The Music Goes on and on

(27-08-2015, 04:03 PM)CityFarmer Wrote:

(27-08-2015, 01:46 PM)greengiraffe Wrote: Aiya,

So long as human against robots sama sama and its just another name...

Still create volatility...

I too old to debate about names especially since they change the whole paradigm of trading and takes advantage of the emotions of mkt participants...

GG

Ok lah, but we can't blame higher productivity with "robot" as long as both are competing on same ground, right bo?

Taxi driver (or Taxi companies) can't blame the invention of GrabTaxi, albeit the GrabCar is debatable...

dunno lah endless debate...

now a days i want to buy or sell, i just hoot seldom q else kanna front run by robots

Fed decision still the focus point...

Stocks fly after Fed official cools September rate hike talk

LONDON - Stocks surged on Thursday, following the biggest gains on Wall Street in four years, after a U.S. Federal Reserve policymaker said the case for an interest rate increase next month "seems less compelling" than it was a few weeks ago.

Increased appetite for risk also lifted crude oil prices further from last week's lows. The price of government bonds and the Japanese yen fell.
...
http://www.todayonline.com/business/asia...lar-surges

Haha after recovery this week it will be compelling for rate rise then?? Fed play market or market play fed hahaha

sent from my Galaxy Tab S

(27-08-2015, 06:04 PM)greengiraffe Wrote:

(27-08-2015, 04:03 PM)CityFarmer Wrote:

(27-08-2015, 01:46 PM)greengiraffe Wrote: Aiya,

So long as human against robots sama sama and its just another name...

Still create volatility...

I too old to debate about names especially since they change the whole paradigm of trading and takes advantage of the emotions of mkt participants...

GG

Ok lah, but we can't blame higher productivity with "robot" as long as both are competing on same ground, right bo?

Taxi driver (or Taxi companies) can't blame the invention of GrabTaxi, albeit the GrabCar is debatable...

dunno lah endless debate...

now a days i want to buy or sell, i just hoot seldom q else kanna front run by robots

Forced selling by quantitative traders increases stock price volatility
DateAugust 28, 2015 - 9:31AM

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Lu Wang

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Volatility in the US equity market is being whipped up by traders who don't care what stocks are worth, according to an analyst at JPMorgan Chase & Co.
Selling by "price insensitive" investors employing strategies that take their cue from recent trends in stocks is worsening this week's swings, according to Marko Kolanovic, a derivatives strategist at the New York-based bank. In particular, he cited forced selling by traders who hold positions known on Wall Street as "short gamma", a bet that prices won't move much.
The research comes about a week after the Standard & Poor's 500 Index was knocked out of a trading range that had supported it for about seven months. Sudden moves like that one spur computerised traders to buy and sell, exacerbating moves past what is justified by the economy and earnings, Kolanovic wrote.
"Everybody knows about it," said Julian Emanuel, executive director of US equity and derivatives strategy at UBS Securities in New York. "If you look back over the last five, six years, any time we have seen a period of excessive volatility like we've seen in the past two weeks, strategies such as those which typically are short gamma and basically need to rebalance at the end of the day."
Kolanovic cited three types of quantitative strategies specifically: trend followers, risk parity traders and funds that adjust holdings when volatility in the market rises or falls. Such investors have hundreds of billions of dollars in assets and the power to move markets, he wrote.
Together, institutions employing the tactics could force up to $US300 billion of selling in the US market over the next several weeks, according to the note.
"The obvious risk is if these technical flows outsize fundamental buyers," Kolanovic wrote. "In the current environment of low liquidity, they may cause a market crash such as the one we saw at the US market open on Monday."
The Dow Jones Industrial Average plunged more than 1000 points in the first minutes of trading following last weekend, sending gauges of price swings in the US market to jump the most on record.
Quantitative traders have been blamed for market disruptions in the past. Losses approaching 3 per cent in the S&P 500 in two days in early August 2007 were ascribed in a study by the Federal Reserve Bank of New York to program traders using strategies tied to various momentum indicators.
The 19 per cent retreat in the S&P 500 during August 1998 occurred as hedge fund Long-Term Capital Management, at the time one of the biggest quant funds, was imploding.

(28-08-2015, 11:35 PM)greengiraffe Wrote:

(27-08-2015, 06:04 PM)greengiraffe Wrote:

(27-08-2015, 04:03 PM)CityFarmer Wrote:

(27-08-2015, 01:46 PM)greengiraffe Wrote: Aiya,

So long as human against robots sama sama and its just another name...

Still create volatility...

I too old to debate about names especially since they change the whole paradigm of trading and takes advantage of the emotions of mkt participants...

GG

Ok lah, but we can't blame higher productivity with "robot" as long as both are competing on same ground, right bo?

Taxi driver (or Taxi companies) can't blame the invention of GrabTaxi, albeit the GrabCar is debatable...

dunno lah endless debate...

now a days i want to buy or sell, i just hoot seldom q else kanna front run by robots

Forced selling by quantitative traders increases stock price volatility

The traders are our friends, who has made our value investing, a sustainable, and lucrative venture. 

(29-08-2015, 09:58 PM)CityFarmer Wrote:

(28-08-2015, 11:35 PM)greengiraffe Wrote:

(27-08-2015, 06:04 PM)greengiraffe Wrote:

(27-08-2015, 04:03 PM)CityFarmer Wrote:

(27-08-2015, 01:46 PM)greengiraffe Wrote: Aiya,

So long as human against robots sama sama and its just another name...

Still create volatility...

I too old to debate about names especially since they change the whole paradigm of trading and takes advantage of the emotions of mkt participants...

GG

Ok lah, but we can't blame higher productivity with "robot" as long as both are competing on same ground, right bo?

Taxi driver (or Taxi companies) can't blame the invention of GrabTaxi, albeit the GrabCar is debatable...

dunno lah endless debate...

now a days i want to buy or sell, i just hoot seldom q else kanna front run by robots

Forced selling by quantitative traders increases stock price volatility

The traders are our friends, who has made our value investing, a sustainable, and lucrative venture. 

That one, I agree but have to work very hard in order to see through all the noise...

New GFC? Fortress hedge fund manager David Dredge says markets trouble on the way
DateSeptember 2, 2015 - 2:59PM

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Jonathan Shapiro
Senior Reporter

The recent convulsions in global sharemarkets are "just the beginning" of a painful adjustment, writes Jonathan Shapiro.


Markets nervous over China 'confessions'
Shares in British hedge fund manager Man Group Plc have fallen following a report that the head of its China unit has been taken into custody as part of a probe into the country's recent market volatility.


David Dredge of global hedge fund Fortress has built a career studying, predicting and protecting against the world's major financial crises. The recent convulsions in global sharemarkets are "just the beginning" of a painful adjustment as money drains from the emerging market economies, he says.
"August 2015 will go down in the record books, much like July 2007 or July 1997, as the beginning of the coming contractionary cycle," says Dredge who is the co-chief investment officer of Fortress Convex Asia Fund.

David Dredge, Fortress Wrote:August 2015 will go down in the record books, much like July 2007 or July 1997, as the beginning of the coming contractionary cycle. 

He's a believer that markets move in long cycles, which "despite all efforts to the contrary, central bankers have not by any means gotten anywhere close to eliminating".

"Like weathermen have not eliminated seasons," he says.
Singapore-based Dredge says the current volatility in financial markets is in the early stage as markets react to a correction of global imbalances that will last from18 months to three years.
The global economy is made up of nations with a deficit of capital – the West – and those with a surplus of capital – the East and emerging markets, he explains.
Policy determined by deficit
"The flaw is that those with the surplus have all tied their currency to the main protagonist on the deficit side – the US.
"So monetary policy is determined by the deficit of capital side and flows through the currency linkage, and you end up having some form or another of the same monetary policy on both sides, with economies that are 180 degrees diametric to each other."
The financial links to easy-money policies in the US have unleashed a burst of credit expansion in emerging markets that has proved unsustainable and is now in the process of unwinding.
That is forcing a painful "market-induced tightening" that will affect  the growth of emerging markets as credit expansion is halted and reverses.
The "simplest measure of these imbalances" is foreign exchange reserves, which have swelled in the past few years but are now being liquidated, tightening financial conditions in emerging markets.
"When the hose is on and credit is pouring from the deficit to the surplus side, the FX [foreign exchange] reserves increase and are indicative of the growing size and the location as to where the imbalances exist – because that's where the most money is going."
China's foreign currency reserves peaked at $US4 trillion ($5.7 trillion) in mid-2014 but have since run down to about $US3.6 trillion.
'In the inverse of imbalance'
"Each crisis occurred at the peak of FX reserves. The emerging-market FX-reserves graph looks exactly like the US debt to GDP because they are just in the inverse of the imbalance."
Dredge says that differentiating among emerging economies misses the point of what is occurring. Capital is draining from the emerging markets as conditions have tightened, and has been since the "taper tantrum" of May 2013.
"In December 1999 the point wasn't whether you should invest in Apple or Microsoft. The point was they were both going down [as the tech bubble deflated]. And that's where we are now.
"The [credit] contraction might be triggered in China with retail margin lending in the equity market, or in Malaysia with recognition of corruption.
"But the trigger is not what we are trying to compare. It's the potential risk, which is the excess credit creation in the last cycle. In that sense Brazil, China and Malaysia are all the same."
Dredge co-manages the Convex Asia fund, a "volatility fund", which manages about $US200 million and seeks to deliver outsized gains in times of market stress.
Stay ahead of spreading fire
He says he's attempting to stay ahead of the spreading fire and that means looking for cheap exposures to volatility. Interest rate volatility is low and, while foreign currency volatility may have risen, it is below many of the peaks reached over the past five years. Corporate credit spreads, too, are around post-financial crisis lows despite a fair-sized correction in corresponding equities.
"This is indicative that we're just at the very beginning of this," Dredge says.
Where does Australia fit in as the cycle turns dark for emerging markets? We're special in the sense that we have not pegged our currency to the US.
"It is just about the only non-manipulated currency in the entire world, along with New Zealand. By allowing the currency to move and avoid being a hard linkage to the monetary policy whims of the global reserve currency, it takes a lot of the pressure off."
But there has still been a build-up of risks as credit has grown virtually interrupted and our economic linkages to China make us vulnerable to, not immune from, any shocks.
"Australia came through many of the last several cycles better than most because most of the volatility was allowed to take place in the currency.
"This has allowed the asset volatility to be far less than it otherwise would have been. But that means credit has built up and imbalances, while far less than they would have been, have been allowed to persist."

Bill Gross: Fed tightening cycle could create self-inflicted financial instability

NEW YORK: Bond guru Bill Gross, who has long called for the Federal Reserve to raise interest rates, said on Wednesday that U.S. central bankers may have missed their window of opportunity to hike rates earlier this year and normalizing them now could create "self-inflicted financial instability."

In his September Investment Outlook report, Gross wrote that his concept of a neutral policy rate closer to a nominal 2 percent "now cannot be approached without spooking markets further and creating self-inflicted financial instability."

The neutral rate is the point at which the rate is neither stimulative nor contractionary.

The Fed seems intent on raising the fed funds rate this month if only to prove that they can begin the journey to normalization, said Gross, who runs the Janus Global Unconstrained Bond Fund .

"They should, but their September meeting language must be so careful, that 'one and done' represents an increasing possibility – at least for the next six months," Gross said.

"The Fed is beginning to recognize that 6 years of zero bound interest rates have negative influences on the real economy – it destroys historical business models essential to capitalism such as pension funds, insurance companies, and the willingness to save money itself. If savings wither then so too does its Siamese Twin – investment – and with it, long-term productivity, the decline of which we have seen not just in the U.S. but worldwide."

Gross said: "The global economy's finance-based spine is so out of whack that it is in need of a major readjustment. In this case, even the best of chiropractors could not even attempt it. Nor would a one-off fed fund increase straighten it out."

He suggested that major global policy shifts – all in the same direction – should emphasize government spending as opposed to austerity, and that countries recognize that competitive devaluations do nothing but allow temporary respite from the overreaching global problem of too little aggregate demand versus too much aggregate supply.

"It is demand that must be increased – yes China must move more quickly to a consumer-based economy – but the developed world must play its part by abandoning its destructive emphasis

on fiscal austerity, and begin to replace its rapidly decaying infrastructure that has been delayed for decades," Gross said.

Overall, Gross said "super-size" August movements in global stocks are but one sign that something may be amiss in

the global economy itself, China notwithstanding.

(Reporting By Jennifer Ablan; Editing by Chizu Nomiyama)

- Reuters

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•  Aug 26 2015 at 12:12 PM 
   
  
  
•  Updated Aug 27 2015 at 8:10 AM 
  

Low interest rates make the unthinkable routine

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NaN of
[img=620x0]http://www.afr.com/content/dam/images/g/j/7/v/y/t/image.related.afrArticleLead.620x350.gj7uly.png/1441150457042.jpg[/img]Low interest rates have fueled asset bubbles and busts. Reuters
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by Maximilian Walsh
A few years ago  Andrew Haldane, the chief economist at the Bank of England, told a British parliamentary committee that global interest rates were at the lowest-ever level. A wise colleague challenged him afterwards: "How do you know they were not lower in Babylonian times?"
Recalling this exchange at a speech given recently to the Open University in London, he told his audience: "Several exhausted research assistants later, I can report that, luckily, I was on safe ground. Interest rates appear to be lower than at any time in the past 5000 years."
We should probably not be surprised at the longevity of the historical record of interest rates. However, this continuous and detailed record of what could be called the history of money sits rather uncomfortably with our limited ability to understand just how money works.
As it happens, Haldane's latest speech mentioned above was delivered within days of the Bank for International Settlements' (BIS) 85th annual report. The BIS economics team was lead by Claudio Borio, head of the Monetary and Economic Department. The timing of these contributions to the global debate on why the recovery from the global financial crisis has been so slow and fragile is quite auspicious.

The US Federal Reserve is deciding when to begin returning interest rates towards their historical level. Until last week's sharp correction across global equity markets, the first step of tightening was considered  likely to occur at the Fed's September meeting. Haldane and Borio agree that ultra-low interest rates are wreaking damage. Haldane recalled Walter Bagehot's aphorism: "John Bull can stand many things, but he cannot stand 2 per cent."
Before 2009, the Bank of England had heeded this advice, as it had done during its previous 315-year history. Since 2009, the 2 per cent rule has been breached repeatedly and financial markets say it will not rise back to 2 per cent until 2019. The British experience is not unique. Global real rates have been falling for more than three decades. They averaged 5 per cent in the 1980s and 4 per cent in the 1990s. So far this century they have averaged 2 per cent. Currently they are about zero or slightly negative.
DREAD RISK AND RECESSION RISK
The explanations for this secular fall in global real rates include the slowdown of China, excess savings in Asia, deficient investment in the West, worsening demographic trends and rising inequality. Haldane, however, focused on two other factors: dread risk and recession risk. The first, he said, generates an elevated perception of risk, the second an asymmetric balance of risk. Both  were relevant to explaining the path of interest rates, the probable fortunes of the economy and the optimal setting of monetary policy, he said.


Dread risk describes how catastrophic events generate an exaggerated sense of fear and insecurity. Haldane said while this might be irrational, its anthropological roots were deep and went back to hunter-gatherer communities that existed thousands of years ago.
He cited how the dread risk associated with 9/11 led to an exaggerated fear of flying and a sharp rise in car use. "The self-same logic applies when moving from catastrophic losses of life to catastrophic losses of livelihood. Financial crises are classic example of such catastrophic events." He pointed out that the widening of the equity-bond wedge, the so-called equity premium puzzle, had occurred for several decades after the Great Depression.
The global financial crisis has generated the same precautionary responses by governments, corporations and households, with interest rates falling as investors choose safer assets. Haldane said: "The psychological scars of the Great Recession, as after the Great Depression, have proved lasting and durable. They help explain the sluggishness of the recovery, and the adhesiveness of interest rates, since the crisis. And if the past is any guide, these scars may heal only slowly."
Then there is precaution risk. Based on historical data that dates to 1945, the probability of a recession runs at about 12 per cent, or about one year in every 10. 

Haldane said: "If financial markets' guesses about interest rates are realistic, it is odds-against there being sufficient monetary policy headroom to cushion a typical recession." After Australia's long run of recession-free years, a return to a typical pattern of recessions could be traumatic for an economy that has become quite complacent about such a development.
ECONOMIC TIME MOVES SLOWLY 
Borio shares Haldane's concern about the incremental and extended duration of economic change, of just how long it takes for the scars of the casualties to heal. He said when outlining the BIS annual report: "You'd hardly know it from financial markets' constant frenzy and round-the-clock media razzamatazz that eggs them on. But economic time moves slowly, much more slowly. The developments that really matter and shape our lives take a long time to unfold. Economic time should be measured in years or decades, not in minutes or microseconds."
And, like Haldane, he has been confounded by the behaviour of interest rates in the face of massive stimulatory measures launched by central banks. Until last week's rout in financial markets, all of the macroeconomic indicators were flashing green – except interest rates.

Borio pointed out that interest rates "have been exceptionally low for an extraordinary long time, against any benchmark ... negative bond yields that prevailed in some sovereign bond markets were unprecedented." They have "stretched the boundaries of the unthinkable".
He saw the persistence of exceptionally low interest rates as reflecting the response of central banks and market participants "as they fumble in the dark in search of new certainties". Now the BIS fears that these low rates might not be "equilibrium ones, conducive to sustainable and balanced global expansion".
Rather than just reflecting the current weaknesses, they might in part have contributed to it by fuelling financial bubbles and busts that create expensive financial imbalances and delay adjustment.
As Borio put it: "The result is too much debt, too little growth and too low interest rates. In short, low interest rates get lower rates."
Borio called his team's paper "Is the unthinkable becoming routine?"
Haldane settled on "Stuck".
Maximilian Walsh is deputy chairman of Dixon Advisory and is a former editor and managing editor of The Australian Financial Review.

AFR Contributor

• Sep 11 2015 at 4:05 PM 
   
  
  
•  Updated Sep 11 2015 at 4:05 PM 
  

Perfect one day, a washout the next

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Promises and targets from the G20 meeting of finance ministers in Cairns 12 months ago now seem like a distant memory, writes Jacob Greber.

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by Jacob Greber
It was only a year ago in the sweaty tropical holiday atmosphere of Cairns that Joe Hockey clinched a deal with the world's leading finance ministers to save the world economy.
For a treasurer just 12 months into the job, it was a hefty achievement. Basking in the afterglow of getting within striking distance of a target to boost global growth by 2 per cent over five years, Hockey declared, "By God, we've made great strides in Cairns."
Hundreds of "concrete" proposals by Group of 20 member states would kick-start a fresh wave of growth to excise the ghosts of the global financial crisis after more than half a decade of recession, joblessness, budget and debt crises, and market turmoil.
Twelve months on and, perhaps not surprisingly, it's clear not much has changed.

Financial markets have been on tenterhooks for much of the year over three big questions, in ascending order of importance; Greece; the US Federal Reserve's will they, won't they September rate meeting; and the future of China, for which 2015 marks its arrival on the global stage as the main influencer of sentiment in just about every asset market imaginable.
The common theme across all three questions? Not enough sustainable growth, too much reliance on monetary policy and debt-fuelled government spending.
Which was supposed to be the point of Cairns: a chance to reset the agenda, reboot growth.
Yet there is a growing sense of despair that hopes for a lasting worldwide recovery have again been delayed, hurting the credibility of the G20 and Hockey, who campaigned hard for the agreement.


MUST TRY HARDER
"Downside risks to the outlook have increased," said International Monetary Fund managing director Christine Lagarde this month, repeating what must surely be the most overworked line of her four-year stint in the job.
G20 finance ministers meeting in Turkey's capital Ankara in early September conceded sheepishly that the globe was once again falling "short of expectations".
Boffins at the Organisation for Economic Co-operation and Development – charged with monitoring progress on Hockey's 2 per cent growth target – estimate that only a third of more than 700 commitments made by the G20 under Australia's presidency have been implemented.

More "effort is needed", the group declared in its official communiqué. No kidding.
What has become apparent is that so many of the growth pledges involved a fair bit of padding – in Australia too, which was always likely to some extent, given they were being written by professional politicians.
Yet the lack of genuine progress on many of the goals underlines how fraught the business of government has become.
Hoping to set the example, Hockey provided a long list of pledges that Australia would undertake. A year later, many of them are in tatters.

The Treasurer counted as part of his G20 growth contribution the Coalition's infrastructure asset recycling initiative which has been wounded by the return of Labor governments in Queensland and Victoria.
Another was the government's May 2014 budget proposal to cut dole payments for job seekers under 30, scrapped earlier this year. Same story with Prime Minister Tony Abbott's unpopular paid parental leave scheme.
In industrial relations, Hockey nominated the re-establishment of the Australian Building and Construction Commission – another washout.
Add to the list Christopher Pyne's troubled – and now stalled – plan to deregulate the higher education system.
Most fundamental of all, Hockey and Abbott's 2014 obsession with debt and deficit is now well and truly on the backburner.
What, in the wake of all that failure, does the Abbott government now stand for on economic policy?
With a performance like that being replicated around the world, there's a good chance next year's G20 will be even more dispiriting. Perhaps the 2016 host, China, can inject some fresh vigour.