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Wall Street’s Trading Desks Endure Worst First Half in a Decade

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Re: Wall Street’s Trading Desks Endure Worst First Half in a Decade

#71

Post by TuringNYC »

kweinber wrote: post #53
mruts wrote: post #25

Earlier quoted context omitted.

The rule they are talking about is the Volcker Rule. Prevents certain banks from proprietary trading. They are only allowed to buy and sell for the purpose of market making. This, of course, is an incredibly stupid rule. There’s not really a big difference between market making and proprietary trading in the first place.

Proprietary trading is trading your own money with no obligation to transact or do any business with others. Market making is offering public liquidity as part of a market function. They are designated market participants with rules and responsibilities. They are not the same.

They are not the same, but Market Making requires hedging. Hedging is not usually 1:1 but rather portfolio hedging — so distinguishing prop trading from hedging is difficult except in the obvious case of prop desks where there was not hedging mandate.

Consider the London Whale incident — the entire $6b shortfall was a giant prop position passed off as a hedge.

Re: Wall Street’s Trading Desks Endure Worst First Half in a Decade

#72

Post by arbitrary_name »

perl4ever wrote: post #44
mrep wrote: post #36

Earlier quoted context omitted.

> but I think share buybacks are another major reason for the disproportionate rise of US markets. US corporations have bought more of their own shares than anyone else in recent years Share buybacks are just a more efficient way of returning profits back to investors than dividends [0]. > Why can't corporations find anything better to do with that money? Why is capital spending relatively muted while productivity gr…

Share buybacks aren't necessarily done on a regular schedule nor do they imply the same sort of public commitment or are required to be paid for out of profits. Saying they are just a more tax efficient alternative to dividends assumes that they are exactly substituted for dividend payments in amount and timing, but I don't think that's the case in practice. Something that I've wondered is, if a company has excess ca…

Dividends are sticky: once the level is set, they are expected in perpetuity and any reduction is assumed to be indicative of poor performance or future performance. Buybacks have the benefit of not having that expectation attached.

Re: Wall Street’s Trading Desks Endure Worst First Half in a Decade

#73

Post by jnordwick »

cm2187 wrote: post #12
lefstathiou wrote: post #9

A lot of our clients work in investment banks. There’s been a long (since the election) and growing narrative that the market will correct any second now... any second. Meanwhile the market has gone up up up. Part of that, I believe, is because most of these trading desks sit in one place - NYC, a super liberal anti trump environment - so it’s hard not to buy into the narrative and go risk off which means you would h…

We are back in a market manipulated by central banks. I call it “junkie mode”, you can tell because when there is bad economic news the market goes up, as it expects central banks to pour more liquidity/lower rates, lifting asset prices, like a junkie waiting for its fix. A healthy market goes down on bad economic news. I think you shouldn’t forget December last year, which was a pretty clear warning shot. The last 6…

Data didn't show that at all. The market seems to be doing the exact opposite of what the fed had been wanting it to do. They have been so bad at it all they've managed to do is invert the yield curve on the short end.

YOY the crb commodity index is down as well as the metal index. Gold is even only up a little since beginning of 2018.

All of this would be the opposite of the fed was pumping too much liquidity into the system or controlling interest rates at all.

Re: Wall Street’s Trading Desks Endure Worst First Half in a Decade

#74

Post by perl4ever »

arbitrary_name wrote: post #72
perl4ever wrote: post #44

Earlier quoted context omitted.

Share buybacks aren't necessarily done on a regular schedule nor do they imply the same sort of public commitment or are required to be paid for out of profits. Saying they are just a more tax efficient alternative to dividends assumes that they are exactly substituted for dividend payments in amount and timing, but I don't think that's the case in practice. Something that I've wondered is, if a company has excess ca…

Dividends are sticky: once the level is set, they are expected in perpetuity and any reduction is assumed to be indicative of poor performance or future performance. Buybacks have the benefit of not having that expectation attached.

Sure, that's what I was alluding to, but I think it's obvious that the difference is not necessarily beneficial. People make commitments for valid reasons, and they are usually worth something.

Re: Wall Street’s Trading Desks Endure Worst First Half in a Decade

#75

Post by albertshin »

TuringNYC wrote: post #69
albertshin wrote: post #68

Earlier quoted context omitted.

Sure the power law holds in the stock market value ($), but you're confusing that it will hold with market returns (%) as well. The rate of return (%) has been better for pension funds, IRA, 401ks invested in market wide index funds than the wealthy that have invested in active hedge funds. (This has been very true historically, especially net of fees.) So it's fair to say that the wealthy have seen worse returns com…

The wealthy don’t just invest in hedge funds, they also have index funds and plenty of real estate. Also, pension funds don’t just have index funds, many are invested in hedge funds. At a certain level of AUM and intent the allocations become similar. It would be wrong to say the common man has suddenly outrun the wealthy, wealth continues to be highly skewed, esp given asset inflation.

Sure - agreed that I may have simplified a bit too much for the sake of illustrating the apples ($) to oranges(%) comparison u/thundergolfer was making.

Still, I highly doubt that the asset allocation of the median investor of the bottom 90% is similar to that of the median investor of the top 10% -- even if PFs have access to the same vehicles that HNW/FO have.

Wealth is definitely skewed. But, if you're willing to accept the wealthy have allocated more to HFs which have underperformed market, recently, it seems that the "common man" have outperformed by keeping it simple and letting their automatic biweekly 401k contributions go to VOO instead of some highly complex financial product.

EDIT: simplified wording

Re: Wall Street’s Trading Desks Endure Worst First Half in a Decade

#76

Post by thestartup »

thestartup wrote: post #17

I'm going to lay everything I have on the line next week by trying to catch a short position on index futures by Monday morning, July 22, 2019. My guess for Sunday is a big dip down, followed by dead cat bounce for somewhere at or near the open Monday morning. Sell the rallies as long as we are below ES ~8,000 / NQ ~3,000. Would be interesting to see MSFT, for instance, take a 70%-75% haircut in the next X years. [SP…

Short now
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