writser

Yes. To be fair I have also worked at a HFT firm for a couple of years (scapegoat!). I quit my job a while ago but I might be biased. Mainly it pisses me off how people that are mostly clueless about financial markets have such a strong opinion about something they know nothing about. At least I know a little bit about the subject, as does Kiddynamite (and he is far better at explaining things, I encourage everybody to read his articles on HFT). If you look at the 60 minutes show it's featuring: - a guy that promotes a book about how HFT is bad. - a guy that designed a new exchange with as main selling point: no high frequency trading. - an investor in said exchange. and is aired on a commercial channel; a story about how computers steal our money is far more attractive for advertisers than a story about 'how things got better on the stock market the last decades'. Now the show raises a couple of valid concerns but also grossly overstates the issue and gives no opposing view. If you watch this for an hour and think you have a fair and balanced view of how electronic markets work and how HFT is destroying our capital markets: think again.

And you arrived at that conclusion based on what? This is the popular fear mongering story but is simply not true - if it was HFT firms would be violating the law and even Lewis conceded that they were not. They simply see faster that an order 'has arrived' in the order book. What you assume (the HFT firms can peek at your orders and quickly buy shares before you can) is blatantly incorrect and ignorant but people have repeated it so often that it became a prime argument against automated trading.

What if it was an illiquid stock and your order would only be partially filled because some HF trader snaps up the shares you intended to buy? Then you'd either pay the higher price or wait. To larger institutions nearly every stock is illiquid within a certain time frame. To them, HFT this feels like a transaction tax. There are good reasons why "traditional" front running is prohibited. Orders are atomic operations. A HFT firm cannot snap up shares halfway your order. What they can do is snap up shares after your order is partially filled. Everybody can do that. Everybody could do that 200 years ago. To counter that you can use limit orders, 'click through the book' to fill your order completely, trade smaller chunks or whatever. Exchanges have always worked like that.

@Jschembs: regarding point 3: I think mom & pop are actually getting screwed by your mutual fund: 1) The one or two pennies the fund hypothetically loses when buying MSFT are nothing compared to the annual management fee and 2) If these pennies are actually starting to get significant the fund should trade less & invest instead. @Otsog: the whole point of an exchange is that your order information is visible. The aggegrate of all those orders forms a market. There have always been people who react to order information faster than others (steamboat vs. sailboat, telegraph vs. pigeon, phone vs. computer). These people make money and that is perfectly legal, as long as the order information is public. The problem with all HFT media attention is that it insinuates that HFT firms use private order information. That's not true, they're just faster. The scaremongering about 'flash orders' is completely irrelevant, it is a specific order type for a select number of exchanges that you have to choose to use. Somehow a competitive edge based on speed has been perfectly fine for a centuries but if HFT firms are doing it it is 'frontrunning'. But even Lewis had to admit that what HFT firms are doing is completely legal. I agree with critics that there probably is a better market model and that the HFT speedrace is not very beneficial to society but actually the current market model works much better for most investors than 50 years ago due to: 1) More transparency. Back in the days a guy on the floor could be friends with a broker and he would give you a headsup if a big order was coming. And if a smart kid with a pocket calculator was giving better prices you'd kick hiss ass outside the building after trading hours. Or you spat in his ear on the trading floor. Or you made a deal for $3.33, wrote a ticket for $8.88 and hoped backoffice wouldn't spot the difference. Now everything is automatized, logged, retraceable and happens according to rules designed by the exchange. Less chances for fraud. 2) More liquidity. Computers don't panic, can calculate faster and don't need toilet breaks. They're simply much better at providing liquidity than humans and that's why they have surpassed them. In the middle of another 2008-style crisis I'd prefer to deal with an unemotial computer rather than a coked-out idiot on a trading floor. The former will always give better prices than the floor trader. That's why HFT firms account for so much of the traded volume: they give the sharpest prices (surprisingly!). Anyway, I'm done with this topic. It's painful to see all these people blaming technology that has been hugely beneficial to them in the past decades and want to get in the time machine back to the good old times when you were ripped off ten times harder and didn't even notice.

Contrary opinion: I think this is just a blatant case of fear-mongering and promotion of his new book. A bit disappointing frankly (though probably a good read). HFT is mostly profiting from 'old-school' brokers, banks and other middle men. The fact that a couple of firms are making so much money now is only making transparent how much investors got ripped off in the past. But instead of being angry at the friendly broker that used to call us (Saluzzi) and now is pissed he lost his job to more efficient competitors it is probably easier to blame a bunch of techies with computers doing stuff we don't know anything about if we lose money in the markets. One always needs a scapegoat ... I'm not saying the current speed race is benefiting society and probably the market model of exchanges could be improved. But the stuff about front-running poor investors is just nonsense. Kiddynamite wrote an article about HFT that's still relevant: http://kiddynamitesworld.com/we-fear-what-we-dont-understand/. Update: I see he just wrote a new article. Mandatory reading material if you want a more balanced view of current markets: http://kiddynamitesworld.com/still-want-talk-high-frequency-trading/

What I read.

What annoys me is that if the most accomplished investor of all times calls something a bubble he suddenly is 'an old white man who doesn't understand technology'. During a week when a VR glass company gets taken over for $2b and an internet storage company with annual revenue of $124m vs profit of $-168m IPO's at a > 2$b valuation. It's encouraging the madness.

AOBI is 'interesting' for sure :) It's so small that part of me hopes it is a scam. Just so I can tick it off the bucketlist :D

Disagreed. I think society at large would be a nicer place if you try to punish people who do stuff like that. It's a slippery slope, but my gut tells me that driving in a Bugatti financed by scamming retired couples should not be encouraged. But up until what point (if any) should you protect people from their own biases and stupidity? Difficult stuff. Maybe you should ban the victims from participating in financial markets (just like casino bans). Or give a portion of the seized assets to a charity.

What really baffles me is that you can actually still 'lose' a plane in 2014. Governments have spent billions of dollars on airport security, we can read license plates with satellites, we have GPS, satellite phones, radar, black boxes, etc. But a fully loaded plane disappeared and a coalition of 15(!) countries doubt, a week later, whether it crashed, flew to Kazachstan or Indonesia ... A similar accident happened a couple of years ago with an Air France flight near the coast of Brazil and it took two years to find the wreckage. I think you could make a < $1000 tracking device using a GPS receiver, a satellite phone and a roll of ducktape. But apparently that is not as important as banning everybody from bringing a bottle of water in their hand luggage.

Hi Kraven, yes, I agree! And I repeat my “7 lean years + 3 boom years” model for FFH: 7 years of no return, followed by 3 years of 35% cagr… therefore, 3 more years of no return to go! ;) Cheers, Gio So you're happy to strive for ~9% annualized gross return?

On oil, the prize is also a pretty good read ([amazonsearch]The Prize: The Epic Quest for Oil, Money & Power[/amazonsearch])

Are you allowed to buy/sell options / warrants?

I always get the feeling that Kyle Bass invests in stuff he can get on television with.

Yeah, the preferreds are on the books as a liability at face value. The fund provides here how many preferreds are still outstanding. Before the redemption announcement, in the latest semi-annual, the numbers were (roughly): * 0.75m preferred outstanding, face value $50. * 7m normal shares outstanding * 173m assets * 3m liabilities So NAV according to the books was (173 - 3 - .75*50) / 7.06 = 18.77$. After all preferreds are converted that liability is gone but there are .75 * 3.716 = 2.79m extra common shares outstanding. So after the conversion NAV is: (173 - 3) / (7.06 + 2.79) = 17.26$ It's just an accounting gimmick, the NAV in the base case was overstated because the liability of the preferreds was recorded at face value ($50) but had a higher actual value since they could be converted. The numbers look a bit extreme now because the actual NAV at the time of the redemption announcement was around 18.30$, which makes the conversion ratio more reasonable. Right now we're somewhere in between these two scenarios. Alphavulture has some nice blog posts about this. He can correct me if I'm mistaken.

Then either they're working at the wrong place or they aren't very good. I don't know if it's a good thing or not but all big financials are still highly profitable and have found ways to sidestep bonus caps (for example: RBS, Goldman or Barclays). If you're good and work hard you still earn a shitload. Not to mention that if you work for a hedge fund, prop firm or whatever the bonus caps don't even apply to you. Due to the public backlash after the crisis both banks, bankers (and politicians!) are very keen to show everybody that they are slashing bonuses but the system just doesn't work that way. If a financial firm finds a smart way to sidestep the bonus cap they have a huge edge on the playing field, so everybody is trying to do so. That's true.

I studied CS because I think it is interesting. I highly recommend studying something you enjoy. If you really want a job and you are suited for it, you can get there regardless of your specific background. So you might as well study something you like instead (though this might be considered a bit of a 'European' attitude here). Something tells me you don't have much job experience - why are you looking at your possible salary in ten years? A shitload of things can happen in a decade. Especially in IT because, as you pointed out, technologies are changing quickly. Which is great, keeps it from getting boring and generates lots of opportunities. Don't let all the wealthy people present here influence your job choice.

I graduated in CS and ended up as a trader at a prop trading house (though you probably are thinking about asset management?). I'd say the first step is a job interview. ;) I don't know the competitive landscape in Canada though. You might want to consider talking with a recruitment firm - the good ones usually have a couple of intake meetings where they try to gauge you and do a few suggestions regarding jobs you might like. No clue if it also works that way after having worked for 10 years in IT. What job are you looking for? What makes you think you are particularly qualified?

The interesting thing is, if too many people make the smart choice of buying SPY that will become the next bubble in itself. SPY is up 32% over 2013, VT (Vanguard total stock market) is up 'only' 23%. It could very well be that part of this outperformance is caused by asset inflows in passive S&P 500 funds. If so, that effect will only grow due to the rising popularity of passive investing. Until at some point the S&P 500 crashes and active investing will replace passive investing again :)

Maybe this is too obvious, but I think there are a lot of things you could look at as heuristics to minimize the risk of buying into a fraud: - Google everything. Look for their HQ with Google Maps, google the CEO, google their products, google the auditor etc. - Try to order their services / products. - Do insiders own a significant amount of equity? - In the past, has the company been paying dividend or raising capital? Do they have a history of profitability and positive cashflow? - Is management compensation reasonable? Are they diluting existing shareholders? Is management very promotional? - Are there dubious footnotes in their filings? I.e. a change in inventory valuation method, pension liability assumptions, etc. - Does the company story sound too good to be true? Is it a 'hot' sector stock (fracking, social media, 3d printing, solar power)? - Do other investors have their doubts about the company being a fraud or not? And probably a lot more. The real question is; what risk are you willing to take if the company scores badly at some of these points. Personally, I pass most of the time. Enough other opportunities out there. You can practically apply half of WEB's quotes here: "bla .. bla .. honest management .. bla bla .. wait for the pitch .. bla bla .. willing to trade away a big payoff for a certain payoff .. bla bla .. rule 1 never lose money .. bla bla". No disrespect :) I also agree with other posters suggesting Financial Shenanigans and Quality of Earnings as great reads.

Hah, some suggestions: http://www.informationweek.com/mobile/mobile-business/16-stupid-tech-job-interview-questions-show-your-snark/d/d-id/1113474

Not sure where to find recent data, but have you seen this topic? Might be a starting point: http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/shiller-pe-by-country/msg106454/?topicseen#msg106454

@ Racemize: do you have a Bloomberg terminal?

brokers, the scum of the earth :)

$2k or $15k isn't be that relevant, imho. Most important question would be whether you actually like what you are doing and what your future prospects are .. But the fact that you already are thinking about leaving one year in makes me guess you are in the wrong place.