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  • Are HFTs Responsible For Low Market Volatility? [View article]
    To some extent, we can examine the age-old question of 'pinning' at options expiration. Absent some extraordinary macro event on a Friday afternoon, the market will flat-line. Part of my thinking is that the advent of weekly options and the increase in sophistication of trading methodology should logically result in less volatility.
    What would happen if all market decisions were entrusted to super computers? In other words, if human emotion were totally eliminated, would these machines not reach an equilibrium quite rapidly? And having found that relative tranquility, how could volatility ever return? After all, 'volatility' is a function of human ignorance, compounded by irrational reactions. There is no question but that the market as we've known it for a mere couple of centuries or so will morph into a sterile calculus. It's been said that the market 'hates uncertainty.' Well, one might as well declare that they despise their human frailties. Be careful what you wish for-too late methinks.
    Jun 27, 2015. 12:19 PM | 2 Likes Like |Link to Comment
  • The U.S. Economy Is Shrinking [View article]
    The best of the best tend to be macro traders. But managing money is like picking the best golf swing. It's matching innate talent and ability to creativity and one's unique perception.
    I tend to set up trades that resemble a 'tug-of-war' between two equal sides. I just want to earn rental income by leasing out the rope. I don't really care which side wins-and there's always another game.
    Some folks like to 'pick winners' like TSLA or NFLX-some like to stay with old-fashioned dividend payers-and maybe sell some calls to enhance yield. Trend followers go long and short-depending on their longer term perspective.
    We've been in a very unique era where shorting volatility has been like shooting fish in a barrel. I still can't believe how easy it's been-and continues to be.
    For the past few days, I've been shorting current interest rates-and so have many others. In fact, why was the market down today? A logical construct would be to simply pair discounted cash flow with current equity yields. (Of course, one can look at China and do a little head scratching as to rationality). But, then there's always some sector or part of the world that momentarily hears a different drummer-and therein lies a skewed opportunity.
    Jun 26, 2015. 07:15 PM | Likes Like |Link to Comment
  • Wynn Resorts: Set To Double By 2018 [View article]
    I've been a long-time Steve Wynn fan. I had the opportunity to dine at the table next to him in Vegas several years ago. Our two tables were the only ones being served that night. He was incredibly gracious and he had his mother with him. Coincidentally, I flew my mom out and she was with me as well.
    I always have WYNN on my screen, and I find that I'm always pulling for him, which is extraordinarily rare for me.
    I think the stock gets a little lower, but nothing wrong with selling LEAP puts, and averaging in. Gambling is not going away, folks. One can invent all the battery operated cars, remedy various medical diseases and so forth, but human nature ain't changing any time soon.
    Jun 26, 2015. 06:56 PM | 8 Likes Like |Link to Comment
  • The Paint's Starting To Chip At Sherwin Williams [View article]
    That debt-service coverage ratio would violate a lot of loan covenants. I recall that 1.4 used to be somewhat of a benchmark-certainly for smaller caps. I also watch WHR, and they have taken a small hit recently-despite the enormous horn-blowing from housing imps.
    Jun 25, 2015. 04:49 PM | Likes Like |Link to Comment
  • The Unreliability Of Human Judgment [View article]
    At least a nod to Daniel Kahneman would have been appropriate.
    Jun 25, 2015. 04:26 PM | 2 Likes Like |Link to Comment
  • 2,120 Tuesday: This Time Is Different? [View article]
    Peter, I guess I'm one of those aging 'boomers' but fortunately I can still watch the 'Andy Griffith Show', and several of my favorite westerns-like 'The Rifleman.'
    I see my father in the roles of Andy, teaching Opie that there are consequences to our actions, and Lucas instilling in Mark the virtues of hard work. Somehow, somewhere along the decades hence, that became 'old fashioned' and dated.
    Now we have wimps and politically correct sheep traipsing around masquerading as the real thing-in need of a fitbit to tell them how many steps they've taken, as they buckle their seat belt to drive that battery-operated vehicle over to the nearest vitamin store.
    I'm very thankful that I had two parents that shared a common wisdom and a heritage forged in a depression and world war. There was a unique independence and self-reliance that characterized the adults that formed my early life-and no amount of money or 'entitlement' could ever replace that experience. I've tried not to juxtapose or unfairly compare one generation against another, but take a look at the news every night; or try to get a rational person on the phone at your bank or pharmacy.
    Jun 25, 2015. 12:12 PM | 2 Likes Like |Link to Comment
  • Inherent Vice [View article]
    Well, no doubt our minds take the road less traveled, and it's enjoyable to come across a kindred spirit-keep up the excellent work!
    Jun 25, 2015. 10:55 AM | Likes Like |Link to Comment
  • Will The Quants Blow Up The Markets Again? [View article]
    The game used to be nothing more elaborate than a little front- running, triggering a few stop losses, buying calls before an upgrade, etc. But dominating the entire market by suppressing volatility to sell puts? Certainly possible. And, no doubt the same geniuses are preparing to reverse course- and likely selling put ratio BACKSPREADS.
    It's all in the game.
    Jun 24, 2015. 03:40 PM | 7 Likes Like |Link to Comment
  • Apple gains following bullish Piper, Morgan Stanley iPhone notes [View news story]
    That's all well and good-but who bought calls yesterday-and why?
    Jun 24, 2015. 11:33 AM | 2 Likes Like |Link to Comment
  • Inherent Vice [View article]
    Excellent article and comments.
    Regarding Nash equilibria, I would note that the broad concept works quite well where one can establish the initial parameters. For instance, if I establish a 'game' of box spreads, I now have a laboratory of tit-for-tat, where each short option spread will succumb or prevail vis-a-vis a unique mathematical formulation. Of course, this formulation is 'unfortunately' subject to rogue human propensities, but that is the source of the option premium and the challenge. We can now introduce Bayes into our little game, and listen to him and he tells us to make adjustments as we refine our observations. Now, if we just left our game to Nash alone we might find that, financially speaking, we are a bit pensive about our returns. But, wait, there's old Pareto over there, he might be useful.
    Diminishing marginal utility/returns is an incredible gift of 17th century scholars. Options traders have labeled the delta's delta (second derivative of change in the underlying) as 'gamma.' Hence, the gamers come up with terms such as 'gamma scalping', 'spike fishing', etc. So, one of my favorite strategies is to wait for the fish to breach the water, make a great leap into the air, only to return to the safety of its equilibrium below. Of course, my goal is to sell the fish at the apex.
    As to uncertainty vs risk, one thing that strikes me is simply that we never know if we live within a stable period of an inherently chaotic distribution (long periods of stability within a chaotic system), or within a relatively stable system characterized by chaotic aberrations. Or does it matter, if we refuse to have an opinion or belief, but rather degrees of belief. Do Bayesians learn from experience, or should we say that they simply revise probability assignments relative to new information? (This is a trifle simplistic, and a critical rationalist would insist on responding with several pages-and by all means have at it).
    But, to return to risk, we tend to think and conceptualize according to the gold standard-the binomial distribution. But could we not be in a very long and complicated transient state? (see e.g. the thoughts of da Costa and Doria). And to borrow from Dawkins, our total existence on this planet, and in this universe, comes down to nothing more than a game of tit-for-tat. Which brings us back to Nash, for it is his sheer mathematical brilliance that allows evolutionary biologists a new dimension into the beginning.
    Jun 24, 2015. 11:24 AM | 3 Likes Like |Link to Comment
  • Grant Williams Says Source Of Next Financial Crisis Impossible To Anticipate [View article]
    The current situation reminds me of the 'boy that cried wolf.' It's an old lesson, but humanity never seems to learn.
    Yet, one can't learn where the mentality is best characterized by another oldie: 'he who knows not and knows not that he knows not'- so we have the colorful parade of the imps, knaves and fools so eloquently expressed in the Bard's famous soliloquy..."Tomorrow, tomorrow and tomorrow..."
    But, what I personally find so horribly pathetic is that an extraordinarily small amount of education can completely flip a perceived negative into a unique opportunity. I'm reminded, though, of yet another old truism-'ignorance is bliss.' So be it.
    Jun 24, 2015. 10:31 AM | Likes Like |Link to Comment
  • Fed's Powell: 50/50 chance of September hike [View news story]
    I like the 50/50-I'll just sell time premium against the middle. Day after day, month after month-the 'new normal' is good for trading. Sell a few spreads, short the vix, play a few bull call spreads on the euphoric mo-mo stocks-nothing but wine and roses.
    Jun 23, 2015. 02:12 PM | 1 Like Like |Link to Comment
  • 2,120 Tuesday: This Time Is Different? [View article]
    Next to Post WWll median income declines, I have felt for several years now that the percentage of kids (above 18) still living at home, is one of the most telling statistics of our time. It's extremely difficult for me to grasp that unique data point (we never had kids-just dogs)-but many of our friends and clients are currently dealing with this issue.
    I suppose I don't have a 'dog' in this situation, but I'm amazed-even astonished-that society just seems to sweep this cosmic aberration under some giant, mythical rug. This phenomenon has actually persisted now for well over a decade, and I began to notice it well before the 2008 financial crash. And, most importantly, the data shows absolutely no improvement.
    It strikes me that, after all these years, we now observe a kind of tacit acquiescence- a reluctant acceptance that we stand at one of the greatest changes in modern history, transfixed not by this momentous shift, but rather by highly scripted and choreographed 'reality' TV.
    Perhaps the 'real reality' is too disconcertingly inconvenient for most. Or perhaps the populace is merely sedated with 'just enough', and still fortified with the gifted legacy so freely and honorably given by past generations. But, hey, why not have a universal no-fault, politically correct society with complimentary wine and cheese? Oh-ok-let's add free netflix.

    Jun 23, 2015. 01:52 PM | 3 Likes Like |Link to Comment
  • Another Major Player Moves To The Internet: Goldman Sachs To Offer Consumer Loans Online [View article]
    I think it's a brilliant idea. Millions of Americans don't use local banks anymore-small banks make it too cumbersome. Why has LC been so successful?
    Even pawn shops provide better service to consumers. The days of the "First National Bank of Main Street USA" exist in a twilight setting. The clock is ticking on their historical existence.
    When I was CEO of a REIT, we had a division that made home improvement/rehab loans to folks that couldn't get credit at their local and friendly small bank. We paid our investors the double-digit interest rates and kept the points. Of course, numerous local banks wanted to extend a line of credit to us and accepted our notes as part of the collateral-so we could keep on lending.
    If GS does this right, they could be the Amazon of click n' lend. They already know how to trade complex derivatives, why would dominating this nascent new wave of cultural change be such a challenge?
    Jun 16, 2015. 05:08 PM | Likes Like |Link to Comment
  • Housing Starts [View news story]
    The residential market is devoid of vibrancy and enthusiasm-for the most part-which reflects the general mood of the average American. That we seek any glimmer of some significant rebound from mediocre statistics just adds to the seemingly intractable malaise.

    We can whistle past the decline in median income until the cows come home, but it's a tune of a dirge, not the sound of a joyful band. I prefer the 'go-go' years of the past, not the cultural schism of today. But, it is what it is-and it's up to each individual to scale Maslow's hierarchy.
    Jun 16, 2015. 02:00 PM | 4 Likes Like |Link to Comment