tag:blogger.com,1999:blog-14963913.post8124299431846978433..comments2023-10-27T20:27:57.900-04:00Comments on Kid Dynamite's World: The Little Guy Has Nothing to Complain AboutKid Dynamitehttp://www.blogger.com/profile/17475987512856310577noreply@blogger.comBlogger40125tag:blogger.com,1999:blog-14963913.post-28583276995019268052010-05-15T08:35:31.499-04:002010-05-15T08:35:31.499-04:00jonathan - we're talking about market structur...jonathan - we're talking about market structure - not Macro outlookKid Dynamitehttps://www.blogger.com/profile/17475987512856310577noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-47353659595863272302010-05-14T23:28:52.256-04:002010-05-14T23:28:52.256-04:00I have to respectfully disagree. Today is one of ...I have to respectfully disagree. Today is one of the worst times to invest in the United States or to be a "little guy."<br /><br />$13 trillion national debt, $1.6 trillion national deficit and $107 trillion in unfunded liabilities and expenditures. Not to mention all the money that is being printed and will lead to serious inflation.<br /><br />Government Keynesian policies, like the one in <a href="http://www.wallstreetoasis.com/forums/eu-proposes-928-billion-crisis-aversion-planits-about-time" rel="nofollow">Europe</a>, does not benefit the "little guy"!Jonathanhttps://www.blogger.com/profile/08945793694131304692noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-71598979538313291622010-05-12T21:43:36.716-04:002010-05-12T21:43:36.716-04:00There is a paper for that -
http://citeseerx.ist....There is a paper for that - <br />http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.139.1931&rep=rep1&type=pdfAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-14963913.post-43324831750854927522010-05-12T18:45:45.780-04:002010-05-12T18:45:45.780-04:00"If you want to trade with the big boys, who ..."If you want to trade with the big boys, who are faster than you, smarter than you, more experienced than you, and have more technology than you, you're going to lose." <br /><br />This is analogous to table selection in poker. It's easy to find "inefficient markets" in both poker and trading. Simply focus on less liquid, arcane, or complex securities that do not scale up to the Big Players. But this absolutely central concept in poker... never seems to occur to "day traders" obsessed with the "sexiest", most liquid, and effectively rigged markets. <br /><br />And no one has a right to 8%... but it's impossible to succeed with a trading business unless you can grind at least 20% long term (speaking as someone whose done it for 15 years).QuantPlusnoreply@blogger.comtag:blogger.com,1999:blog-14963913.post-13898013362037330222010-05-12T15:42:15.245-04:002010-05-12T15:42:15.245-04:00but Ken -your post EPITOMIZES what I'm talking...but Ken -your post EPITOMIZES what I'm talking about here - the "victimization" of the little guy when it makes no sense. no offense, but your entire comment is irrelevant. I absolutely agree that the big banks have access to free money from the Fed, which sucks.. guess what - do you think that helps them invest? do you think CAPITAL gives them a competitive advantage over you? hah. if anything, it gives them a competitive DISADVANTAGE in terms of trying to get a good return on their capital (of course, that return is irrelevant if their cost is zero!)<br /><br /><br />they make money by borrowing for free (zero), and investing at greater than zero. it's IRRELEVANT to your profits as an individual investor, and if anything, can only help you once you figure out what they're doing and get on the train. Bill Gross said it last year: shake hands with the government!<br /><br />this post has NOTHING to do with big bank profits, and the facts that big banks are making big profits, even every day, has nothing to do with this post.Kid Dynamitehttps://www.blogger.com/profile/17475987512856310577noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-23601961961929279612010-05-12T15:25:42.816-04:002010-05-12T15:25:42.816-04:00KD,
While there is no denying you are right and ...KD, <br /><br />While there is no denying you are right and traders today can do things and have access to information that did not exist 20 years ago, the market today is basically nothing more than a kleptocracy, in which banks, that are not really banks, are now able to borrow from the Fed for nothing and trade, trade, trade away. <br /><br />Having a competetive advantage because you outwork me, out research me or employ superior technology is one thing, but having a competetive advantage that gives "select" firms unlimited access to taxpayer capital that can be invested and leveraged to the point where you can have an entire quarter where you made a profit trading every single day is a bit much.<br /><br />All we need to hear at this point is that it turned out the fiasco that occurred last week was intentionally concocted by a group of trading Mensa's who figured out a way to to outsmart the computers and took full advantage of the calamity that ensued.Kennoreply@blogger.comtag:blogger.com,1999:blog-14963913.post-28529921771587556712010-05-12T15:20:05.716-04:002010-05-12T15:20:05.716-04:00One my favorite aspects of financial blogs is the ...One my favorite aspects of financial blogs is the dueling blogger debate threads. Its really what its all about. Lets see what the themis Guy has to say! Interesting thread and comments. -scharfyAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-14963913.post-74098644155656502582010-05-12T14:28:23.204-04:002010-05-12T14:28:23.204-04:00hi sal -
let me know how to get in touch with yo...hi sal - <br /><br />let me know how to get in touch with you via email.<br /><br />I won't pre-promise to post your response, but if it's intelligent (and your stuff is generally pretty well written), i'd be happy to. <br /><br />if you are going to respond, please also address the specific point that Adam picked up on in your recent paper, which is "What? Investment is required to make money in a competitive business? You have to actually do research and be aware of things? Who would have guessed. "Kid Dynamitehttps://www.blogger.com/profile/17475987512856310577noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-83650972580330503692010-05-12T14:05:02.906-04:002010-05-12T14:05:02.906-04:00KidDynamite, if I get time later I would like to p...KidDynamite, if I get time later I would like to post a response to this post. On your site, and with your original post on my site. May I please do so? Sal at themisAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-14963913.post-81023681129643862452010-05-12T13:32:51.838-04:002010-05-12T13:32:51.838-04:00also, Transor - the buy and hold guys kinda ARE my...also, Transor - the buy and hold guys kinda ARE my point - none of this crap matters to them! HFT doesn't matter. flash crashes and instant rebounds DO NOT MATTER...<br /><br />but they need to be disabused of the notion that if they buy and hold for 50 years they will be able to confidently expect some rich annualized return...Kid Dynamitehttps://www.blogger.com/profile/17475987512856310577noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-34059651039180190792010-05-12T13:31:04.042-04:002010-05-12T13:31:04.042-04:00Transor -
"Just saying, please be careful no...Transor -<br /><br />"Just saying, please be careful not to fall into the solipsistic trap of thinking "inside every buy-and-hold 401(k) participant is a sophisticated investor struggling to emerge." "<br /><br />whoa - i certainly agree with you on that - which is to say that the average monkey CANNOT beat the market and be a sophisticated investor.<br /><br />however, the average monkey, thanks to our progress in market structure and access, can easily generate market returns, and even customize those returns (with tremendous granularity and accuracy, thanks to new products) if he wishes. that was my message.<br /><br />you highlight a bigger problem, though, one that i'm not going to philosophize on any more here, and that's that these 401k holders you're talking about are not INVESTORS - they are people who think they are entitled to a return. as i've said throughout this thread, that is a horrible assumption, and one that no one should even expect to have. the stock market owes you nothing.<br /><br />maybe, if the government wants people to be able to compound their wealth at 8% a year over a 30 year period, they should sell 30 year bonds... OH WAIT - they do !!! ;-) and the yield is about half of that 8%....Kid Dynamitehttps://www.blogger.com/profile/17475987512856310577noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-13266300581668000212010-05-12T13:22:23.491-04:002010-05-12T13:22:23.491-04:00Sorry, ROISorry, ROITransor Znoreply@blogger.comtag:blogger.com,1999:blog-14963913.post-39843481703224252312010-05-12T13:20:06.409-04:002010-05-12T13:20:06.409-04:00All that being said, I think everyone trying to se...<i>All that being said, I think everyone trying to secure their own financial future can find the time. Pick your least favorite TV show, take it off of your list, and replace it with investment research and management. Your financial future is too important to have determined by the average mutual fund manager.</i><br /><br />@peterpeter and kd:<br />First, IMO you've both written some really exceptional thing over the past week. This line of thought isn't one of them. :-)<br /><br />Bankruptcy is one of our main practice areas. I see what we euphemistically refer to as a "cross-section of society." To the idea that most people can manage investing to come up with a large portion of their retirement needs, I'm just going to say, "No." And I'm afraid that if you disagree, we're going to have an exchange that looks like this:<br /><br />http://www.youtube.com/watch?v=j96TUnBBpso<br /><br />No. This is why we need a properly funded Social Security/Medicare system. Guys, I completely support you in your effort to spread the gospel of risk and reasonable expectations around ROV (i.e., anti-Ponzi). But you're swimming upstream against 20+ years of institutionalized "buy and hold" "advice" disseminated to most Americans. <br /><br />Just saying, please be careful not to fall into the solipsistic trap of thinking "inside every buy-and-hold 401(k) participant is a sophisticated investor struggling to emerge."Transor Znoreply@blogger.comtag:blogger.com,1999:blog-14963913.post-66630807707319379272010-05-12T12:48:35.256-04:002010-05-12T12:48:35.256-04:00also, anon - we have regulations in place to deal ...also, anon - we have regulations in place to deal with "gaming capital ratios" already - the problem isn't markets, structure, or regulation - we don't need more rules, we just need to enforce the rules we have!Kid Dynamitehttps://www.blogger.com/profile/17475987512856310577noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-40446178325477351982010-05-12T12:47:18.983-04:002010-05-12T12:47:18.983-04:00anon 11:09: as i mentioned in my previous comment...anon 11:09: as i mentioned in my previous comment, i'm certainly not saying that now is a good time to buy stocks, and i'm about as far from a CNBC cheerleader as you can get.<br /><br />in general, i don't think there's any reason at all to think that we currently have a lower integrity of information than before. in fact, we're constantly trying to improve clarity and accountability (sarbanes Oxley, etc - even though there is potentially a great cost of compliance for companies)<br /><br />if you've read my blog before, you'll know my response to your question: if you can't value something, DO NOT BUY IT. if the financial companies are fraudulently representing their balance sheets, they should be prosecuted.<br /><br />now, i think that the health of the entire banking system is being misrepresented - but good luck prosecuting it, because it's by DESIGN - courtesy of the Fed/Treasury, mark to fantasy, etc...Kid Dynamitehttps://www.blogger.com/profile/17475987512856310577noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-45020010274711161562010-05-12T12:39:34.218-04:002010-05-12T12:39:34.218-04:00Hey Kid -
Thanks for your reply. I get your poin...Hey Kid -<br /><br />Thanks for your reply. I get your points, and they are certainly valid. I totally agree with you that no one is entitled to risk-free, or even low risk "above inflation" returns. However, I feel compelled to nitpick you a little since you used the title "The Little Guy has Nothing to Complain About".<br /><br />I will stand by my 2) angle. Accuracy/integrity of information is just as important as availability, as that has to do with market integrity, which is the last important part of the structure. Look at what happens with the big guys game their capital ratios, which allows them to hyper-lever, which leads to various bailouts, debt crises, etc. If nothing else, I think the little guy has legitimate sour grapes here.<br /><br />OK, so one can avoid financials and do their homework in other sectors. Fair enough. I would just say the title should be something more like "The Little Guy has a Tremendous Opportunity" given all to other valid points you make.<br /><br />Allright, no more nitpicking. Just don't want one of our brighter beacons to devolve into one of those mindless CNBC market <br />cheerleaders.Anonymous 11:09 AMnoreply@blogger.comtag:blogger.com,1999:blog-14963913.post-28412140455041588092010-05-12T12:26:34.553-04:002010-05-12T12:26:34.553-04:00i think a lot of people are missing the point of t...i think a lot of people are missing the point of this post. the point of this post is NOT that it's an easy time to make money in the markets. on the contrary - i think it's INCREDIBLY hard right now - as valuations appear stretched, yet government appear intent on keeping them that way. I repeatedly use the term Ponzi scheme, which I think accurately describes our economy. Perhaps the US Gov't can keep this ponzi going. who knows. I absolutely understand that no one wants to be the last one left holding the bag when it collapses.<br /><br />that has nothing to do with people complaining about MARKET STRUCTURE though - which is what I was trying to address here. simply: retail investors can now do things that only professionals could do 25 years ago - and that's a good thing for them.Kid Dynamitehttps://www.blogger.com/profile/17475987512856310577noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-66402823872417011982010-05-12T12:18:19.770-04:002010-05-12T12:18:19.770-04:00anon re Mark Cuban: sighhh... i just realized wha...anon re Mark Cuban: sighhh... i just realized what my point was, because although Cuban makes some good points, he continues to miss the main point, confusing and confounding trading and investing.<br /><br />here's my point: if you're an INVESTOR, you don't check your stock quotes 5 times a day. or 50 times a day. the short term gyrations DO NOT MATTER. it doesn't matter if some ETF trader, HFT algo, or mutual fund is selling your stock as part of a rebalance - none of that changes the underlying business fundamentals, which is the reason you are INVESTING.Kid Dynamitehttps://www.blogger.com/profile/17475987512856310577noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-5924154285571968582010-05-12T12:12:44.753-04:002010-05-12T12:12:44.753-04:00daniel - re: tarp: TARP sucks. i'm not going ...daniel - re: tarp: TARP sucks. i'm not going to argue against that, but the reason your wife's company had to sell new equity to payback TARP is because they NEEDED MORE EQUITY! if they hadn't got TARP in the first place, they would have still had to raise equity. If you don't think this is true, and they didn't need the money at all, then they could have just given the TARP money back.Kid Dynamitehttps://www.blogger.com/profile/17475987512856310577noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-88287885803944945882010-05-12T12:10:10.736-04:002010-05-12T12:10:10.736-04:00keiran - first of all - the majority of those bank...keiran - first of all - the majority of those bank profits you talk about don't come from equity markets, if that matters. they come from borrowing for nothing (from the Fed) and investing at positive rates. I looked through a few of the press releases to see if i could get breakdowns across product lines, but couldn't find the details.<br /><br />know one thing though - this is EXACTLY as the Fed/Treasury designed it - and it's actually the ONLY way for the extend and pretend to work - they delay the writedowns for long enough for the banks to earn the equity back via "trading" - which isn't really trading at all.Kid Dynamitehttps://www.blogger.com/profile/17475987512856310577noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-51201144254047344342010-05-12T12:06:32.048-04:002010-05-12T12:06:32.048-04:00anon @ 11:09am - i agree very much with that. i ne...anon @ 11:09am - i agree very much with that. i never said that now is a great time for investors to get rich easily. i never made any comment about long term value. of course a diligent investor can have long term losses. so what? what's wrong with that?<br /><br /> and again - NO ONE SHOULD HAVE THE RIGHT TO EXPECT TO GET RICH EASILY IN THE MARKETS! via, trading or "investing."<br /><br />can the market go down over 30 years? sure. is that unfair? of course not! Americans need to be disabused of this notion that stocks always go up long term. the government will do its best to make sure that happens, like I said - i think the game is rigged in favor of the longs, but it's not our birthright to demand positive consistent equity returns.Kid Dynamitehttps://www.blogger.com/profile/17475987512856310577noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-44824080310824835202010-05-12T12:02:24.629-04:002010-05-12T12:02:24.629-04:00the Dude - well put. and Daniel - you and TheDude...the Dude - well put. and Daniel - you and TheDude both mentioned beating market returns - you don't even NEED to beat market returns! one point here is that the plethora of products makes it extremely easy to generate market returns. 20 years ago you could invest in the SPX index fund. now you can invest in almost any index, easily and cheaply.<br /><br />but my main point is that we should not be conditioned to EXPECT market returns to be 8%, 10% or 15% a year - as theDude says. if you want to save for retirement, don't live beyond your means - SAVE - start a business... don't expect free money in the market.Kid Dynamitehttps://www.blogger.com/profile/17475987512856310577noreply@blogger.comtag:blogger.com,1999:blog-14963913.post-34464496914963837412010-05-12T12:00:57.198-04:002010-05-12T12:00:57.198-04:00I'll echo Mark Cuban's sentiments in this ...I'll echo Mark Cuban's sentiments in this article:<br />http://www.businessinsider.com/what-business-is-wall-street-in-2010-5Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-14963913.post-64615240512778591782010-05-12T11:57:23.502-04:002010-05-12T11:57:23.502-04:00Apologies if this is diverting from the conversati...Apologies if this is diverting from the conversation, but it felt relevant - just saw this (sec public comment from tradeworx) and I thought it was a great source of info on hf/stat arb in general - it contains some good information, debunking of claims where necessary, and contains some valid criticisms (ISO orders, tiered rebates):<br /><br />http://sec.gov/comments/s7-02-10/s70210-129.pdfadamnoreply@blogger.comtag:blogger.com,1999:blog-14963913.post-45828537665456749482010-05-12T11:35:17.320-04:002010-05-12T11:35:17.320-04:00Yeah to follow on Kieran, if I have one major grip...Yeah to follow on Kieran, if I have one major gripe its the ability of these swing dicks, just because of who they are, to borrow money at 0%. Let me borrow at 0%. And not for a car or a tv or dishwasher. Let me borrow some real capital at 0% and I'll straighten you out let me tell you. Trading is NOT a zero sum game as somebody said it was. And I have no problem with the playing field. Pinning pays my mortgage.<br /><br />Here is what my wifes ceo did: they took TARP. TARP limited comp. CEO didn't like that. Floated secondary, thus diluting all common shareholders (us), to raise capital to pay TARP so he could get bonus. Yeah, I know what a fat finger is. So eff GS, C, BAC JPM etc. That don't give a rats ass about me.Danielhttps://www.blogger.com/profile/15018793399599951413noreply@blogger.com