“Eric Schneiderman, New York’s attorney-general, in a speech on Tuesday called for (alt) ‘tougher regulations and market reforms’ of high-frequency trading (HFT) firms. He highlighted contracts that allow high-frequency trading firms to place computer servers inside trading venues and gain access to extra bandwidth to speed their access to information, such as prices and volume.” Meanwhile, the CFTC is jumping on (alt) the “Anti-HFT Bandwagon”: “The Commodity Futures Trading Commission is investigating deals between large high-speed firms and the two futures-exchange operators, CME Group and IntercontinentalExchange Group (ICE)…the probe is focused on complicated, often opaque incentive programs that give high-volume trading firms financial benefits such as discounts on fees the exchanges charge to execute trades.” Perfect quote: “[Tradebot Chairman Dave Cummings] said he sees nothing inappropriate about Tradebot speaking regularly with exchanges and requesting order-type features it believes would be useful. ‘Tradebot is treated the same as any other customer,’ he said.” Meanwhile, individual investors should probably leave the technical analysis to Tradebot: “individual investors who report using technical analysis are disproportionately prone to have speculation on short-term stock-market developments as their primary investment objective, hold more concentrated portfolios which they turn over at a higher rate, [take more risk etc.]…we estimate that for our data, technical analysis costs investors on average approximately 50 basis points per month in raw returns from poor portfolio selections, and 20 basis points from additional transaction costs.” All in all, high frequency trading by humans costs them about “8.5 per cent a year for normal traders, and about 20 per cent a year for high rollers.” Also, consider this: Vanguard has some super convenient research on measuring the true value of wealth-management/financial advisors: they say you’re worth about 3bps to clients as long as you stick to their “Alpha strategy modules.” So all in all, financial advisors practicing asset allocation, rebalancing and “don’t panic” coaching (i.e. sticking to the plan through the scary times) add over 10% in returns for their clients. Well done. Speaking of which, here’s some more evidence that bonds are the best “hedge” you can get with a portfolio weighted towards equities (i.e. asset allocation is a good idea). Meanwhile, a new study “suggests that people can be prodded into doing something they don’t want to do, by a robot.” During their experiments, “most apparently believed that the robot was issuing requests autonomously (it wasn’t, a human being was behind a glass wall controlling things) and responded accordingly. They also found that some of the volunteers even tried bartering, either with themselves or the robot, by requesting another task or by suggesting out loud that perhaps the robot was malfunctioning.”
“Not only can Yellen alter the guidance on interest rates with which the FOMC has been steering global financial markets. Beyond that she could do something far more profound and exciting: transform an entire generation’s way of thinking about economics, market forces and the role of government in achieving and maintaining prosperity.” For some reason, people seem to be teasing the idea that Janet Yellen could introduce some fairly radical new monetary thresholds/forward guidance; especially when it comes to overshooting their original 2% inflation target. The show starts at 11:30 AM PST.
“China’s central bank and one of its largest state lenders are holding emergency talks over whether to bail out a defaulting real estate developer.” “Failure of a small property developer is not unusual in China or even in Zhejiang Province, where [Zhejiang Xingrun Real Estate] is based.” Furthermore, “Xingrun’s problems appear to stem mostly from mismanagement and alleged illegal activity.” Interestingly enough, the PBOC is denying involvement in bailout talks. Meanwhile, a survey from the American Chamber of Commerce in China finds that U.S. companies are concerned “over intellectual property, the safety of proprietary data and government-sponsored campaigns against foreign firms operating in [China].”
Seattle’s millennials are going all “damn the man!” over this; it seems fairly significant, however, in the context of Seattle’s growing reputation as a major West Coast tech hub á la Silicon Valley. Meanwhile, Silicon Valley counties Santa Clara, San Mateo and San Francisco top the list of highest wages in America in Q3 2013. Also, apparently Yolo, CA is a real place (#7 on “Percent increase in average weekly wage”).
Here’s an interesting piece on how the market doesn’t seem to have a “correct” grasp on Yahoo!’s market value given its massive stakes in Alibaba and Yahoo Japan: “Alibaba and Yahoo Japan could both be overvalued, thereby understating the true value of Yahoo’s core business…Or it’s possible that Yahoo’s shares are too cheap…Or maybe the markets have it right and Yahoo’s business is hopeless.”
“Given our current view, we have lowered PIMCO’s overall Stewardship Grade to C from B, with an A grade being the highest possible and F the lowest.”