Our story begins on November 14, 2011 in a nondescript hotel room in the hills above the Chinese city of Chongqing – roughly 850 miles north-west of Hong Kong – where a British businessman, 41 year-old Neil Heywood, was found dead.
After an extremely basic autopsy, the initial cause of death was listed as ‘excessive alcohol consumption’ and a rather hasty cremation took place in China with Heywood’s family being in- formed of his demise by telephone.
The story barely made the news either in China or back home in the UK.
Heywood wouldn’t have been the first British businessman abroad to overindulge in the bars and nightclubs of a foreign land and, if one were predisposed to finding a suitable ‘accident’ to befall an enemy who fit that mold, then drink- ing himself to death would have ordinarily been a fairly plausible cover story – but in this case, there was something that didn’t quite fit the of- ficial story – Heywood was teetotal.
Guest post by Doug Short.
The Fed’s latest strategy for managing the economy,Operation Twist, has about 10 weeks to go. The program was announced on September 21st of last year with the stated purpose of selling $400 billion in shorter-term Treasury securities by the end of June 2012 and using the proceeds to buy longer-term Treasury securities. The Fed assumed this would put downward pressure on longer-term rates, which would stimulate the economy through “a broad easing in financial market conditions.” In other words, more loans at lower rates.
How effective has this strategy been? Here is a snapshot of selected yields and the 30-year fixed mortgage since the inception of Operation Twist.
Weekend must watch videos with James Rickards, author of Currency Wars, is calling for $7,000 gold! Courtesy Future money trends.
Guest post by Vix and more.
Lately it seems as if everyone with a keyboard is aflutter about the two weeks of selling in Apple (AAPL). I was about to label this a correction, but really, which is more correct: AAPL at 644 or AAPL at 582? How about the Topeka Capital Markets analyst that put a 1001 price target on the stock?
With earnings due out on Tuesday, there are rumors circulating about possible revenue beats and misses, what may emerge from the product pipeline when, etc.
There are a lot of investors out there that would like to own AAPL or add to an existing position. Many of those see the stock as an excellent value at 582, but are worried about the possibility of a negative earnings surprise, so they are not sure what to do.
Yesterday I tweeted the following trade idea:
“Simple idea: pick a price at which you would like to own $AAPL and sell the puts”
“$AAPL May 520 puts at 7.25. Think of it as being paid 7.25 to see if you can get the stock at a $70 discount”
Missing the bull in finance is a no no. How do managers of other peoples money think, act and justify their behavior. Edward Harrison on the herd chasing the bull market.
The central truth of the investment business is that investment behavior is driven by career risk. In the professional investment business we are all agents, managing other peoples’ money. The prime directive, as Keynes knew so well, is first and last to keep your job. To do this, he explained that you must never, ever be wrong on your own. To prevent this calamity, professional investors pay ruthless attention to what other investors in general are doing. The great majority “go with the flow,” either completely or partially. This creates herding, or momentum, which drives prices far above or far below fair price. There are many other ineffciencies in market pricing, but this is by far the largest. It explains the discrepancy between a remarkably volatile stock market and a remarkably stable GDP growth, together with an equally stable growth in “fair value” for the stock market. This difference is massive – two-thirds of the time annual GDP growth and annual change in the fair value of the market is within plus or minus a tiny 1% of its long-term trend as shown in Exhibit 1. The market’s actual price – brought to us by the workings of wild and wooly individuals – is within plus or minus 19% two-thirds of the time. Thus, the market moves 19 times more than is justified by the underlying engines!
-Jeremy Granthan, Quarterly Newsletter, April 2012
Here’s the chart he gives, demonstrating the volatility of herding.
According to themselves, they add liquidity, improve transparency, and create a net good for the markets and society. Whatever you think about HFT, this guy is the master of HFT. From Huffpost.
Mark Gorton is sitting in the Zen garden on the roof of his office in downtown Manhattan, squinting into the sunlight and telling me he’s not evil.
“If you listen to some of the rhetoric in the press recently, you’d think we were killing babies,” Gorton says, in between sips of organic blood-orange soda as he leans forward in a wicker chair. He’s upset that his business is being “tarred” by the bad publicity plaguing the rest of Wall Street. “What we’re doing is a net positive for the world.”
This is an interesting complaint because in many ways Mark Gorton is the new face of Wall Street. Gorton is a high-frequency trader. His company, Tower Research Capital LLC, with its 275-person global staff of engineers and computer science and physics majors, is part of an industry that today is responsible for more than half of all stock trading in the United States, according to the Tabb Group, a financial markets research and strategic advisory firm. Gorton’s is an industry under scrutiny.