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Saturday, April 12

12th Apr - W/E: Markets & Economics

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Dare to be great IIOaktee Capital
The real question is whether you dare to do the things that are necessary in order to be great. Are you willing to be different, and are you willing to be wrong? In order to have a chance at great results, you have to be open to being both.

Recap: Drive-byGlobal Macro Trading
Whatever the reason, equities are in a tough spot technically.

Some Chart ObservationsGlobal Macro Trading

Biggest Credit Bubble in History Flashes Warning: ‘Seek Cover’Testosterone Pit
Hidden in the IMF’s just released 188-page Global Financial and Stability Report is a doozie of a chart that screams not only “credit bubble” but also flashes a red warning sign: “seek cover, implosion in sight.”

Computer Strategies Often Rely on Unsound Math, Researchers SayBB
Strategies that use computer models to predict future market moves are often based on selective historical data, the authors said in the paper, “Pseudo-Mathematics and Financial Charlatanism: The Effects of Backtest Overfitting on Out-of-Sample Performance.” The results lead to “the proliferation of investment products that are misleadingly marketed as mathematically sound”.

Faber: Own Most-Beaten-Down

The forever elusive α Statistical Ideas
With such daunting odds, what advice is there for people who dimly choose to speculate anyway, tying up large amounts of their human capital?  There are five specific advice here to impart.

The Machines Gain Ground in FXWSJ
Global probes into the FX market are accelerating the industry shift from voice to computerized system.

The Oracle of Omaha, Lately Looking a Bit OrdinaryNYT
Using a series of statistical measures, the study suggests that Mr. Buffett has indeed been blessed with an impressively big dose of alpha over a very long career. But it also reveals something that isn’t impressive at all: For four of the last five years, Mr. Buffett has been doing worse than the typical, no-frills Standard & Poor’s 500-stock index fund — so much worse that it’s unlikely to be a matter of a string of bad luck. Mr. Buffett has begun to behave like an investor with no alpha at all.

A quant lesson from a technicianHumble Student
No quant model for all seasons * Barriers to entry to quant investing are falling * You have to learn to be a market savvy strategist - because good quant techniques aren`t going to cut it anymore.

Tough Swap Standards Drive Up Trade Costs 92-Fold – BB
Derivatives Rules Softened in Victory for Banks – BB
Banks Win, Proposed "Toughened" Basel Rule "Seems To Have Evaporated" – ZH

High Frequency Trading: All You Need To KnowZH
In the aftermath of Michael Lewis' book "Flash Boys" there has been a renewed surge in interest in High Frequency Trading. Alas, much of it is conflicted, biased, overly technical or simply wrong. And since we can't assume that all those interested have been followed our 5 year of coverage of a topic that finally has earned its day in the public spotlight, below is a simple summary for everyone.

1215095 - The Flash Boys Mystery SolvedZH
The Father Of High Speed Trading Speaks: "The Market We Created Is A Casino; A Complete Mess; A Rigged Game"ZH

Scrutiny of High-Frequency Trading Weighs on Online BrokeragesWSJ

The SEC's Internal Battles over Goldman Sachs ProbeThe Americal Lawyer
Now, more than 2,000 pages of documents newly released by the SEC in response to an American Lawyer Freedom of Information Request sheds fresh light on the Abacus case. They show deep internal divisions at the SEC over the investigation and charging of that case, as one veteran lawyer relentlessly pushed for the SEC to target a more senior Goldman executive, and ultimately failed.

SEC Goldman Lawyer Says Agency Too Timid on Wall Street MisdeedsBB
A trial attorney from the SEC said his bosses were too “tentative and fearful” to bring many Wall Street leaders to heel after the 2008 credit crisis, echoing the regulator’s outside critics.

Yes, the SEC was colluding with banks on CDO prosecutionsFelix Salmon / Reuters
Now that this information is public, the SEC should apologize to all of us for its behavior, and promise not to collude with Wall Street again. If it doesn’t, that’s a clear sign that Wall Street’s most salient watchdog is still as captured as ever.

Global manufacturing PMI tracker: Growth robust in MarchTradingFloor

Austerity, journalists and the financial sectorMainly Macro
The argument that current growth (since 2013 in the UK and maybe from 2014 in the Eurozone) vindicates austerity is ludicrous. Anyone who comes to the debate without existing baggage can see that developments in the UK and Eurozone have been entirely consistent with what academic critics of austerity have been saying. So rather than go over the arguments yet again, let me ask why some people continue to make or support this ludicrous argument.

G-20 Deeply Disappointed U.S. Preventing IMF-Resources BoostBB
G20 gives U.S. year-end deadline for IMF reformsReuters
Emerging FX: No longer crawlingThe Economist
The number of economies using hard-currency pegs has actually gone up a bit over time. And free floating, which peaked right before the global recession, has lately gone out of fashion. But the big shifts, as it turns out, are in the hybrid exchange-rate regimes. In particular, there has been a broad move away from crawling pegs and toward managed floats. That represents a net move toward more liberalised exchange rates, but it's not the same thing as a general move to floating.

Chief Economist Of Central Banks' Central Bank: "It's Extremely Dangerous... I See Speculative Bubbles Like In 2007"ZH

The Growing Divide Within Developing EconomiesProject Syndicate
Look around the developing world and you will see a bewildering fissure opening up between economies' leading and lagging sectors. Worse, in many developing countries, the share of employment in these low-productivity sectors is expanding.

The slumps that shaped modern financeThe Economist
Finance is not merely prone to crises, it is shaped by them. Five historical crises show how aspects of today’s financial system originated—and offer lessons for today’s regulators

Greed Is Good: A 300-Year History of a Dangerous IdeaThe Atlantic
Not long ago, the pursuit of commercial self-interest was largely reviled. How did we come to accept it?

Why We’re in a New Gilded AgeThe New York Review of Books
Paul Krugman: Thomas Piketty, professor at the Paris School of Economics, isn’t a household name, although that may change with the English-language publication of his magnificent, sweeping meditation on inequality, Capital in the Twenty-First Century. Yet his influence runs deep. It has become a commonplace to say that we are living in a second Gilded Age—or, as Piketty likes to put it, a second Belle Époque—defined by the incredible rise of the “one percent.”

IMF/World Bank Spring Meetings: Three QuestionsCFR

Explainer: Why is deflation so harmful?CBS News

Who really benefits from EM export feedback loops?FT

Manipulate Me: The Booming Business in Behavioral FinanceBB

Monetary Policy in the New NormalIMF
The current debate on the shape that monetary policy should take after the crisis. It revisits the pros and cons of expanding the objectives of monetary policy, the merits of turning unconventional policies into conventional ones, how to make monetary policy frameworks more resilient to the risk of being constrained by the zero-lower bound going forward, and the institutional challenges to preserve central bank independence with regards to monetary policy, while allowing adequate government oversight over central banks’ new responsibilities. It will draw policy conclusions where consensus has been reached, and highlight the areas where more work is needed to get more granular policy advice.

Are Countries Better Off with Their Own Monetary Regimes?PIIE
What is the best monetary regime for countries facing such stresses? The answer is that no monetary regime is best for all countries, at all times, in all circumstances, including times of stress.

Global solar dominance in sight as science trumps fossil fuelsThe Telegraph
Solar power will slowly squeeze the revenues of petro-rentier regimes in Russia, Venezuela and Saudi Arabia. They will have to find a new business model, or fade into decline