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Sunday, May 13

13th May - Weekender: Trading & Markets

Here are the week’s markets- and trading-related articles, now even less technical than previously. Follow ‘MoreLiver’ on Twitter or Facebook.  The LTRO and JP Morgan posts have been updated.

Previously on MoreLiver:

Investing In A G-Zero WorldThe Capital Spectator
"A world order in which no single country or durable alliance of countries can meet the global leadership."…It's easy to see a G-Zero world as favorable for investment opportunities, but it's also a world filled with new and uncertain risks.

The Ultimate in High-Frequency TradingAll About Alpha
Messaging with neutrinos?

Inoculation 2012: The Berkshire Hathaway MeetingCove Street
This was my fourth trip to the so-called Woodstock for Value Investors and my latest attempt to capture the majority of the comments made by Warren Buffett and Charlie Munger.

Making Banks Small Enough And Simple Enough To Fail Simon Johnson / Baseline
The proposition is simple: Too-big-to-fail banks should be made smaller, and preferably small enough to fail without causing global panic…But big banks and the Treasury Department both opposed it, parliamentary maneuvers ensured there was little real debate.

Economics professor in London: 'They aren't here to learn, they're here to pass' | Joris Luyendijk The Guardian

Jeffrey Gundlach, Bond Savant Businessweek
Since DoubleLine first took investor money in April 2010, it has amassed $34 billion in assets. Even as it quadrupled in size last year, DoubleLine’s $22 billion Total Return Bond Fund (DBLTX) outperformed 99 percent of its rivals. The firm takes in $80 million to $100 million in new client dollars every day.

Interviews with Julian Robertson & Jim Chanosmarket folly

Derivatives trader: 'The trouble is, regulators are idiots'The Guardian
Joris speaks to a trader about City short-termism, high pay, the excitement of recent years and why he now wants a way out

How Wall Street Killed Financial ReformRolling Stone
It's bad enough that the banks strangled the Dodd-Frank law. Even worse is the way they did it - with a big assist from Congress and the White House.

On Covestor, Copycat Traders Auto-Buy as Mirror Trading Takes Off Beta Beat
A few years ago, Covestor pivoted to emphasize an even weirder business: mirror trading. In addition to merely watching Mr. Sykes make his millions from his Columbus Circle apartment, one can share the wealth by automatically mirroring his moves.

CFA Conference: Eugene FamaAbove The Market
some bullet points from Fama’s presentation

John Hussman on the unsustainability of high-growth and AppleCan Turtles Fly?

Winning Methods of the Market Wizard - Jack Schwager Youtube
1 hour video.

CFA Conference: James MontierAbove The Markets
Quick lecture notes. GMO’s asset allocator, previously SocGen’s co-head of global strategy. The focus: bad models. bad policies, bad incentives and bad behavior. EDIT: just found the video

James Montier on why investors struggle to follow the Magic Formula: Cognitive Biases and Behavioral ErrorsGreenbackd

Diversification: Still the Only Free Lunch - dshort
To diversify you need low correlations – and thus by minimizing correlations, you minimize the variance!

How to Beat the Market, and Why Most Investors Don'tdshort
Value and momentum work, but sometimes they underperform for a year or two. Stick with the strategy and don’t switch after a period of sub-par performance!

Angels, Pinheads, Capital Gains and DividendsThe Psy-Fi Blog
Are dividends really redundant? Many investors do not think so.

Asset correlations with minimum variance portfoliosPortfolio Probe
The minimum variance portfolios have slightly reduced correlations to assets in weight-constrained portfolios.

Billion-Dollar Traders Quit Wall Street for Hedge FundsBB
As banks slash or defer pay and reduce the amount they’re willing to wager, the traders are seeing better opportunities at hedge funds and investment firms that seek to profit in markets lenders are retreating from.

Hedge funds head for big banana skinFT
Diversification has proven the most robust survival mechanism against failures of judgment by any one society, hedge fund manager or style. But what if we are now a single global hedge fund community afraid to take stop losses and convinced of an inflationary outcome to be all short US Treasuries and long real assets?

Hedge Fund Inflows Slowing, a Report IndicatesDealBook / NYT
Inflows into hedge funds rose $2.3 billion in March, a significantly slower pace than the $6.8 billion increase in February. It is also much slower rate than the $13.9 billion of inflows posted in March 2011.

Infographic: The Worlds Richest Hedge Fund Managers Exposedmathfinance

Euromoney FX Fistfight Is Over for Another YearThe Source / WSJ
The small fries have taken a beating this year as the biggest banks have stolen a still-bigger proportion of the market share. This year, the top five FX-dealing banks share a whopping 55% of the $4 trillion-a-day market.

CDS and Synthetic CDOs ExplainedThe Big Picture
(video) Nationally renowned forensic accounting expert, Thomas A. Myers, explains the fundamentals of credit defaults swaps and synthetic CDOs (collateralized debt obligations).

Strategic Briefing: The Outlook For Oil PricesThe Capital Spectator
Links and summaries of recent articles

Long Term Secular Cycles on S&PThe Big Picture
Some nice-looking charts – inflation-adjusted.

Facebook – Retail RoadshowFacebook

Don’t Fight the Last War: Lessons from the Battlefields of Risk ManagementCredit Writedowns
Dealing with the unexpected - Stability breeds instability - Correlated mistakes - One-dimensional thinking - The all important question

JP Morgan Loss Bomb Confirms That It’s Time to Kill VaRnaked capitalism
The good news is the regulators seem to be a step ahead of Dimon in turning their backs on VaR. FT Alphaville last week reported on the latest missive from the Basel Committee on Banking Supervision on capital requirements for bank trading operations. They said they don’t like VaR and want to move to other metrics

History of Value-at-Risk: 1922-1998Holton (pdf)
27-page working paper.