John At The Center

According to Sprenger’s research, the sentiment rankings that his system extracted matched the ebb and flow of the Standard & Poor’s 500-stock index fairly closely, and appeared to predict movements in the market by more than a day. The researchers said that any investor who bought or sold using their analysis in the first half of 2010 would have achieved an average rate of return as high as 15 percent. At TweetTrader, which Sprenger set up recently with some fellow students, investors can track the sentiment rankings of various stocks and indexes based on the systems used in his research.

via Can Twitter Help You Predict the Stock Market?: Tech News and Analysis «.

Roger Lowenstein writes in Newsweek about the new spotlight on Warren E. Buffett: “It is tempting to idealize such a figure, and Buffett is partly to blame, at times glossing up his image as a prairie sage. When he feels threatened, he is not above a little dissembling. This is a minor flaw, but a flaw all the same.”

via Buffett’s Flaw – NYTimes.com.

So clearly at least one of the sellers was setting their price algorithmically in response to changes in the other’s price. I continued to watch carefully and the full pattern emerged.

via Amazon’s $23,698,655.93 book about flies.

“When everyone ran for the door in the crisis it changed people’s desire to invest in things that aren’t listed” on an exchange, says Anton V. Schutz, manager of Burnham Financial Funds, who says he no longer buys issues that aren’t listed. “Even deeper markets than this haven’t come back after the crisis.”

via A Hot Idea Falls Short at Goldman – WSJ.com.

In 2007, Goldman set up a new, private marketplace open only to institutions and ultrarich investors. There, they would be able to own and trade shares, which wouldn’t be registered with the Securities and Exchange Commission. The attraction for listing companies: avoiding many of the disclosure and regulatory requirements of public stock markets, as well as the pressures that come with dealing with public investors.

“We need to go to magnetar and see if we can buy a bunch of cdo protection… Can tell them we have a protection buyer, who is looking to get into this trade now that spreads have tightened back in.”

via Goldman Traders Tried to Manipulate Market in 2007, Report Says – Businessweek.

The New York Stock Exchange and Deutsche Borse are planning a move to a single cash equities trading platform, understood to be based on Red Hat Linux, in a crucial step towards saving €79 million (£64 million) in annual IT costs and delivering robust, fast messaging.

via NYSE and Deutsche Borse merger chiefs size up single Red Hat Linux trading platform – ComputerworldUK.com.

AIMA Chief Executive Andrew Baker said the days of one man and a dog running a hedge fund were over and only those with an “unimpeachable track record”, who could build an infrastructure team around them and who could attract service providers to support them were going to make it.”Some have tried and some have failed already. I think its a tough environment,” London-based Baker told Reuters during a visit to Hong Kong. “The number of people who have the credentials to make it properly with a decent launch of $250 million or above is very small,” said Baker, who left Schroder Investment in 2007 to join the AIMA.

via Prop desk spin-outs face tough road ahead – AIMA CEO | Reuters.

They discovered that trading from the optimal point would reduce the time it takes for information to travel between the two exchanges,

via Speed Trading May Be Heading Out to Sea, Literally – CNBC.

Citadel and hundreds of other hedge funds are struggling to hit their so-called high water marks, their historic highs at which they can begin collecting profits again. The research firm HedgeFund.net estimates that roughly 35 percent of the 2,500 funds that have continuously reported since 2008 have not recovered — with smaller hedge funds dominating the list.

via Many Hedge Funds Still Smarting From the Financial Crisis – NYTimes.com.

Asness thinks Nassim Taleb is right about the increasing frequency of Black Swan events. And quants still face severe threats from market volatility: according to a report from Morgan Stanley, quant funds betting against momentum stocks in Europe took a beating in early January that reminded many of the 2007 crisis, causing as much as a 10 percent overall loss. “In only a few days,” the report said, a number of quants “experienced unprecedented losses in seemingly ‘normal’ market conditions.” But Asness thinks the episode was overblown, and says AQR was unaffected by it. And he does not believe that quants, or other more traditional hedge funds, had any role in the catastrophic events of 2008. “The crash was about credit and real estate,” he said. That seems to be the conventional wisdom, at least as reflected by the report of the Financial Crisis Inquiry Commission. “If you look at our history–even AQR’s aggressive hedge funds–we’ve made money, and we have smoothed the path,” he said.

via Man vs. Machine on Wall Street: How Computers Beat the Market – Business – The Atlantic.