Perry Glasser

Posts Tagged ‘algorithms’

CITIZENS & TUMBLING STOCKS

In Business, Economics, Economy, EDUCATION, Finance, FINANCE FOR THE CLUELESS, Personal Finance, Politics, ROBERT REICH, SOCIAL MEDIA, Wall Street on February 5, 2018 at 7:27 pm
jimmy-stewart

investor

Dollar$ readers have asked for a comment on the recent path of stocks falling off a cliff. Though Dollar$ seldom references perturbations in the market, in this case he will make an exception because any number of people with brains of tapioca or in possession of advanced degrees will point to this event to declare it political, a referendum of sorts on Donald Trump for whom they hold unsustainable rage.

 

THE AXE OF RAGE 

Rage as a political stance is unsustainable because it consumes its object as well as those who revel in it. We grind that axe at our own peril.

That won’t bother pundits such as Robert Reich at Berserkely. Expect his gloating to surface in a day or two while his cadre of unsalaried graduate student do his work for him.

After all, Reich persuaded thousands of Facebook followers that Spring rain, the demotion of Pluto from planet to rock and back again, and your most recent dose of athlete’s foot, were all ploys by the rich to separate you from your money because there is no bottom to the depth of their greed. (Except for St. George Soros, who sends wheelbarrows of Canadian cash to political causes in the United States out of simple generosity, something that most of us would find curious if the cash came from Outer Slobbovia or Russia.) The Professor has yet to mention the President’s promise to go after Big Pharma or his championing “the right to try” to give the sick access to medications stalled in the FDA’s long system for approval. How could Reich do so? His followers might dial back their rage, and then who’d buy the Professor’s books, subscribe to his videos on Netflix, or line up to enroll in his one class per year in a lecture hall packed with the beneficiaries of privilege, those students at Berserkeley who on cue wildly applaud before marching to deny free speech to someone else?

To be sure, Professor Reich will neglect to mention that the trillions lost on world markets in the past few business days have mostly been lost by the rich. Who did you think owned the shares of companies? Your barber?

Also, make certain you know, that Dollar$ believes our President to be at base a lout, a racist, sexist, and probably a compulsive adulterer who happened to revolutionize American politics by seizing on social media as a means to create a bridge between himself and voters when his own party and the American press gave him all the chances of a balloon in a pin factory.

Benjamin-Franklin-U.S.-$100-bill

Chastity?

None of that, by the way, makes him unfit to join the ranks of John Kennedy, Franklin Roosevelt, Dwight Eisenhower, or Bill Clinton. There were many others; the folks who brag about zero tolerance for white male sin remain eager to rewrite history by expunging ordinary men from the presidential rolls. God help us if they figure out what the Founders did with their time when separated from spouses for months, and that rascal, Benjamin Franklin, was not know for his chastity.

Fortunately, The Donald did not run for Pope.

STOCKS

Dollar$ is happy to report the sky has not fallen, at least not in my neighborhood. If Jemima Puddleduck races past your front door, Dollar$ urges you to unwrap that shotgun you received as a gift from Grandpa. Go bag yourself an inexpensive cheap chicken dinner.

Responsible financial advisers will tell you to do nothing: Dollar$ agrees, unless you have a working crystal ball in which case Dollar$ would appreciate a call. All the elephants could not get through the door without the house collapsing. That’s what happened today.elephants

DECISIONS

What now? Better to ask: Where would your money be better off?

The world economy is peachy.

The American economy is also peachy, showing healthy signs of continued growth.

Do not confuse the economy with the stock markets. After a run-up of 21% in a year, market algorithms were bound to get nervous.  (Algorithms don’t properly get nervous, but the notion of market sentiment is a joke when upwards of 90 percent of all market transactions are conducted by computers.)

The American economy is in danger of suffering wage-inflation. Prices will rise because Joe Doakes, his cousin Joe Six-Pack, and their cousin, Jane Doe, are earning more.

O, the Horror! What will Reich say if people are earning more?  What fraud is being perpetrated that will need a decade to play out?

RELAX

The past week has seen a drop of 5 percent. More is coming.

Bear in mind that historically, a 7 percent gain in a year is good news. If after the carnage we saw today and can expect for a few more days your 401-k, your kids’ 509, and your savings ratchet back to a “mere” 12% annual gain, try not to swoon.

Stay  the course. There are bulls, there are bears, and there are pigs. People who try to time the market—that is, sell now with the hope and expectation of buying it all back when things have settled—are pigs , and like pigs will be slaughtered.

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TREES DON’T GROW TO THE SKY or WHY RHETORIC WILL LEAVE YOU BANKRUPT

In Business, Economy, Finance, FINANCE FOR THE CLUELESS, Personal Finance, Wall Street on December 17, 2017 at 2:11 pm

Simple Truths

  • The stock market neither advances nor retreats–though prices indeed go up and down.
  • For every buyer, there is a seller.
  • When buyers and sellers agree to prices, they set asset values.
  • Buyers buy with the expectation of future profit; sellers sell when they believe continued ownership of an asset constitutes a risk no longer commensurate with possible reward.
  • No one in a free market is under compulsion.
  • Wall Street is neither a battleground for territory, nor  an adversarial contest.
  • It’s a market.

Wizards require small investors to believe that generals understand the battlefield and so deserve your trust and your fees because they otherwise have nothing to sell.  Internet access to mutual funds, closed-end funds (CEF) and  exchanged traded fund (ETF) has made giving professional advice a media game.

Sell newsletters, attract viewers, collect advertising dollars.  You need not be wise or even right. Scare the piss out of customers, and they come back anyway, thrilled that you were wrong. If God-forbid the doom-saying prognosticators prove to be right, customers will come back chastened and ready to listen.

Market Sentiment

Basically, after getting in the game buy buying 3 to 5 broadly diversified vehicles, you should do nothing. In 2017, if you followed that strategy, so far you are making a mere 20%. Since the vast majority of investing operations on Wall Street are performed by networked machines that monitor every price tick and move great mountains of capital for millions of worldwide financial vehicles, there is no human sentiment involved.

When you as a small investor get the news of sharp price movement, it is too late to act, unless you think and make decisions at light speed and are plugged directly into markets.

  • Machines do not agonize over decisions such as Buy, Sell or Hold.
  • Machines have no hearts. Machines do not succumb to sentiment. Machines do not read the newspapers.
  • Machines do not hold on to send their kids to college.
  • Machines do not save pennies to accrue the down payment on a house.

Nevertheless modern Wizards want us to believe market sentiment exists and that t hey are plugged into that sentiment.

Yeah. Sure. Right. Got it. Roger that.

How do TV Wizards get away with recommending buying or selling new assets every day?

kramer7

Sells perpetual panic and urgency

The fact is that while our money trickles into pension funds, 401ks, college funds, health insurance funds, and all the rest of the vehicles invented by Wizards to lure us with illusions of safety in an uncertain world, machines–owned assets are being sold.  There’s a buyer for every seller, Binky. Remember that.

Machines sell in torrents. We pray for 7 to 10 percent each year, are happy to get 3%, but when the algorithms indicate “Sell,” prices drop 20 to 50 percent in minutes.
Sentiment? Level playing field?

A Warning

Dollar$ is aware that sharp price moves can be precipitated by events and non-events such as national elections. If you think the US is going to hell in a handcart, do you also believe that after crap hits the fan that the money you buried in the backyard will buy a can of tuna?

This is why reasoned investors await blood on the floor before buying, and unless you are within 5 years of a financial goal–retirement, your kid’s first year of college, that down payment on your house–sit tight, never sell.

  • Buy and hold.
  • Ignore alleged “corrections.”
  • Sleep at night.

FLASH MOBS, BLACK BOXES, AND VANDALS

In Business, Economics, Economy, Finance, Politics, Wall Street on August 16, 2011 at 7:24 am

Welcome to Philadelphia

The United Kingdom, Chicago, Philadelphia, and Cleveland are suffering from the same illness that has shaped the stock markets for a decade: a mob mentality that spreads at the speed of light with no purpose other than to make vandals rich.

Remember when there was such a thing as “investors?”  Show Dollar$ a hedge fund manager interested in investing for the long term, and I will show you a money manager going broke. Those wealthy clients want high returns, 20 percent or more, and no one survives with a buy-and-hold mentality. The mentality is epidemic, and Citizens with memories extending back further than breakfast will recall notions of “rational markets.”

Rationality has nothing to do with a flash mob. They dance, they sing, they clap, they cheer, but when they get surly they burn and loot.

And in the stock market, they do it for the same reason: profit.

My algorithm can beat up your algorithm

INSIDE THE BLACK BOX

“A special class of algorithmic trading is “high-frequency trading” (HFT), in which computers make elaborate decisions to initiate orders based on information that is received electronically, before human traders are capable of processing the information they observe. …. As of 2009, HFT firms account for 73% of all US equity trading volume.” Algorithmic trading is  also called black-box trading.

Kids on the street who text the time and place of an imminent raid on their favorite retail outlet know that law enforcement is helpless in front of a spontaneous mob. They strip shelves of what they want, and then run like hell.

Algorithms signal each other of a raid on markets, strip pennies from value that on leveraged derivatives become millions, buy and sell in an instant, know that regulatory agencies are helpless, and then run like hell.

Dollar$ dares to suggest that any Wizards and Weasels who believe market stability is a healthy climate for investment, innovation, and general macroeconomic non-monetary policy that might create jobs to get those unruly youth off the street, may want to stop the flow of bullshit about how such markets are open and fair.

Dollar$, never shy of suggesting policy, simply asks that all stock and derivative orders in excess of $5 million be limited to any single entity to no more than two per hour.

Let’s level the playing field by tilting it toward traders with blood in their veins.