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Doin' It Bloggystyle: Ben's Intervention Up In Smoke


Minyanville brings together the best of what they are saying "out there" about the topics we're talking about right here.

Blogs themselves need no introduction, as they get as much publicity as pretty much anything these days, save maybe the latest Britney news. There's an expanding world of excellent financial blogs, covering just about everything, from global economics to swing trading. Minyanville's goal is to bring together the best of what they are saying "out there" about the topics we're talking about right here.

How Quickly They Forget
  • Lots of excitement about Goldman (GS) propping up their alpha fund.
  • Blogging Stocks wonders whether the whole asset base was obliterated, and why Goldman needs outside investors for such a once-in-a-lifetime opportunity.
  • Felix Salmon asks if the worst is over.
  • Kind of harkens all the way back to June, when Bear (BSC) did the same thing.
  • How did that turn out? Not so great, Bespoke reminds us.
More Between the Hedges
  • Is it me, or do some quant strategies breakdown in a monstrous way every couple years? And it's always some highly leveraged massive bet on something that works 99.46% of the time, but it's a hit on the .56% of the time that it goes wrong that puts it under.
  • Compounded by the fact that it was also a crowded trade because a bunch of other black boxes piled into it.
  • Anyway, Things Change, as Abnormal Returns notes in a rundown of what the Street is saying on this.
  • Money quote from the WSJ: "Events that models only predicted would happen once in 10,000 years happened every day for three days."
  • In a related story, DealBreaker and Naked Shorts parse the Dear Investor letter from Renaissance, "Bonfire of the Braincells".
  • Want to follow it all at home? How about this handy-dandy Hedge Fund Implode-A-Meter (Hat tip to Bullish Jim).

Hail To the Volatility Valiant

  • Interesting divergence of the VIX above the longer term MA's, via VIX and More.
  • I'm with Trader Mike here. The plus tick rule (or the elimination thereof, I should say) has little to do with the recent uptick in volatility.
  • Why dat? Let me count the ways.
  • Futures and ETFs never required plus ticks to short. And it's not rocket science to see these tend to lead the market around, not vice versa.
  • "Program" traders shorting stocks on index arbs were always exempted from needing plus ticks to short (provided market circuit breakers were not in effect, to the best of my understanding).
  • A big player could always get a plus tick if he needed via pre-arranged trades like Married Puts (he crosses a trade with his clearing firm that gets him long stock and long a deep put) or a reverse-conversions (he goes long the stock, and simultaneously shorts it synthetically via buying puts and selling calls).
  • Plus ticks were exponentially less difficult to generate since we started trading in pennies. And work by Jason Goepfert regarding the change in Tick behavior since the rule change suggests this was indeed happening.
  • And finally, a way way way bigger constraint to short selling is the ability to borrow shares. If anything, that has gotten more difficult lately, not less.

And in Other Bubbles

  • Some of the early ETF's had an unusual structure, they were called Holdrs.
  • Each holdr gave you "x" shares of each stock in the index, and the tweak was that that number was permanent.
  • The advantages of a Holdr structure? No management fees, and when you own one, you actually own the shares in each company in the Holdr.
  • Problems with them?No re-weighting, no changes in the composition. Nothing. The only way it would be altered is if a company gets taken over or goes out of business.
  • Some Holdr's are still popular, like the SMH and the OIH and the BBH.
  • BHH? Not so much.
  • Remember Business-to-Business, anyone?
  • B2B was the hot concept was back in 1999, not so much in 2007. As ETF Trends notes, once Fiserv (FISV) completes their deal for Checkfree (CKFR), there will only be three stocks left in BHH. And CKFR is currently 69% of it.
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