A Liquidity Correction

With the onset of High Frequency Traders, not to mention programmed trades by smart machines, the bulk of turnover can be said IS controlled by these "whatchamacallits". I can see a liquidity driven correction happening sometime soon. It kinda happened during the Greek crisis when market makers stayed on the sidelines in light of huge sell orders, thus prompting big price slides to match the sell order. That in turn triggered program based sell orders and cut loss orders, reinforcing the downward spiral. 

When you have so much of the liquidity in the hands of so few people/machines, them staying sidelined in light of a surpernormal order will trigger flash sells which can cause stomach churning down swings even though in all likelihood, these downswing will not lasts more than a day or two once the real cause has been determined. So beware of upcoming flash crashes
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John Maudlin's blog:

Before the credit crisis, market makers like Bear Stearns, Goldman Sachs, Merrill Lynch, Morgan Stanley, and Bank of America created a huge amount of the overall liquidity in major markets by consistently taking “the other side” of trades. If the markets were selling, market makers bought, and vice versa.

In the wake of 2008, the big market makers either went out of business, merged, and/or were forced to operate at much lower levels of leverage. The net effect is far less trading volume from market makers and other forms of “real money,” to the point that high-frequency trading and ETFs accounted for about 66% of all trading volume in 2010. While that number has fallen to about 50% today, equity mutual fund flows suggest that higher trading volume from smaller investors, not the resurrection of market makers, is responsible for the shift.

In fact, the following chart from Credit Suisse suggests that the average daily trading volume from “real money” fell by more than half from 2008 to 2012, as high-frequency trading advanced. I do suspect that “real money” volume is rising today with the rotation that is underway into an overvalued, overbought, and overbullish market (but let’s save that for our conclusion).

Understanding how the structure of market participants has changed, let's think about the effect of there being less market-making volume to balance against high-frequency trading and the retail/institutional herd.

On May 6, 2010, the markets sold off for most of the day, and market makers expanded their volume as the media ran all-day coverage of a small riot in Greece. But (and this is critical), market makers who can no longer buy at 40x leverage will carry only so much inventory overnight. At some point market makers must stop buying ... and they did when a large sell order came into the market toward the end of the day on May 6. The market makers stepped back instead of providing liquidity, precipitating a sharp drop in prices. Then many of the HFTs shut their systems down, seeing an irregular trading pattern and fearing another “Quant Crisis” like the one in October 2007. Liquidity dried up in a matter of minutes, and the market went into free fall … triggering stop losses and emotional selling from the general public. (As they saw the market collapse and the rioting in Greece, people may have thought, “Something big just happened and I am late... sell everything!”). Without market makers to provide volume, an orderly sell-off became a chaotic collapse.

Now, with market-maker volume way down, a similar situation could develop again; and once again the general public will rush to sell if liquidity evaporates. We should really think about this dynamic, because the next correction may look more like the stock market crashes of 1929 or 1987 as opposed to the more gradual "cascading crash" we all experienced in 2008.

With that in mind, investors will do well to pay attention to the ever-changing structural makeup of the markets before blindly jumping in. Just because US stock markets – along with a lot of the major markets around the world – have found new highs since 2008 doesn’t mean they have healed structurally. It doesn’t mean they are stable. And with long-term valuations at historic levels, both on an absolute basis and relative to the rest of the world, US equity markets are both unstable AND overpriced.

The inevitable correction that is coming to US markets could be a catalyst for a downturn in the broader economy, and without much of a warning. It could be another lion, prowling through fiber-optic cables, data feeds, and stock exchange servers.

I continue to believe that high-frequency trading should be reined in. It is creating the illusion of liquidity, which can dry up in a heartbeat while at the same time sucking billions of dollars from the trading of individuals and institutions.

If Women Used Pick Up Lines

Naturally this came from Cosmopolitan .... you know the cheesy pick up lines used by the inferior gender, mostly crass and stupid lines at best. Even the cleaner ones such as "Heaven must be missing an angel ..." would come across as formulaic at best. People who use pick up lines are trying to get something by offering very little of themselves. Lines are just that, lines ... just be yourself.

However, if women use pick up lines, most of them would work very well I am sure. Cosmo asked for suggestions and compiled the best. My favourite is the last one.

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My favourite:

Amazingly Creative Short Film

Just be amazed at its creativity ......

Fresh Guacamole is a 2012 animated short film written and directed by PES. With a running time of 100 seconds it is the shortest film ever nominated for an Oscar when the film was nominated in 2013 for ‘Best Animated Short Film’.

Fresh Guacamole was originally commissioned by Showtime as part of its “Short Stories” series.

I Wanna Stay At This Hotel

This was a brochure by a hotel on their services and amenities to tourists. Its a hotel in China. I am not laughing at Chinese tripping around the language, we all do that. So this is not targeted at them. Its obviously translated word for word, probably using Google translate. It is soooo funny.

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Getting There:
Our representative will make you wait at the airport. The bus to the hotel runs along the lake shore. Soon you will feel pleasure in passing water. You will know that you are getting near the hotel, because you will go round the bend. The manager will await you in the entrance hall. He always tries to have intercourse with all new guests.

The Hotel:
This is a family hotel, so children are very welcome. We of course are always pleased to accept adultery. Highly skilled nurses are available in the evenings to put down your children. Guests are invited to conjugate in the bar and expose themselves to others. But please note that ladies are not allowed to have babies in the bar. We organize social games, so no guest is ever left alone to play with them self.

The Restaurant:
Our menus have been carefully chosen to be ordinary and unexciting. At dinner, our quartet will circulate from table to table, and fiddle with you.

Your Room:
Every room has excellent facilities for your private parts. In winter, every room is on heat. Each room has a balcony offering views of outstanding obscenity! .. You will not be disturbed by traffic noise, since the road between the hotel and the lake is used only by pederasts.

Bed:
Your bed has been made in accordance with local tradition. If you have any other ideas please ring for the chambermaid. Please take advantage of her. She will be very pleased to squash your shirts, blouses and underwear. If asked, she will also squeeze your trousers.

Above All:
When you leave us at the end of your holiday, you will have no hope. You will struggle to forget it.

Frozen ... Planning A Musical Before A Movie

Undoubtedly, Frozen is one of the best animated movies for the past decade ... it beats the fun and joy of Toy Story series, Ice Age series ... because the story line is within all of us. The need to reconnect to those closest to us. Frozen also works because too many of us put on facades, which we are loathed to face the world with, that the world cannot accept us the way we are. The movie has obviously been made with it being a MUSICAL ON BROADWAY ... the songs are magnificent.

Some of you may be shocked to read me posting something about a cartoon. It takes an adult to appreciate good things, whatever form they come in. I wish I have children now because this movie could help us talk about so many values I wish to impart and discuss.

Do You Want To Build A Snowman is soooo sad ... about a girl wanting to build a snowman again with her sister, who cannot be with her because of her uncertain powers. Kristen Bell plays the role, if you have watched House of Lies, you would be like me, you love Kristen Bell for reasons very different from her virtues and talents in Frozen. I like this song better than Let it Go ... after the movie if you listen to Do You Want To Build A Snowman, it is the simplicity and faith to believe in someone whom we care and will still continue to reach out for  ... it breaks your heart even more than listening to it the first time.

... and how good was Kristen Bell to sing the song with a changing voice from a young girl to a teenager to an adult ...

Idina Menzel sings Let It Go, Idina Menzel was the great lead in Wicked, the great musical (a kinda incredibly creative prequel to The Wizard of OZ.) So, you tell me, Disney already planned for a MUSICAL before the movie!!??










In the end, we are all the same ... the same things that make us laugh, make us cry, make us yearn ... Disney's "Frozen" became the highest-grossing animated film of all time, topping $1 billion worldwide and inspiring a #CongratulationsFrozen hashtag on Twitter.

One reason for the film's runaway success? That infectious Oscar-winning song that says it's okay to be yourself, unwittingly we love Let It Go because it gives us the release, the freedom to let go what weigh us down, burdens we carry for reasons unexplained, letting go of bad memories and hurts — in fact, let it go and belt it out from a snow-covered mountain top while you're at it. It's a message that has proven deeply resonant around the globe.

The fact that the House of Mouse tailored its snowy movie for several non-English speaking audiences, dubbing it in 41 languages total, didn't hurt a thing. This new in-studio version of "Let It Go" in 25 languages, offers a peek into the arduous process of dubbing the film and its songs into 41 tongues.

Let It Go In 25 Languages

Asset Class Returns as At 31 March 2014

March brought another round of healing for assets in emerging markets. For the second month in a row, stocks and bonds in these nations posted handsome gains. Equities led the way in the first quarter’s closing stretch: the MSCI Emerging Markets Index advanced 3.1% last month, closely followed by government bonds in emerging nations, which added 2.8%. At the other end of the performance spectrum, stocks in developed markets led the red-ink parade by shedding 0.6% in March, based on the MSCI EAFE Index.

What was more interesting was the performance of US REITs, it gained 10% on a YTD basis. You would think that the general opinion of interest rates moving up soon, that REITs would under perform. Mind you, on a 2 year basis, US REITs have performed outstandingly already so we are not talking of a rebound from the rubble. The fact that it can eke out a significant 10% in just 3 months may lend credence to the emerging opinion that interest rates will remain benign despite evidence of economic recovery in the US and most places.

For the moment, emerging markets are grabbing the crowd’s attention (and quite a lot of the investment flows)… again. So it goes when price momentum reverses direction in favor of the bulls. “I am not sure what has made emerging-market stocks so attractive to investors over the past few weeks, but many long-forgotten markets such as Turkey and Brazil are back above key moving averages,” notes a columnist for Barron’s. “And some, such as pan-Middle East, have been stealthily leading global markets for months.”

One theory for the latest buying spree in emerging markets is that the world suddenly looks a bit less threatening. “If there was any geopolitical risk, it’s calmed down and we’re showing some economic momentum,” says James Paulsen, chief investment strategist at Wells Capital Management. The change in perception, reasonable or not, appears to be reviving the crowd’s love affair with markets that have taken a beating before the latest mood swing kicked in. “The sentiment is becoming less negative at the margin for emerging-market equities,”observes Morgan Harting, a portfolio manager at AllianceBernstein. “At some point, valuation just starts to matter. The gap between emerging equities and developed equities had become extremely wide.”

Ponderings