sabato 13 febbraio 2010

Financial Armageddon? Aggiornamento al 12 febbraio 2010

Se non avete ancora preso le vostre decisioni di investimento per il 2010 e siete interessati all'opinione di un pool di gurus di tutto rispetto potete ascoltare il lungo dibattito Investments: how to earn in 2010? What are the risks? tenutosi a Mosca una settimana fa: ecco in breve i loro punti di vista

Michael Power: Put your money in Singapore dollars until mid-year. Then invest in emerging markets, coal and consumer stocks in emerging markets with current account surpluses. Avoid the West. Avoid banks in the West. Put some money in frontier markets. Chinese growth will continue to be driven by the rise of the middle class.
David North: Buy protection on credit, as markets are overcooked (e.g. CDS on banks). Buy dividend futures, especially in the UK, as cash flows are high. Take the opportunity to bet against rate increases, as they will not happen.
Michael Gomez: Invest in places that will benefit from rebalancing. Buy Asia and Asian currencies, which should appreciate. Avoid the euro and emerging European currencies. Europe is prone to defaults, given weak balance sheets. Invest in strong balance sheets in countries with good monetary policy and inflation targeting, such as Brazil. You can buy 5y bonds there at 13%. Among G7 countries, Germany is in favor. There is a need to differentiate in emerging markets and buy Brazil over Turkey, for example.
Nassim Taleb: Go no-risk with 80% percent and high-risk with the rest. For the speculative component, short the S&P and be long in precious metals; bet on hyperinflation with OTM calls on gold and puts on bonds; short USTs as long as Bernanke and Summers are in office; trade on the breakup of Europe. Russia is stable.
Hugh Hendry: Think of Keynes’ “Economic Consequences of the Peace”. The euro is the new gold, and governments cannot repay. The amount of debt taken on is enormous and still highly risky, as none of the debt has gone. Mr Hendry would not take any risk now. Debt will squeeze the vitality out of economies. Buy the idea that rates will not rise. The policymakers will not be able to create inflation, as monetary policy does not work. People are all long risky assets as a hedge against inflation and short treasuries, which is dangerous. He likes land and agricultural equities in the long term, but they are risky in the short term. The problem with Asia is excess capital and low returns on capital. It makes no sense for the Chinese yuan to be so cheap. China could fail and go from first to last, as its economic model is unsustainable.
Ashot Khachaturyants: Buy Russia, especially oil stocks with exposure to East Siberia. Nanotechnology and project financing are promising.
Marc Faber: The consensus is to buy Asia. Japan is a good idea as a huge economy where the market has been down for over 20 years. When inflation comes, avoid currency and bonds and buy equity and foreign assets. One should buy land as civilization may collapse; farms in Argentina are promising. Water is a real issue, especially in India. Chinese economic growth is likely to slow this year.

Dopo che avrete deciso come investire, e su quali collassi puntare (se ascoltate Taleb) sarete pronti
a prendere in attenta considerazione le profezie di TraderMark su SeekingAlpha:
HFT, Algorithmic Trading, l'ombra di Jim Simons (al quale va la mia ammirazione: leggete qui) che oscura la vita sul pianeta, altro che inverno nucleare...sentite qui e immaginatevi lo S&P500 che perde il 22% in pochi minuti...

For those who have been around a while you know I constantly refer to the "supercomputers at the hedge funds" controlling things or at least being the marginal decider of prices. As a participant in markets for a while now I have to say some of the things we're seeing the past year or so are beyond compare.
My thesis has been the quantitative hedge funds really have changed the nature of the markets and trading. The most successful and famous is Renaissance Technologies, led by Jim Simons. The track record of success there has been fantastic, and it's all computer driven. Success begets copy cat behavior - and a flood of funds trying to replicate the grand chief have been born. Hence when I refer to "algorithms" dominating trading, I am speaking to this bevy of pooled capital, all doing (or trying to do) almost the exact same thing and taking stocks farther (both higher and lower) than makes any logical sense. And this, in my opinion, is simply crowding out people who use fundamentals or logic. The machinations of August 2007 really was the first time this hit me in the face as I was seeing action that were in no way explainable by any reasonable data point. Much of it was "liquidations," i.e. hedge funds over levered, and much like an individual investors gets a margin call - so did they. So they had to sell what they could, not what they wanted to, as many hold esoteric positions that had no market (hedge funds don't just own simply stocks and bonds). So they sold off the liquid parts of their portfolios. And once a selling begins, a waterfall effect hits as technical conditions are triggered in computer after computer throughout New York City (and in fact the world) and you get this cascading effect.
I am of the belief that eventually something will go very wrong in a system like this, on a much larger scale than August 2007 or some of the cascading selloffs in 2008. "They" assure us they provide liquidity. But with some of these computers doing 1000s of trades a second, and so many quants doing the exact same thing - all set to hair trigger off each other - it is very easy to imagine a scenario where October 19, 1987 happens not in hours but in minutes. Hopefully I am very wrong on this, but I certainly don't take any solace in the assurances from either the quants themselves or their regulators (who are either asleep at the wheel or captured), that it can't happen. These are the same groups of people who assured us they had everything under control and all risk was arbitraged away pre-2007. There is no way to assure anything with a disparate electronic ecosystem spread over countless desktops storage facilities.

Sempre sul ruolo dei quants e sul prop trading ecco il sig. Patterson, giornalista del WSJ e autore di
The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It:

Certo di avervi rovinato il sonno per qualche settimana mi dichiaro soddisfatto e vi lascio con l'immancabile aggiornamento al 12 febbraio.

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