God Bless The Golfers And Bowlers.

God bless anyone who, like Stephen Innes, head of trading for Asia Pacific at Oanda, gave up and went golfing last week. I'd be willing to bet that a lot of gray hairs were generated over the past five sessions as a result of over-the-top hand-wringing and torturous attempts to divine "what is going on" across markets. I'd also be willing to bet that a lot of clicks were generated across the financial media/blogosphere in the course of breathlessly documenting every conceivable explanation for

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11 thoughts on “God Bless The Golfers And Bowlers.

  1. Those banks write about the official exchanges like Nasdaq and Nyse. Large sized trades pass through the dark pools. Those same banks contributed to the development and actually manage dark pools. Weird that they don’t mention anything about it.

    Outside US (they are forbidden there), CFDs have become the main trading product for retail investors.
    Non US retail traders don’t trade real stocks again, because CFDs offer leverage. Brokers quote them on their platforms and match buy sell orders internally.
    European retail traders like me that trade real futures or stocks are only a few. I know what I’m saying, it’s not just a feeling. I talk to dozens of traders every day, and attend some forums.
    I prefer the real stuff to avoid counterparty risk, operational risk.

    Volatility originates from a mismatch of sell and buy orders ex-ante. Obviously once the market clears for a size and price, sell volumes are equal to buy volumes. But ex-ante there was an unbalance. Say there are 1000 stocks on sale, and 600 on the buy side. The only way to create additional demand for 400 stocks is to push prices lower, and some potential buyers will deem interesting the lower prices, they will bid 400 stocks, and voilà…the market balanced. The potential demand became real demand with a lower price.

    The more the unbalance the higher the price change (the higher the volatility).
    So the real question is why at some point there are many sellers and very few buyers, and to “convince” people to buy, prices have to drop considerably? Because some new info came to the market, in the end volatility is caused by a flow of info. If this info is really relevant for stocks or not it doesn’t matter, market participants perceive it as relevant and think stocks deserve a lower price. We can’t enter into the mind of millions of traders and investors and know what they think, what they have in mind, and why. We can’t convince them in a few minutes, hours, that what they think may be wrong.

    The only thing we can do is either not to trade (and go playing golf) or trade the market for what it is, nor for what we would like it to be. Personally I still trade it, and I reduced size, leverage, to cope with it. It’s a good training and experience after all and it can also be a good opportunity. I would never go playing golf with this market, but this is my choice. I go on holiday when the market is stuck and goes nowhere. I prefer this mad December to the quicksand of some summer days or the 2017 days where spx was moving 12 points a day.

    I don’t care that volatility is high if I can buy at 25% discount good quality stocks.
    Those who can’t stand high volatility….. it’s time to retire 🙂
    They want to gain without working. Buy at 9am then insert autopilot, read newspapers and chat on the phone. Ah the good days of 2017 they think.
    It’s hard work now, but it’s well remunerated. Let the market weed out those guys, and eliminate the hedge funds that sucked and have been among the worst asset class performance speaking.
    Price discovery is good, and some guys became too lazy.

    Amen 🙂

    1. “Outside US (they are forbidden there), CFDs have become the main trading product for retail investors.”

      CFDs are also illegal in Canada and Hong Kong, if I’m not mistaken.

      In Japan, where I live, CFDs are a niche product, available for only a handful of stocks, and only at a few brokerages. The great majority of retail investors buy actual stocks on Japanese and international exchanges.

  2. I know. At least for Bloomberg. They need gimmicks to overcome their bad audio. I literally complained to them about it, but they didn’t listen. The others are not invited into my home, so I will take your word about those .

  3. To me it sure seemed like a lot of investors were taking on a lot of risk for most of the year.

    Illiquidity tends to create mispricings and if an investor can realize that then it can be a friend rather than a foe (especially for small funds, individuals, those not tied to short termism – which renders most money managers out sadly). Of course if those mispricings feed into the economy then the thesis/mispricing changes. But if it contained in a short period I view it as opportunity either way (long or short).

  4. And why do they try to give reasons? To justify their existence to the boss or clients. Trust me they are always looking for an answer and 99.9% of the time “I don’t know” doesn’t cut it. Because the guy gunning for your job will have 3 reasons even if they have no clue because bs is better than “I don’t know”. You know that HR.

  5. ” R-sqrd in 2018 from 5% to 45% in 2018.” Got it, whatever the fuck THAT means but I’m sure I can use it!

    “While many investors have suggested that the increase in electronic trading and passive investment vehicles has led to reduced liquidity, we believe simple risk aversion among professional investors is the more likely driver” – Pot meets kettle. It seems to me that the world of financial punditry is populated with people that will say anything that that they think someone else will believe. It doesn’t even have to be a good guess.

    1. R = 0 the model doesn’t explain anything. R = 1 the model is able to explain perfectly everything.
      At 0.05 (5%) they had no clue, at 45% they are starting to see the light but they are still far from having a good model that predicts volatility. The fact that R went from 0.05 to 0.45 means that liquidity factors are important. But they are not the only factor, there is still a 0.55 gap to explain.
      Note that it’s not about explaining past volatility (an easier task), but about predicting future volatility (a very difficult task).

      There are some guys who are doing an interesting work on how the info changes and becomes narrative. And how to try to calculate the future without relying on past data. The H. mentioned them sometimes.
      For instance read these:

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