• Finally! Not Completely Awful News for Jobs
    Posted by on December 4th, 2009 at 10:07 am

    The unemployment rate dropped to 10% in November from 10.2% in October. To be very precise, the unemployment rate fell to 9.992%.
    That’s good news but the economy is still losing jobs—only 11,000 jobs were lost last month. That’s a dramatic improvement over the data we’ve seen during the past two years. The Labor Department also revised the data higher for September and October.
    Here’s a look at the unemployment rate:
    image876.png
    Here’s a look at non-farm payrolls:
    image877.png
    In less than two years, seven million jobs have been lost.

  • Quote of the Day
    Posted by on December 4th, 2009 at 9:48 am

    From Larry Ribstein: “For awhile I carried on an experiment of analyzing closely a mainstream media business commentator to see just how bad it is. The commentator is Gretchen Morgenson, and my findings, as set forth in this archive: very bad.”

  • Tim Sykes Rant
    Posted by on December 3rd, 2009 at 2:27 pm

    I’m glad to see Tim Sykes come out of his shell to tell us what he really thinks.

  • Sign Up Today!
    Posted by on December 2nd, 2009 at 3:28 pm

    Sign up for the Wilmott-Taleb “Robust Risk Management” course in London just £1,999 (or £1,499 if you’re early). Sign Up Today!

  • The Stock Market Fails to Outperform the Stock Market
    Posted by on December 2nd, 2009 at 2:52 pm

    Felix Salmon points to a study by Ken French and Eugene Fama showing that the returns of mutual funds are pretty evenly distributed. The tails are a bit fatter than the bell curve would suggest. The study also shows that fees basically eat up all the alpha. (This leads Matthew Yglesias to call the entire mutual fund industry “an elaborate fraud.”)
    Felix writes:

    For the vast majority of actively managed funds, true α is probably negative; that is, the fund managers do not have enough skill to produce risk adjusted expected returns that cover their costs.

    Personally, I’m happy with some negative alpha out there because it means more for me. However, this study doesn’t impress me much because it looks at the fund industry as a whole. What the study shows is that the stock market doesn’t outperform the stock market. I can live with that. What would be more interesting is to see if the small group of active managers with positive alpha continues to have positive alpha. That’s the key.

  • The World’s Tallest Buildings and Market Bubbles
    Posted by on December 2nd, 2009 at 12:47 pm

    Burj_Dubai_20090916.jpg
    Here’s a look at the relationship between the successive tallest buildings in the world and market bubbles. Via Tyler Cowen, I see that Ed Glaeser writes “Dubai now has the tallest building in the world, and 11 skyscrapers that are taller than any European building.”

  • The Geeks Have Won
    Posted by on December 2nd, 2009 at 12:31 pm

    This is the kind of story the media loves to write:

    Traditional floor trading “really is an alpha-male activity,” said Brett Steenbarger, and an associate professor of psychiatry at State University of New York at Syracuse and an expert in the psychology of trading. “You get these highly competitive people taking a good amount of risk … It’s like being in a locker room. In contrast, computer programmers are almost like a think tank.”
    Now, with high-frequency trading representing some 60 percent of U.S. stock trades, the atmosphere appears to owe as much to Arthur C. Clarke and artificial intelligence as to Gordon Gekko and the 1987 movie “Wall Street.”
    “They are introverts, some are socially awkward, and they don’t seek publicity. They are the type of guys you would see at a Star Wars convention,” said Sang Lee of Aite Group.
    High-frequency traders are practical, problem-solving people with an engineering background. “It’s a very intellectually challenging field — it’s extremely exciting to develop a strategy, implement it and see it make money,” Mr. Steenbarger said.
    And it can be very lucrative, with a programmer typically making 10 percent commission on the money his model generates, said Irene Aldridge of Able Alpha Trading, a one-time quantitative specialist at CIBC in Toronto who has a forthcoming book on the practicalities of high-frequency trading and algorithmic strategies.
    The best programmers can make tens of millions of dollars a year. That was even the case during last year’s financial crisis, as great volatility offered both risks and opportunities for high-frequency traders.
    “It’s a highly technical, mathematical game,” Mr. Berkeley said. “They are playing a very precise game of statistically estimating and predicting over the next three to five seconds whether there is going to be any liquidity in that stock and where it is. And how they can take it without being seen and without leaving any tracks.”
    Low key and somewhat awkward, these introverted but brilliant traders look up to James Simons, the Renaissance Technologies fund manager known as the “King of the Quants.”

  • High-Frequency Trading Surges Across The Globe
    Posted by on December 2nd, 2009 at 10:02 am

    From Reuters, here’s an interesting article on the spread of high-frequency trading:

    Turf battles between exchanges also sometimes prevent the kind of interconnected market approach that provides fertile ground for high-frequency trading. Traditional brokers and institutions, whose positions are threatened by upstart trading houses, also help to erect barriers.
    But the high-frequency wave, estimated to be responsible for about 60 percent of U.S. stock trading, has already washed over much of Europe and is being felt in some emerging markets, particularly in Latin America.
    It is also making inroads in futures, options and foreign exchange.
    In Brazilian stocks, there are signs that high-frequency trading is starting to get a grip, and some relatively small markets like Mexico and Colombia are encouraging major U.S. trading firms to bring in their latest rapid-fire trading techniques.
    Smaller markets are attracted by the promise of more liquidity, which can make investing and trading cheaper and easier for everyone and help those who want to raise capital.
    Concerns about algos gone wild setting off a market panic are secondary.
    “It’s a virtuous circle. The more people come, the more other people want to come,” said Martin Piszel, head of alternative execution services at CIBC World Markets, the investment banking arm of Canadian Imperial Bank of Commerce .

  • I Didn’t See This One Coming
    Posted by on December 2nd, 2009 at 9:56 am

    From the killing fields to the trading floors:

    Cambodia set to build 1st stock market

  • Huge Earnings Beat for Jos A. Bank
    Posted by on December 2nd, 2009 at 9:18 am

    The men’s clothier earned 63 cents per share for the third quarter which was eight cents better than the Street. Same-store sales rose 3.3%. The stock is the one of the most volatile members of our Buy List. Fortunately, it’s been volatile in a good way this year. Shares of Jos. A. Bank (JOSB) are up 63% this year.