I Love High Frequency
And Other Perhaps Random Thoughts
Gotcha! Actually you have to meet Wilson and his brother Manny. I am going to help them start up their new business, High Frequency House Painting, and I want you to know that they rock like Mettalica. After getting estimates for $900 per room by two different local home painting contractors, I resigned myself to doing the job with my boys, and saving the dough.
The idea felt good, but the doom from the reality that I would be spending the weekend taping, spackling, moving furniture, and painting took over quick; after all, I am pushing my mid 30’s. Enter Wilson and Manny. Seeing me rub my back as I started taping, while they were installing new carpeting in the boys’ two rooms, they made me an offer I couldn’t refuse. $500 bucks later and I am sitting with a Blue Moon by the computer, typing Themis Thoughts, and marveling at the great, ultra-high-speed job these two guys did. In one afternoon. High Frequency House Painting.
Seriously, as skeptical as I am on the market, I think I am growing less so on the economy, which I do not feel moves in lockstep with the market. Why? For three years I have been cutting costs at home and lowering my expenses in very creative ways. For three years I have been cutting my own lawn, pruning my own shrubs, raking my own leaves, and massaging my wife’s calloused feet (ok gross I know) by my lonesome. I drive a crappy Honda. And yet here I am buying new carpeting and hiring folks to paint. At my office complex, the parking lot is starting to fill up as well, and I actually joined a wine club. I even just brought up the website for the 2011 BMW 5 series with X-drive. This will not end well. Whoa Nellie!
On the mortgage mess, Fidelity National Financial, a large title insurance company, is putting conditions on mortgage lenders that go something like this: “We agree to insure that the title and ownership of the house is clean, provided that you guarantee that the house’s title and ownership is clean before you ask us to guarantee that the title and ownership of the house is clean”. Isn’t that like Wilson and Manny telling me that they agree to paint my boys’ rooms for $500, provided that I paint the boys’ rooms myself? Have we lost our minds?
I sent out a piece yesterday detailing how the head of the Prague Stock Exchange likened HFT to chewing gum. He states that there has been an alarming drop in liquidity and trading activity from longstanding market participants. In their place have come the microsecond hot-potato guys and gals. Thank you Mr. Koblic! We wrote two years ago how our markets are like an ocean that is out of equilibrium; instead of teeming with many different species, it has one species that accounts for 50-70% of the activity. Today we see that the marketplace has microsecond “liquidity providers” and long term multi-year liquidity providers. The traders who had holding period time horizons ranging from 3 minutes to 3 days have been squeezed out. As such, picture our market liquidity as being a barbell, weighted heavily with players in nano-land and multi-year-land. We have to solve the problem of getting back the liquidity between the two time frames if we ever want to avoid another Flash Crash. THAT is the liquidity that the SEC needs to incentivize, and not additional nano-hot-potato traders.
Speaking of potatoes, let us all thank Google for its flawless execution of the “Double Irish”, where it has avoided paying $billions in US taxes by routing profits through Ireland, the Netherlands, and Bermuda. California gives you a big thumbs-up!
On this date in 1961 Bob Dylan recorded his first album, Bob Dylan. A NY Times Review at the time stated:
“A bright new face in folk music is appearing at Gerde’s Folk City. Although only 20 years old, Bob Dylan is one of the most distinctive stylists to play a Manhattan cabaret in months. Resembling a cross between a choir boy and a beatnik, Mr. Dylan has a cherubic look and a mop of tousled hair he partly covers with a Huck Finn black corduroy cap. His clothes may need a bit of tailoring, but when he works his guitar, harmonica or piano and composes new songs faster than he can remember them, there is no doubt that he is bursting at the seams with talent.
Mr. Dylan’s voice is anything but pretty. He is consciously trying to recapture the rude beauty of a Southern field hand musing in melody on his porch. All the husk and bark are left on his notes and a searing intensity pervades his songs.”
I bring this up because I am seeing his son play Saturday night at the City Winery in NYC. I think the same review could apply to Jakob Dylan’s last few albums.
Go Yankees (still alive!); Go Giants!
Where we left off 4:00pm EST:
DJIA 11,107.97 +129.35
S&P500 1,178.17 +12.27
NASDAQ Composite 2,457.39 +20.44
Futures now at 7:30am EST:
NASDAQ 100: +17.50
Key Data out today:
08:30: Initial Jobless Claims (expecting 455,000)
08:30: Continuing Claims (expecting 4,420,000)
10:00: Philly Fed (expecting 2.0)
10:00: Leading Indicators (expecting 0.3%)
Since the prior close, some key stories:
– Bonus pool declines at CSFB.
– Bonus pool declines at Themis Trading.
– Sarkozy Faces Mounting Strike Threats As Gas Stations Run Dry.
– EBAY, ETrade, Select Comfort, LRCX, Schnitzer Steel all beat.
– STX, XLNX, STEC miss.
– Toyota recalls 600,000 cars.
– Goldman may repay Buffet’s $5 billion.
– Domestic equity funds saw its 24th week of fund outflows in a row, although the pace is smaller. I predict next week funds come into equity funds. Sell Then!
– Accenture CEO to step down.
– JP Morganè BOTTOM LINE: FINANCIALS MAY STALL, BUT NOT LIKELY TO KEEP S&P 500 FROM REACHING 1300
– Fed’s Lacker skeptical on need for more QE.
– Geithner tells the WSJ he doesn’t intend on devaluing the $ to achieve prosperity… [but if it happens….. what can I say?]
- Pre-open: FLWS, ALK, T, BAX, BBT, BMY, BG, CAT, CRUS, CNH, CBE, DO, LLY, ETR, FCX, GMT, GR, HSY, HBAN, ESY, JBLU, LTM, MCD, NUE, NBR, PCX, PENN, PM, POOL, BPOP, POWI, PCP, PGI, RS, R, LUV, STI. TASR, TCB, TRAD, TRV, UNP, UPS, USG, VFX, VSI, WCC, XRX.
- After Market Close: ALB, AMZN, AXP, AMGN, ASBC, ATHN, BJRI, BUCY, COF, CAKE, CMG, CB, CYN, DECK, GDI, HWAY, HITT, INFA, IBKR, XXIA, LEG, WFR, MTX, PMCS, QLGC, RMBS, RVBD, RRR, SNDK, SIMG, SONO, STMP, SYNA, WOOF WIT
Significant Movers This Morning:
NFLX +12.3%, EBAY +7.4%, HE +7.3%, MNTA +7%, ALXN +5.8%, NYT +5%, LUV +5%, BXS + 5%, HBAN +4%, STEC -13%, PLCE – 11%, ADS -6%, NVE -6%, ORB -6%, TEX -5%, HSY -5% – 23%, VMW – 6.5%, AAPL – 5%, IBM -3%, CWTR – 27%, MCP -2.5%, LOW –3%, FCX -3%