Financial Sarcasm Roundup for 01/31/16

Sarcasm on Sunday is way better than attending church. You could listen to some preacher lie about the nature of the universe, or you can listen to me tell the truth about finance.

Alphabet and Apple battle it out for the valuation world heavyweight championship. Both companies are symptoms of the Silicon Valley tech bubble. Investors have chased these stocks because ZIRP made savings accounts look stupid. Apple's (AAPL) P/E is deceptively low at 10 and Alphabet's (GOOG) is really high at 31. Both companies depend very much on smartphone users replacing costly phones more often than necessary in the developed world's saturated markets. Financial advisers who toggle their portfolio optimization searches with "high risk" aren't doing their risk-averse clients any favors by selecting overpriced tech stocks.

The IMF and its lending cartel will review Greece's bailout progress. It's really sick how the world's most important financiers play "extend and pretend" with a country that has no interest in paying its debts. Forcing losses on creditors would clear up credit quality questions a lot faster than extending maturities. I would have hung the foreclosure sign on the Acropolis by now but the IMF never called me to ask for advice. Athens should hire me to fix their problems if they can pay me in something other than gyros (which I really like to eat BTW).

Big SIFIs are cutting the biggest deals with the SEC to settle dark pool allegations. I have always wondered why investors deliberately walk into something they know is dark. The banks telling investors they will get the best execution in dark pools are also the same source of prime brokerage credit for HFT hedge funds trading in those pools. Willfully blind investors, duplicitous banks, and greedy HFTs all jumped into those dark pools to rip each other off. The traditional investors are always the dumbest money in the room, so of course they got taken to the cleaners.

I told you this was better than a church sermon. I'm more entertaining and honest than any religious leader. I should start my own religion so people can properly worship me.

The Limerick of Finance for 04/20/14

Beating HFT systems is hard
Quant algos can play hidden card
Routing orders so fast
Other trades come in last
Giant block trade cut by a small shard

Recent Wisdom From Financial Fools

I have learned about as much from watching stupid people do dumb things in finance as I have from formal education and autodidaction.  Fools are better teachers than they will ever realize.

Leveraged funds continue to use high-frequency trading strategies even though large institutions increasingly route their orders to negate the HFT advantage.  All of the computational horsepower devoted to HFT will gradually lose its reason to exist as large block trades in dark pools go elsewhere.  Math wizards earning huge sums in hedge funds will wonder where it all went.  Hedge fund fools are not prepared for the next financial crisis.

Crypto-nerds still love Bitcoin even though its exchanges are collapsing.  The myth of anonymity dies hard but the magical thinking of child-like Bitcoin fans is an impenetrable shield against real-world hardship.  I really think a lot of these people live with their parents or have marginal careers.  There is no other way they could have the free time to jerry-rig video cards that mine Bitcoins.  Digital currency fools are not prepared for the real-world consequences of shady financial dealings.

Retail investors still love actively managed mutual funds.  They ignore the preponderance of evidence for the advantages of low-cost index funds.  The siren song of outperformance dies hard in the minds of people disinclined to think critically.  Investing fools don't mind throwing money away on costly, underperforming financial products.

A handful of prominent San Franciscans still find the phony tales of a Stolen Valor con artist to be enthralling.  Evidence and facts count for less than emotions when naive people commit their prestige to a charlatan's schemes.  Google searches make due diligence easy but some business "leaders" would rather not take the time.  I guess keeping up appearances at the City Club matters more than integrity.  Elite fools will be blindsided by subpoenas even though they had plenty of warning.

I laugh at fools and I avoid making their mistakes.  I love it when humans who have learned nothing make the same mistakes over again.  It is too easy to outperform investors who play weak hands.  

Financial Sarcasm Roundup for 04/07/14

I may have once seen a scientific study where nine of out of ten doctors recommended a daily dose of sarcasm.  Okay, I didn't really see that, but making it up sounded cute.  I needed an intro for this week's dose of sarcasm.

Multiple law enforcement agencies are investigating high-frequency trading (HFT).  The bureaucratic imperative to "do something" is in high gear even though I'm certain it will lead to nothing.  Entrepreneurs have already solved the HFT's exploitative anomaly by creating a new trading system that slows orders down so algorithms can't exploit time differences in routing.  Investigating "HFT" as a phenomenon makes perfect sense if the political objective is to avoid indicting Wall Street campaign donors while giving the public the appearance of action.  It's a lot like declaring war on "terrorism" rather than some specific state or organization.

Research shows that G20 meetings don't move financial markets.  That's a big slap in the face to big-shots from the developed world who like to see their names in headlines.  Why are all these organizations having "summits" anyway?  World leaders lose at least a day in travel to attend meetings where sub-ministerial functionaries have already solved everything substantive.  They should cancel the G20 and other consultative bodies that do little besides provide photo-ops.

China voices its concern about capital flows.  The intended audience for this message is the Federal Reserve, not big financial institutions.  The big Western banks already know that they are limited to buying and selling the renminbi within limited bands inside the Shanghai FTZ.  China is making it clear that it is willing to defend the yuan's value if the Fed's curtailment of ZIRP roils emerging markets again.  There's a difference between willingness and ability.  The PBOC may find its ability to intervene severely limited by blowups in the shadow banking system.

There's nothing scientific about sarcasm.  I just make it happen.  

Financial Sarcasm Roundup for 03/31/14

March is almost over and the "ides" passed without incident from either lions or lambs.  Calendar idioms aren't very useful in sarcasm.  Financial topics are a lot more useful.

The IPCC is raising the alarm about the climate change threat to the world economy.  I hope they put enough qualifications about probabilities in their report this time.  Critics need to read the footnotes carefully.  The bright side of climate change is that previously frozen tundra will make great farmland.  Just think of the lucrative eco-tourist opportunities that will be available when inland flooding turns previously inhabited floodplains into marshes.

US stock markets are rigged to favor HFT funds.  No kidding.  I've been saying that since like, what, 2008 or so right here on this blog.  Individual investors, traditional mutual funds, and even index funds are getting nickel-and-dimed to death by hedge funds that pay for special access to trade information.  Making new platforms to route around HFT won't matter for long.  HFTs will sign up for those platforms and start gaming them all over again.  The manipulation will persist until a market crash destroys hedge funds with margin calls and rising interest rates remove cheap leverage from those hedge funds that remain.

China wants to make life easier for foreign institutions in its QFII program.  The hidden agenda here is obvious.  China knows it can't bail out all of the shadow banking WMP instruments that are in danger of popping.  Making QFII participation more attractive allows foreign suckers to buy into these things before they collapse.  Let's see if foreign banks rush in fast enough to get sucked into a shadow bailout of the shadow banking system.

I'll be down in Silicon Valley this week seeking out technical wisdom.  Who knows what new innovations lurk there.