One of the nice things about California is the diversity of climates. My brother in law has lived in the wine country since the late 1970’s. He has been a volunteer firefighter for quite some time. Late last year, he fought many of the wine country fires you might have read about. One of them raced just past his home. By just past, I mean across the street.
We walked around and you could see the path the fire took. As we looked miles to the east, you could see the scar the fire left on the hillsides as it blew down the valley and jumped road after road. My brother in law said winds were 90 mph and when they were fighting the fire Continue reading "Wine Tasting And Surveying Damage"
Pitchers and catchers reported this week. Spring is almost here. I am excited for the Cubs season. In Silicon Valley, I notice that there are only San Francisco Giants stickers and hats. I was kind of surprised not to see A’s stuff. You will find White Sox stuff all over Chicago.
I write this from the left coast. I am spending some time out here to get away from the Chicago winter and to meet people. I also do it to get out of my Chicago bubble. I spent a short amount of time in LA. I spent some time in Silicon Valley and now I am in San Francisco. Being here in person allows me to experience things and decide if what I see being reported is true or not.
I like the above video and I think the answer to separate the wheat from the chaff is to have principles that you believe in and to understand why you have those principles. When I was going to church regularly, I was surprised how many ministers told me to question why I was a Christian at all. You’d think in a church they’d not actively ask that question. It turns Continue reading "Thought This Talk Was Interesting"
If you want to be successful, you have to put in the time. Nothing worthwhile comes easy. This is the same across all occupations and endeavors. When I talk to millennials a lot of the time I hear, “That’s hard.”
Yes, it is.
Too often we get exposed to people that completed their journey. We don’t get get a look at them before they were on it, or while they were on it. While stories are powerful, it’s hard to imagine what it was like for yourself. That law partner making the big bucks? They were in law school once and they were low on the totem pole in a law firm once too.
The same is true with traders. Before they became great traders, they had to learn the mechanics. They had to ingrain the fundamentals into their workflow and brain. Before I traded, I worked from Continue reading "Do Your Homework"
The whistleblower’s claims are consistent with those documented by John Griffin, professor of finance at the University of Texas and Ph.D. candidate Amin Shams in May 2017 in research that says the cost of manipulating less-liquid SPX options would be more than paid for by a successful bet on the direction of the VIX. The paper is consistent with the whistleblower’s conclusion—that manipulators are moving prices of the SPX options by spoofing at settlement—entering quotes for trades that are never executed—to “paint the tape” and, therefore, influence the value of expiring Continue reading "Are Contracts Rigged?"
You might have seen this article in the WSJ yesterday about how trades are confirmed by CME. Some traders get confirmation before the rest of the market. They are able to exploit that information advantage to create a profit for themselves.
CME isn’t the only exchange where this happens. Everyone has a similar issue that is an electronic exchange. CME is the biggest kid on the block, so they get the headlines.
There doesn’t seem to be a clear pattern in the amount of time some traders get confirmations earlier than others. Might be 500 milliseconds or it could be a different amount of milliseconds. In CME’s defense, that makes the technological problem tougher to fix.
In addition, CME sells co-location to traders that pay for it. They will automatically get faster information and order entry.
One of the tough things about being a fund is you only get a limited number of investments. Of those, you get to pick one in any particular race. If you invest in one insurance startup, that investment ought to preclude you from doing any more investments in the area of insurance that startup is targeting. Funds need to write a bigger check, so they actually take more risk not less. Funds also might avoid the space if there is failure.
When you are an angel, it’s a bit different. You might make multiple investments over a period of time in the same or similar sorts of things but on different companies. As long as you limit your check size, the pain of failure won’t be as bad.
No doubt you saw the volatility in the stock market last week. I was reading the editorial in the WSJ on The Bernanke Correction and started thinking about it. My accounts didn’t come through unscathed. A hedge fund I am invested in got killed. I heard about another fund that blew out. Fortunately for me there is still money left over and I will still be able to retire, someday.
I am of the opinion that the Fed let rates linger at 0% for far too long. In this highly politicized and cynical age, it is entirely possible to think that the Fed did it because Obama was President and they didn’t want anything adverse to affect him. Tim Knight at Slope of Hope certainly has that sentiment. Economist John Taylor has called for rate hikes over the past several years. It’s not Continue reading "Stock Market Then and Now"
One good thing about getting out of Chicago once in awhile is I get out of routine and the bubble. I grew up in the western suburbs of Chicago. I worked and lived downtown. I am a Chicagoan (minus the graft and corruption) through and through and have the accent to prove it. I am sad about the end of the Blackhawks run and surprised whenever the Bulls win.
My wife and I “missed” the snow yesterday that fell on Chicago. It was fun to look at photos on social media of it. Our routine of leaving in February isn’t about just missing some bad winter weather.
It’s good to get out and see how other people experience their world.
For example, driving through California, I cannot get my radio to hold a radio station for long. You can see why someone would
There are a lot of nooks and crannies in capital markets. Exchanges only trade the big ones. I think it’s important to note that matching trades is super simple. You can go out and buy a crude automated trading system off the shelf and a simplistic one is not that hard to build. The trick is when the trade is made how do you report it? How do you account for it? How do you margin it? How do you make sure both entities on each side of the trade perform? How’s the security of the exchange?
Kind of a cool idea that TD Ameritrade rolled out today. You will be able to initiate trades from Twitter. Hey, maybe soon you will be able to do it with Alexa and Snapchat. TD already has that sort of functionality with Facebook Messenger. A lot of traders have Twitter open to keep track of breaking news when they trade. There are numerous companies that translate tweets into machine-readable language for computers to digest and act on. There are other apps that synthesize social feeds to create trading signals and more alpha for hedge funds. I think that in the startup world they often think that big incumbents will roll over and play dead. After all, they are just corporate whales waiting to be harpooned.
Last night I was at the Hoover Institution. It was the inaugural talk on public policy, a new thing they will be doing. You can follow the conversation on Twitter at #policyed. Economist Russ Roberts gave the presentation. If you don’t know him, he produces the Econ Talk podcast which I really like. The topic of this particular presentation was “Is growth good for everyone or just the top 1%? Does growth reduce poverty? How is the middle class really doing over the last 40 years?”
This is a nice deal for Chicago based Ycharts. I invested in the company way back in 2008-09 at the height of the financial crisis. They continue to add features and provide them at an affordable price so that advisors, family offices, and firms that manage money for people can have quick access to information that is actionable. I find that when I am putting on an option trade, Ycharts really helps me select the duration and the Continue reading "YCharts Partners With Dynasty"
Short answer if you don’t want to read the rest of this is, no this is not a meltdown. It’s not a correction either. For newbies, meltdowns look like this. If you believe this is a market meltdown, then perhaps you follow the Super Bowl Indicator too. When an NFC team wins the championship, buy the market.
If you are only watching Bitcoin, it is in meltdown phase. But, it’s not as if you had to be Methuselah to see it coming. The Bitcoin bubble might have been the easiest one to pick out in recent memory. However, it was impossible to short. You could have shorted it with futures once they started trading but it was very thin, and margin requirements were pretty high so your risk was high in an irrational market. The GBTC is 75% off of its high.
As a Cubs fan, I get it. As a Blackhawks fan, I get it. The Eagles had never won a Super Bowl. They hadn’t won a championship in football since 1960. CNBC’s Jim Cramer is a huge Eagles fan. Philly has won a World Series since the turn of the century but hasn’t won an NBA Championship since 1983 or Stanley Cup since 1975.
What’s really amazing is they did it with their second string QB. His own personal story is a story of never quit, never say die and mental toughness. Championships are so random. It’s awfully hard to repeat. Teams look dominant when we look back at them Continue reading "Congrats to the Philly Fans"
One of the most difficult things about being in a small fund is how much capital to allocate to an investment. Many funds put the exact same amount in each deal. That doesn’t seem right to me because the valuations of each deal are always slightly different. Cap tables are different. The capital needs of the company to get to exit will almost certainly be different.
Others are very random in their approach. They might put more in one deal because either they understand it better or they trust the lead investor more. Perhaps something clicks between them and the team so they feel more comfortable putting more money in.
Yesterday I had the good fortune of being near a basket and a ball. When I was growing up, I used to shoot baskets in my driveway or in a gym for hours and hours. In the summer, I never had a tan I was in the gym so much. Even to this day, my leg hair stops at where my ankles are because I taped them so much I ripped the hair follicles out.
There is something about feeling the ball roll off your middle finger, making a gooseneck with your arm and wrist and getting the feedback of the twine on the net barely moving as the ball sweeps through.
I don’t have my legs anymore. I can’t move at all. I tried to do some dribbling drills. I used to be able to handle the ball pretty well. When I was Continue reading "Something So Pure"
The socialists in Illinois have resurrected the Privilege Tax Bill. It is a creation of the increasingly larger and dominant socialistic wing of the Democratic Party but let us be honest. Most if not all of them agree with it.
California Democrats are trying to figure out how to continue to tax their constituents in spite of the new tax decreases that were in the Trump tax plan. In New York, Governor Cuomo proposed the same sort of tax. Hedge fund manager and University of Chicago PhD Cliff Asness correctly remarked that if Cuomo’s plan goes through” they aren’t running a government they are running a gulag.” It’s tongue and cheek but the sentiment is accurate. I find that people in our business across the spectrum have a tremendous sense of humor.
A company I angel invested in Truss.co has expanded to Washington DC. Truss started in Chicago. It uses artificial intelligence to find office space for clients. They developed a chatbot, Vera, that clients can interact with to find the best space for their needs. Commercial Real Estate Brokers actually make more commissions by utilizing Truss.
CRE Brokers spend a lot of time and resources no matter what the space size. Truss allows them to make money on small space, build a relationship with clients, and still concentrate on leasing out the big spaces where their bread and butter are.
If you are a startup or a small business, finding office space is super painful. Truss makes it simple, quick, and efficient.
Yesterday Facebook and Google killed ads for ICO’s. My friend Josh Brown (@reformedbroker on Twitter) applauded it. Last fall, he blogged about getting a walrus sex ranch off the ground and funding it with an ICO. It’s preposterous and obviously a farce, but so are many ICOs.
I am not against ICOs. It’s important to go in with eyes open.
There is a whole cottage industry around them. Not only legal, but there are small investment banks that raise money for ICOs. I saw a pitch for an ICO yesterday. Without grading the pitch, or the company I will tell you it reminds me a lot of the very very early days of starting Hyde Park Angels. You cannot imagine the places I would go to hear pitches in Chicago. Many apartments. The crowd that showed up was a combination of sketchy, service providers looking to make a buck, and Continue reading "Facebook and Google Kill ICO Ads"