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Incredible Images Of Wall Street Trading Before The Bloomberg Terminal

From Business Insider -Incredible Images Of Wall Street Trading Before The Bloomberg Terminal

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You will notice in the lower part of the ticker display there is an indication of how late the ticker was running. Before trading became fully computerized which took a lot longer than people thought the tick would always run late during the day. The degree of lack was dependant upon the volume of trading – during market upheavals the tape could run several hours late. This is why brokers used to depend upon their floor operators to keep them clued into what was happening and to also act independently – something operators can no longer. The advent of screen trading has in many ways been a boon for traders – it means that I have everything I need in the palm of my hand. However, it hasn’t been a bonanza for some instruments. The move to screen trading has been one of the factors that has killed options trading locally. Before screen trading a good option broker was worth their weight in gold – they knew all the other operators and market makers and were integral to operating a successful trading business. A good operator could get large orders filled and get you out of a sticky situation much better than screen trading ever could/

Hedge Fund Rich List

Forbes have once again produced their annual rich list and once again hedge fund and alternative investment managers are over represented. To steal from Winston Churchill – never in the field of human endevour has so much been paid to so few for so little.

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Another Lesson In Volatility

Recently, I happened across an article that claimed that the local markets was going up because volatility had gone up this year. After careful consideration I thought…BULLSHIT. This touches on a topic that always irritates the living daylights out of me – volatility and trend are not the same thing and only people who have a limited grasp of markets think so. There are a few basic points regarding volatility that all traders should understand –

  • Volatility is simply a measure of the speed and magnitude of an instruments price movement.
  • Volatility is not directly observable.
  • Volatility has no bias there is no such thing as upward or downward volatility so when you see a talking head on CNBC talking about upside volatility you can be assured that they are a fool .
  • The greater the volatility, the greater the probability that a stock will either do well or do poorly.

Whenever you come across this sort of statement it is necessary to go directly to the evidence. the chart below is the average 30 day volatility of the ASX 200 for the years 2008/2014. It is quite clear that on an historical basis that volatility has been falling in the local market since the GFC.

Volatility 2008 - 2014

Zooming in we can see the trajectory of volatility in the local market for this year. As you can see the overall trend in volatility this year has been mostly been  down.

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If we pan back you get a good sense of the collapse in volatility experienced by the market since the GFC – the very large peaks of previous years have simply evaporated along with investor interest.

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In trading there are a few essential concepts that traders do need to master and an understanding of volatility is one of them. If you do not know what volatility is then dont write about it.

Women And Trading

I have been pondering this article by LB and the wider notion that according to a few peanuts some forms of knowledge might be sex linked. Even this blog has not been immune from sexism. My note on the first women to win a Fields Medal attracted the usual dickhead comment from a reader. Working with a women is also interesting, there has been more than one occasion of the past two decades when I have had to tell someone they were close to going out a window without their consent.

I was reflecting on the wider issue of women in trading as if somehow having a vagina excluded you from being able to do this as a task. I have had time over the past decade or so of being involved in the mentor program to conduct a modest observational study of women in trading. I will talk about performance later but one point struck me as almost a universal constant. Males who undertake the mentor program get almost universal support from their female partners. There is the occasional exception but it is rare. Women who undertake the course get either qualified, limited or no support from their partners and it is the no support group that interests me. Males who fall into what I would call the angry inch brigade have always intrigued me. That is those men who couldn’t support their partner because they are frightened that they might never get an erection ever again if their women were successful. Although my guess is that this wouldn’t be that much of a waste because I cannot imagine that it was that impressive to start with.

This dichotomy in support disturbs me as it smacks of a desire to maintain a profound imbalance in a relationship. It seems as if these idiots are more attuned to a parent/child style of marriage rather than a partner/partner relationship. However, I have often wondered about who the child might be in the relationship. Watching friends of mine who are married it is not hard to work out. Irrespective of the rationale for the lack of support it is still indicative of a profoundly small-minded attitude that needs adjusting (probably with a large stick). My blunt prescription for this problem is that most of the women who have been through the program would be better off  without the partner they have. This in itself is a sad indictment of the quality of some of the holders of XY chromosomes.

The second point from my observational study has been that women tend to be unencumbered by notions of testosterone. Once during every program we get a fucken idiot and that idiot is always a male. It has never been a female. The dickhead gene is strong in many. The other point that has been hammered home is the notion of performance. As a population female traders tend to do better than men. This observation simply confirms the work of others most notably Terrance Odean who found that –

Men trade more than women and thereby reduce their returns more so than women. Furthermore, these are most pronounced between single men and single women. 

The same observation has been found to be true within the field of professional money managers. The Rothstein Kass Institute found that –

Women hedge fund managers performed ahead of the industry through 3Q 2012. The Rothstein Kass Women in Alternative Investments Hedge Index produced a year-to-date net return of 8.95 percent, in comparison to the HFRX Global Hedge Fund Index, which generated a 2.69 percent net return through September.

I will cede the point that this is a short-term sample but it should be noted that the HFRX Global Hedge Fund Index is composed of mostly male investors since blokes run the majority of hedge funds.

Intriguingly, companies that have a larger percentage of women on their boards seem to generate a greater return on shareholders funds.  Over the course of five years, companies with women on their boards had average returns on equity of 15.3 percent, while those of companies without any female board members were 10.5 percent.

So what does this all mean. It means simply as the Buddhist are apt to say – don’t be a dickhead. I know that such a request is obscenely hard for many but trust me your life will be much easier if you don’t give into your tendency to be a dick and for women married to peanuts – get rid of them. life and trading is hard enough without an anchor.


Motivation Monday

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Seven Bad Ideas

In “Seven Bad Ideas: How Mainstream Economists Have Damaged America and the World,” Jeff Madrick — a contributing editor at Harper’s Magazine and a frequent writer on matters economic — argues that the professional failures since 2008 didn’t come out of the blue but were rooted in decades of intellectual malfeasance.

As a practicing and, I’d claim, mainstream economist myself, I’m tempted to quibble. How “mainstream,” really, are the bad ideas he attacks? How much of the problem is bad economic ideas per se as opposed to economists who have proved all too ready to drop their own models — in effect, reject their own ideas — when their models conflict with their political leanings? And was it the ideas of economists or the prejudices of politicians that led to so much bad policy?

I’ll return to those quibbles later, but Madrick’s basic theme is surely right. His bad ideas are definitely out there, have been expressed by plenty of economists, and have indeed done a lot of harm.

More here – The New York Times – Sunday Book Review

Occupational Hazards of Working on Wall Street

Technology entrepreneurship will never have the power to displace big Wall Street banks in the central nervous system of America’s youth, in part because tech entrepreneurship requires the practitioner to have an original idea, or at least to know something about computers, but also because entrepreneurship doesn’t offer the sort of people who wind up at elite universities what a lot of them obviously crave: status certainty.

“I’m going to Goldman,” is still about as close as it gets in the real world to “I’m going to Harvard,” at least for the fiercely ambitious young person who is ambitious to do nothing in particular.

The question I’ve always had about this army of young people with seemingly endless career options who wind up in finance is: What happens next to them? People like to think they have a “character,” and that this character of theirs will endure, no matter the situation. It’s not really so. People are vulnerable to the incentives of their environment, and often the best a person can do, if he wants to behave in a certain manner, is to choose carefully the environment that will go to work on his character.

One moment this herd of graduates of the nation’s best universities are young people — ambitious yes, but still young people — with young people’s ideals and hopes to live a meaningful life. The next they are essentially old people, at work gaming ratings companies, and designing securities to fail so they might make a killing off the investors they dupe into buying them, and rigging various markets at the expense of the wider society, and encouraging all sorts of people to do stuff with their capital and their companies that they never should do.

More here – Bloomberg View

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