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  1. The Consequences of Underperformance

    The following message is my reply to an online publication that made the argument for actively managed funds over passive index funds. The author discussed fees for both vehicles so it is not mentioned in this response. Though the message is intended to address actively managed mutual funds, the same can be applied to any attempt to outperform.
    One issue with actively managed funds is that the lead manager can bail out to a different fund or company at any time. This is like ...
  2. Institution Trading on Earnings Day

    Institutions managing large sums of money are generally long term investors with infinite time horizons. When an institution decides to add or decrease their holdings in a particular company it is not as easy as clicking a button on their computer screen. This is an overview of what might take place at your mutual fund or pension fund office on trading day.

    Let's say the Fund of Thrift has a vested interest in company XYZ since they own .5% of all outstanding shares. The fund has ...
  3. Exchange Volume

    Since the early 2000’s, trading on the major exchanges has been on the decline because multiple trading venues exist away the major exchanges that account for the bulk of daily trading volume. Dark Pool liquidity simply refers to an exchange outside of the major exchanges where stocks are traded anonymously by large institutions.

    When you put in an order to purchase a stock at 20.05, your broker charges you only $7 because he sells it to a High Frequency Trading (HFT) shop. The HFT ...
    Tags: hft
  4. High Frequency Trading and the Market

    High Frequency Traders (HFT’s) are the biggest player in global markets today and are responsible for the highly complex trading algorithms that companies like GS strive to keep secret. HFT’s claim to be “liquidity providers” to pick up a bid when needed while large institutions who trade large blocks of a stock claim they have had a negative impact on the overall financial markets. This post is a quick overview of one particular strategy HFT’s participate in called “Rebate Arbitrge”.
    Tags: hft
  5. Decoupling? Again?

    For those who forgot, a quick recap: From October of 2007 until present, bulls claimed that China would be the ultra stellar growth module for the entire universe. Nothing mattered at all because China would buy all commodities and drive global profits. Today, the rhetoric is still there but another look under the hood shows otherwise.

    I've read much about how what happens in Spain, Greece, Ireland, Italy, Brazil, Germany, and Portugal doesn't matter because the problem is contained. ...
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