The Independent Trader Crash Course
Over $300 of Trading Lessons, FREE through April 18!
Click Here to Get Your Free Lessons
More About the Independent Trader Crash Course
You've heard them say, "Buy low, sell high." You've also heard, "The trend is your friend." Then there's, "Don't fight the Fed" and many other age-old trading principles.
But have you ever actually tried to live by them? If so, you know that it's easier said than done. Because, for example, how do you know if you're really buying "low" and selling "high"?
Elliott Wave International, the world’s largest market forecasting firm, is releasing 5 unique reports and videos that can help you bridge the gap between the theory of wise adages and the practice of benefiting from them.
The Independent Trader Crash Course compiles over 4 years of the best trading lessons from Elliott Wave International with 64 pages and 17 minutes of insightful online videos that you simply cannot get anywhere else.
These five reports and supplemental videos will reveal to you several key techniques of analysis, forecasting and risk-management that are tailored to fulfill one purpose: making you a better trader.
Click Here to Get Your Free Lessons
Thursday, April 10, 2008
Wednesday, April 9, 2008
Quants search for new math
For many years, quantitative hedge funds were hailed across the Wall Street community as inspired leaders in the next generation of finance. All the old rules about valuation, risk control, and proper evaluation were all relics of the past. The next phase of the “brave new world” of finance was being defined by these mathematical geniuses, hailed by their colleagues and the press as brilliant.
Maybe the Long Term Capital Management failure in 1998 should have served as a warning about the train wreck that was ahead. (BTW John Meriwether, the most well known of the “Geniuses” who lost billions with LTCM, has just blown up his new hedge fund). Perhaps the notion that all these quantitative hedge funds were pursuing mirror strategies with no risk control should have waved a warning flag.
Over the past six months, Hedge Funds have been closing shop at the rate of over three per week. Among the most severely impacted are the funds pursuing quantitative strategies. Many are victims of the extreme leverage used to trade the risky computational strategies.
When discussing these distressing fund blow-ups the press has started to use terms like “bet on the market” instead of focusing on quantitative math when discussing the latest victims. Most quantitative funds are suddenly viewed as pouring money down a rat hole, with the perception that their “math” was doomed to blow-up suddenly regarded as the foreseeable outcome.
Earlier Hingefire articles (see The Redefinition of Risk and Quants Meet Reality) outlined many of the problems with quantitative strategies deployed by the Wall Street wizards. It was simply a matter of time before a multi-sigma event took out many of the funds. Black swans do exist, and strategies that do not deploy reasonable risk control measures all meet the inevitable brick wall.
So what are the quants doing now their house of cards has come crumbling down? The mathematical wizards are searching for new models to replace the old ones that have gone up in smoke. Maybe this time they should throw in several cups of risk control into the recipe.
A recent article in Alpha Magazine outlines The New Math. Hedge funds are pressing ahead with new mathematical concepts for trading. The math wizards are hunting for new arcane magic that will give them an edge on the street; molecular physics, mathematical linguistics, artificial intelligence, behavioral response, and any other possible concept are on the table. The funds are also looking beyond traditional financial instruments into other asset classes. The bottom line is that most quantitative strategies are still searching for instruments which are mis-priced, yet risk control is still not a priority.
While the community has to give credit to the quants for pressing the boundaries and searching for new math that will provide them a computational edge on the market; maybe it is simply time for the wizards to focus the effort on risk control in their models to ensure long term market trading success. Even at the cost of several basis points of profit in their models and a reduction of leverage; having a strategy that does not blow up the firm every few years must have some inherent value. At minimum, it will eliminate the need to update their resumes regularly and search for a new fund to hang their math diplomas at.
Maybe the Long Term Capital Management failure in 1998 should have served as a warning about the train wreck that was ahead. (BTW John Meriwether, the most well known of the “Geniuses” who lost billions with LTCM, has just blown up his new hedge fund). Perhaps the notion that all these quantitative hedge funds were pursuing mirror strategies with no risk control should have waved a warning flag.
Over the past six months, Hedge Funds have been closing shop at the rate of over three per week. Among the most severely impacted are the funds pursuing quantitative strategies. Many are victims of the extreme leverage used to trade the risky computational strategies.
When discussing these distressing fund blow-ups the press has started to use terms like “bet on the market” instead of focusing on quantitative math when discussing the latest victims. Most quantitative funds are suddenly viewed as pouring money down a rat hole, with the perception that their “math” was doomed to blow-up suddenly regarded as the foreseeable outcome.
Earlier Hingefire articles (see The Redefinition of Risk and Quants Meet Reality) outlined many of the problems with quantitative strategies deployed by the Wall Street wizards. It was simply a matter of time before a multi-sigma event took out many of the funds. Black swans do exist, and strategies that do not deploy reasonable risk control measures all meet the inevitable brick wall.
So what are the quants doing now their house of cards has come crumbling down? The mathematical wizards are searching for new models to replace the old ones that have gone up in smoke. Maybe this time they should throw in several cups of risk control into the recipe.
A recent article in Alpha Magazine outlines The New Math. Hedge funds are pressing ahead with new mathematical concepts for trading. The math wizards are hunting for new arcane magic that will give them an edge on the street; molecular physics, mathematical linguistics, artificial intelligence, behavioral response, and any other possible concept are on the table. The funds are also looking beyond traditional financial instruments into other asset classes. The bottom line is that most quantitative strategies are still searching for instruments which are mis-priced, yet risk control is still not a priority.
While the community has to give credit to the quants for pressing the boundaries and searching for new math that will provide them a computational edge on the market; maybe it is simply time for the wizards to focus the effort on risk control in their models to ensure long term market trading success. Even at the cost of several basis points of profit in their models and a reduction of leverage; having a strategy that does not blow up the firm every few years must have some inherent value. At minimum, it will eliminate the need to update their resumes regularly and search for a new fund to hang their math diplomas at.
Tuesday, April 8, 2008
The new price tag: $945 billion
$200 Billion (nope)
$400 Billion (nope)
$550 Billion (nope)
$800 Billion (nope)
According the IMF the new cost of the subprime credit crisis is $945 billion globally. Over $565 billion of losses are expected for U.S. residential loans and securities. The figure has risen to $240 billion for commercial loans.
"The U.S. subprime crisis is not only eroding the U.S. economy -- the world's largest -- but also wreaking havoc on global financial markets, including Japan's stock and currency markets. "
There appears to be one item that the U.S. is very good at exporting – our credit crisis.
In other related news, it appears that the Wall Street investment banks are hooked on emergency funds. As outlined in an earlier HingeFire article, these financial institutions built on risk-taking are borrowing over $38 billion each day from the Federal Reserve.
The program was designed as a temporary measure to alleviate the credit crisis; it appears that the investment banks are using it as a payday scheme to make further bets in the market. Finally the mainstream press is coming to grips with the story, stating that the Federal Reserve will need to wean these banks off of these loans, similar to taking the needles away from a heroin addict.
$400 Billion (nope)
$550 Billion (nope)
$800 Billion (nope)
According the IMF the new cost of the subprime credit crisis is $945 billion globally. Over $565 billion of losses are expected for U.S. residential loans and securities. The figure has risen to $240 billion for commercial loans.
"The U.S. subprime crisis is not only eroding the U.S. economy -- the world's largest -- but also wreaking havoc on global financial markets, including Japan's stock and currency markets. "
There appears to be one item that the U.S. is very good at exporting – our credit crisis.
In other related news, it appears that the Wall Street investment banks are hooked on emergency funds. As outlined in an earlier HingeFire article, these financial institutions built on risk-taking are borrowing over $38 billion each day from the Federal Reserve.
The program was designed as a temporary measure to alleviate the credit crisis; it appears that the investment banks are using it as a payday scheme to make further bets in the market. Finally the mainstream press is coming to grips with the story, stating that the Federal Reserve will need to wean these banks off of these loans, similar to taking the needles away from a heroin addict.
ETrade: Standing at the edge of the cliff
A recent article in Fortune about E*Trade gives an insiders view of the panic that hit the firm as billions in losses piled up as customer fled. Defying Wall Street expectations, the firm fought back and stayed alive. However it is not out of the hot water yet.
Since October, E*Trade has watched $56 billion in customer assets evaporate, while it still has $39 billion in mortgage related securities and loans on its balance sheet. This is a significant exposure for a firm that only has a $1.9 billion market capitalization.
Only the intervention of Citadel, a Chicago-based hedge fund, enabled the firm to avoid bankruptcy in November, and these funds came at a tremendous cost. Citadel now owns 20% of the firm, holds 12.5% interest rate bonds from E*Trade, and acquired a $3 billion portfolio for $800 million. All of this for a mere $2.5 billion in cash. It provides the impression of a vulture picking at a carcass.
E*Trade is working to sell divisions to raise cash; nobody wants the toxic mortgage securities. The company expects to raise $350 million in cash by selling a wealth-management division, an institutional arm, and a partnership in Japan. Still the future prospects of the online brokerage firm are touch and go. A number of analysts question if it will survive 2008 as an independent entity or be purchased by a stronger firm.
Since October, E*Trade has watched $56 billion in customer assets evaporate, while it still has $39 billion in mortgage related securities and loans on its balance sheet. This is a significant exposure for a firm that only has a $1.9 billion market capitalization.
Only the intervention of Citadel, a Chicago-based hedge fund, enabled the firm to avoid bankruptcy in November, and these funds came at a tremendous cost. Citadel now owns 20% of the firm, holds 12.5% interest rate bonds from E*Trade, and acquired a $3 billion portfolio for $800 million. All of this for a mere $2.5 billion in cash. It provides the impression of a vulture picking at a carcass.
E*Trade is working to sell divisions to raise cash; nobody wants the toxic mortgage securities. The company expects to raise $350 million in cash by selling a wealth-management division, an institutional arm, and a partnership in Japan. Still the future prospects of the online brokerage firm are touch and go. A number of analysts question if it will survive 2008 as an independent entity or be purchased by a stronger firm.
Monday, April 7, 2008
A brief blip of good news for Washington Mutual
Back in November, HingeFire outlined that Washington Mutual was going down in flames. Today, WaMu received some good news that sent the already depressed stock up nearly 30%. WaMu is close to landing a $5B cash infusion from private equity group TPG; this will enable the bank to survive into 2009 without becoming illiquid. Of course, Washington Mutual (WM) had to basically give away the house to land these funds; nearly 25% of the outstanding shares, a seat on the board, and all sorts of other preferences. This appears to be the best deal that WaMu could land, considering their perilous….and nearly bankrupt position. Sadly the five billion dollar investment will not take Washington Mutual out of the woods; at least an additional $8 billion is needed to cover impending loan losses this year.
Many victims of Washington Mutual’s service practices will state that this fate is well deserved. Some are upset that the bank has not gone completely under. In reality the most likely course for WaMu still involves its acquisition by another institution.
Many victims of Washington Mutual’s service practices will state that this fate is well deserved. Some are upset that the bank has not gone completely under. In reality the most likely course for WaMu still involves its acquisition by another institution.
Cartoon: Banks are golden
A cartoon that reflects the current climate where the banks are being bailed out but the homeowners are being cut adrift.
Subscribe to:
Posts (Atom)