What I’ve been reading and listening to in the trading and finance space:
House Money and the Break-even Effect:
Imagine that you are attending a convention in Las Vegas, and you walk into a casino. While passing the slot machines, you put a quarter into one machine and, surprisingly, you win $100. Now what? Will your gambling behavior for the rest of the evening be altered? Might you make a few more serious wagers, even if you usually abstain? Suppose instead that you had $100 in cash stolen from your wallet while taking a swim at the pool. How will that alter your behavior?
Macrodesiac (David Belle) talks to Macrohedged about market making, getting to the truth about the role of the market maker and squashing the myths that appear on social media.
In the U.S. the top 1% of workers, collectively, earn vastly more than the bottom 50%. “The market system as it gets more specialized pushes more money to the top,” Buffett explains. “The natural function of a more specialized market economy is to divert more and more of the rewards to the top. That’s something I don’t think we’ve fully addressed in this country.”
Once people reach a conclusion, they aren’t likely to change their minds, even when new information shows their initial belief is likely wrong and clinging to that belief costs real money. That’s especially true when the matter at issue is important to us.
Micro E-Mini Futures Are Here:
The Micro contracts will be one-tenth the size of CME’s existing “E-mini” stock-index contracts. So if a trader currently has to post around $7,000 to trade an E-mini S&P 500 futures contract, he or she would only need to post about $700 to trade a Micro version of the same contract, according to Tim McCourt, CME’s global head of equity-index products.
“Hello Everyone, thanks for tuning in. I know you’re probably shocked to hear that I had a heart attack at the age of 36. But I can assure you, you weren’t as shocked as I was.”
“The FX market, in which traders are able to buy, sell, exchange and speculate on currencies, is one of the world’s largest and most actively traded financial markets,” with trading averaging $5.3 trillion a day. 1 And six of the biggest banks in that market just settled charges of manipulating it.
Driven in part by their seeming ability to profit in all circumstances, high-frequency trading (HFT) firms have recently attracted a great deal of attention. Still, many basic questions about their strategies and profitability remain unanswered. For example, how do HFT firms make money? How do they compete with one another? And how useful is speed in driving revenue?
As the founder of Pimco — the biggest and most influential fixed income powerhouse in the world — Gross was a finance industry rock star. At one point the “bond king” managed hundreds of billions of dollars, and his bets could make or break the fate of countries. His anecdote-laden, often outrageous investment letters made him a colourful splash in a monochrome industry.
Have a nice weekend!