explained that Obama should add further fiscal stimulus to create (or save, we assume) jobs.
- Russian markets hit as Putin tightens grip on Crimea (Reuters)
- Ukraine Sees More Russian Incursions as Standoff Worsens (BBG)
- Ukraine Crisis Roils Global Markets (WSJ)
- Cold War Ghosts Haunt East Europe in Moves for Crimea (BBG)
- How Moscow Orchestrated Events in Crimea (WSJ)
- Russia Gas Threat Shows Putin Using Pipes to Press Ukraine (BBG)
- Euro-zone PMI slowed less sharply than estimated (MW)
- Two top Microsoft execs to leave in reshuffle (Reuters)
- Soaring Luxury-Goods Prices Test Wealthy's Will to Pay (WSJ)
- IQ-Boosting Drugs Aim to Help Down Syndrome Kids Learn (BBG)
For those who follow folksy Uncle Warren, here is the breakdown of Berkshire's Q4 and full year results, as well as his latest letter to investors.
"If I ask you what’s the risk in investing, you would answer the risk of losing money. But there actually are two risks in investing: One is to lose money and the other is to miss opportunity. You can eliminate either one, but you can’t eliminate both at the same time. So the question is how you’re going to position yourself versus these two risks: straight down the middle, more aggressive or more defensive. I think of it like a comedy movie where a guy is considering some activity. On his right shoulder is sitting an angel in a white robe. He says: «No, don’t do it! It’s not prudent, it’s not a good idea, it’s not proper and you’ll get in trouble». On the other shoulder is the devil in a red robe with his pitchfork. He whispers: «Do it, you’ll get rich». In the end, the devil usually wins. Caution, maturity and doing the right thing are old-fashioned ideas. And when they do battle against the desire to get rich, other than in panic times the desire to get rich usually wins. That’s why bubbles are created and frauds like Bernie Madoff get money." - Howard Marks
If they’re bailing on the market… what are the odds trouble is approaching?
Fundamentally oriented investors tend to think that quants, like blondes, have all the fun. As ConvergEx's Nick Colas notes - it all looks like easy money - scalping trades with lightning fast computers, front running news with preferential access to press releases, or managing leveraged portfolios with thousands of small but profitable positions – but quants face their own significant challenges. Finding common rule sets that work in a wide array of stocks is not easy, and markets adapt quickly to close opportunities that seem historically profitable - the number of potential signals is seemingly endless; and regulators are now aware of quantitative investing and, in some cases, don't like what they see. Here are 10 reasons why why "it's not easy being a quant."
All you need to know about the New Normal breed of crony capitalism and unbridled hypocrisy is once again best exemplified by the following quote by Charlie Munger - the lifetime business partner of crony capitalist par excellence Warren Buffett - from May 2013, in which he said that "I think it is very stupid to allow a system to evolve where half of the trading is a bunch of short term people trying to get information one millionth of a nanosecond ahead of somebody else. It's legalized front-running. I think it is basically evil and I don't think it should have ever been allowed to reach the size that it did. Why should all of us pay a little group of people to engage in legalized front-running of our orders?" Noble, noble words Charlie. What Munger, however, did not disclose is that as part of the Berkshire Hathaway-owned Business Wire news service, the company was enabling just this "basically evil" frontrunning, by allowing some, those who could afford the hefty fee of course, to make Munger and Buffett even richer and to subscribe to BW's HFT direct news access which gave them a few millisecond headstart and in the process frontrun everyone else.
- Frustrated by Karzai, U.S. Shifts Afghanistan Exit Plans (WSJ)
- Yellen Testimony Guide From Payrolls Report to Emerging Markets (BBG)
- Gold hits three-month high, shares up ahead of Yellen (Reuters)
- Tightfisted New Owners Put Heinz on Diet (WSJ)
- Senator describes "gruesome" bin Laden photos (Reuters)
- More reasons for the ongoing economic contraction: U.S. Winter Storm Seen Spreading Snow, Sleet Across South (BBG)
- Barclays Cuts Up to 12,000 Jobs as Quarterly Profit Falls (BBG)
- Boeing Considering 787-Size Medium-Range Jetliners (WSJ)
- AOL Chief Apologizes for ‘Distressed Babies’ Comment (BBG)
According to a 2001 Fortune interview, Warren Buffett believes that Market-Cap-to-GDP is "probably the best single measure of where valuations stand at any given moment." As Doug Short shows in the following charts, we suspect Warren is a little more than worried about the valuation of his portfolio (unless of course, it's different this time). Both the "Buffett Index" and the Wilshire 5000 variant suggest that today's market is at lofty valuations, now above housing-bubble peak in 2007.
As we previously noted, the 85 richest people in the world have about as much wealth as the poorest 50% of the entire global population does. In other words, 85 extremely wealthy individuals have about as much wealth as the poorest 3,500,000,000 do. There is certainly nothing wrong with making money. In fact, the founders of the United States intended for this nation to be a place where free markets thrived and where everyone could pursue their dreams. Unfortunately, this country (along with the rest of the world) has moved very much in the opposite direction. Today, we have a debt-based global financial system which is dominated by gigantic predator corporations and big banks. Working together with national governments, these corporations and banks have constructed a system in which the percentage of all global wealth that is being funneled to the very top of the pyramid steadily grows over time. The Founding Fathers were very correct to be very suspicious of large concentrations of power. In the early days of the United States, the federal government was very small and the size and scope of corporations was greatly limited. Our nation thrived and a huge middle class blossomed. Sadly, over the past several decades the pendulum has completely swung in the other direction.