HiLo

Yeah, there's also 50% of the US' refining capacity along the Gulf Coast, as well as a massive new surge of crude and therefore products in the area. They simply can't get enough dockspace or pipeline takeaway capacity to make a meaningful dent.

Wow, nobody mentioned the natural rate of interest yet?

Yeah so actually the IMF puts out some great economic research that is pretty highly regarded across the econ community, further, your pet theory for what happened is really only accepted in maybe some media outlets, but not really the academic community. "A large part of the cash withdrawn from Zero Interest Rate Policy"? Like what? That doesn't even make sense. Are you talking about how low interest rates and a dearth of profitable investment projects causes CFO's to see that the best immediate use for their cash is to return money to shareholders and shore up their balance sheets, after this huge balance sheet recession we had?

The generally accepted theory is that there has been a worldwide demographic slowdown combined with a large number of countries accumulating huge current account surpluses, leading to "the world being awash in savings." This oversupply of capital causes the natural rate of interest to drop, and that is the rate that the Fed needs to follow (it really doesn't so much decide on a proper rate as much as it estimates it mathematically), as it will cause stagnating growth or deflation if too high compared to the natural rate (!!!!!), but will cause inflation if it's actually "too low." So there's no evidence ZIRP has been "too low," in fact all the evidence points to the fact that interest rates actually haven't been low enough.

What? The LIBOR scandal was Wall St banks.

Very good point, I think it's very telling that they seem to have minimal appreciation for those fields. These techies hate the Wall Street types but are quickly becoming them, like the nerds who became jocks.

lol, probably true, but it's actually pretty easy to keep up with accounting standards once you're somebody with his experience and you just have access to the FASB website, like we did in my accounting class in university. On a side note, this guy was my friends' little league coach :)

You know, financial theory pretty much has this theory of people lending directly to each other not looking so good.

Quite frankly, you have zero predictive ability to outperform the market, particularly over an extended timespan or multiple credit cycles.

Furthermore, even if you were to "average out" / index your portfolio of P2P loans, your transaction costs would be way higher than simply going through a financial institution that streamlines that process for you so as to minimize transaction costs.

Aside from legal reasons, this is one reason stocks and other financial instruments aren't sold P2P. Considering transaction costs are probably the biggest controllable variable affecting your portfolio's returns, particularly over time, I just can't see how this makes the cost of borrowing go down for the system as a whole.

That's such as simplified analysis. Perhaps there's no shortage (unlikely given Texas' power needs), perhaps there's transportation bottlenecks creating local oversupply? That price has to lower to send the price signal that the arb is there and firms can make money building that transmission, at which point, just like the other energy products in West Texas (crude), the relative price will begin to rise again relative to the benchmark. (See: West Texas / Midland grades of crude being priced at steep discounts that are now shrinking due to increased pipeline capacity coming online.) It's not that Midland crudes were "oversupplied" it's that demand was being "artificially" lowered by transportation bottlenecks. (Economists / econometricians may argue definitions with me on that, but from the energy trader perspective, that's how I would approach it.)

Startup events remind me a lot of what it was like going to investment banking and sales & trading events, or financial conferences. Every overachieving Ivy Leaguer with no real sense of who they are or what they want to do just chasing prestige that was at finance events truly seems to have shifted to tech.

I'm actually at a bit of a loss for words that somebody thinks a business can be reverse engineered just by looking at it as a black box system. There are so many intricacies with cash flow forecasting and management alone, requiring deep understanding of each market's nuance and settlement mechanisms, simply to pay the bills. That's not even to get revenue in the door. Sorry, but most businesses aren't software programs, they're social systems and local contracts that were socially agreed upon to get something done in a politically acceptable way.

I would just like to add that multiple concentrates from different locations are frequently blended before being smelted into a refined product, so, even more to your point...

Inside the matching engine, there's a sitting limit order on the limit order book flagged as a retail order, just off the bid/ask. Whereas you may not have taken the other side of that resting order before, you might now because you know it has extra informational value attached. Dealers will pay exchanges for the right to access this information, either outright or in reduced liquidity rebates they would normally otherwise receive (normally outright to my understanding).

How would this work in areas where local cartels already have control over these types of assets?

Meanwhile, nobody on here complaining about those mutual fund fees that are orders of magnitude bigger than HFT haircuts for the savers themselves :)

The only reason retail orders actually get matched up well is because they're flagged as retail, are known to contain less information, and are a statistically good bet to transact against. Fundamentally, this was around before HFT and still is. The funny thing is that even if it's helping them in this small way, the whole idea of retail investing is some of the best marketing in the face of contradictory facts I've ever seen.

Can you guys explain what you mean by a sentinel order?

That's a pretty interesting solution to a pretty interesting problem. This happens all the time in the physical commodities markets - you insert or remove a document required to make payment on a letter of credit, shorten the time windows for payment, try to get the counterparty to pay for external costs (insurance, port agents, bunkers, fines, and an entire department just for this type of thing as it concerns demurrage), and so on.

So the problem is obviously there, and believe it or not, even among the least tech-savvy everybody is aware of this problem, how it's done, and current methods to minimize it. It's very important. For example, look at Vitol, the biggest energy trading house in the world (followed by Glencore and Trafigura, both split from the same company). This doesn't include metals or ags. Vitol has $300 billion or so in revenue per year. Strictly looking at their trading business, and considering minimum wholesale volumes around 25,000 barrel lots (barge sizes in the Gulf Coast), so wholesale crude and products trades in blocks worth between $1.5 and $2 million at today's prices. While this is an extremely simplified, ballpark analysis, assuming their trading business has a 2% net margin, they're selling $300 billion that they bought for $294 billion. Roughly, that's about 300,000 transactions for separate, physical movements of petroleum and products. Saving even a few days on payment terms across the board would mean they have to borrow money for a few less days, which would add up to millions of dollars in cash savings that begin to accrue immediately and continue to daily over time.

So, again, the problem is there, and various groups have attempted to build software (which actually did work, technically). The big problem is that implementation of these tools has been tried in areas such as Letters of Credit (negotiation between counterparties and banks for each one if doing transactional trade finance) and the rest of trade finance. The problem isn't the tools, it's that the companies kind of like to play this game, because if you see yourself as on the more sophisticated end of the market then this benefits you, and this system is tried and true, whereas the new system could be prone to errors or other unknown unknowns, where they don't know how to protect themselves.

edit: By the way, much of the above (especially as it concerns the individual specifications of each order, either physical variables in the commodities markets or financial variables in the bond and derivatives markets) is exactly the reason implementation of more streamlined alternatives for clearing and settlement have been so slow. It's not that the technology for actually doing it isn't there, it's that the bottlenecks leading up to that are still there. So if you have a good way for traders to automatically decide which fees and costs apply when and to who, please do tell, but then you've effectively automated the traders, as much of what they do is negotiating those terms.

"Remember kids, Wikipedia is not considered a valid source for your essays."

lol k

I live in Houston, and am moving to LA soon over NYC (finance + commodities background) or SF (fits current career path). I know NYC and SF can be really cool places, but you really have to stop pretending they are unless you really are pulling in 7 or more figures. The people and lifestyle in LA are way more conducive, intellectually and otherwise, to the life I want and the way I see things going. I see places like Houston, Austin, and LA outperforming NYC and SF for the time being.

solid pr

Although I already have my finance degree and wouldn't so much need it, getting my CFA is a near-term goal.

Learning wise, trying to completely re-learn mathematics, starting with books like the Mathematicians Delight and beginning with the most basic arithmetic, hopefully up through diffy q's, linear algebra, and intermediate stat. If anybody has any good tips on completely teaching yourself math from start to finish, please send them my way!

Haha I like that comment about how everybody is bashing the use of median income while offering a more arbitrary and harder to measure metric instead. Somebody correct me... but wouldn't that be a pretty good metric if it's pre-tax, since that would be without healthcare costs on both sides anyways? I would think that using anything but pre-tax "revenue" (median income for individuals) you would have to argue why one cost (healthcare) should be considered but other costs (shelter, food, autos, education) shouldn't. So I guess you would want to carry it through to one of the logical ends, but to use disposable income you would have to then be able to compare quality of life on a quantitative basis, which rules that one out too (in my opinion).

They don't have enough berths. However they have really fast turnaround, 1-2 days for jobs that for most others take 2-4 days. Edit: this is partly because they have so little space and have to share so much with petrochemical and other bulk commodity ships, while simultaneously being probably the primary shipping hub for Asia.

Considering most on average do fail, most people will never recover from this financial damage before they die, particularly later in life when the differences are most pronounced and the marginal dollar is much more valuable due to rising health-care cost and dwindling income. So finance says you're wrong on that one.

You really can't recoup the money. $1,000 invested at 23 is worth $37,165 at 75, assuming 7.2% historical equity risk premium. $1,000 invested at 30 is worth $22,844 at 75 with the same 7.2% growth.

Your comment seems to imply that people can strike it rich if they just pull the level enough times, but your comment is actually false for the majority of people that read your post.

I was in finance as well as trading risk management at one of the largest physical commodities trading houses in the world ($100+ billion revenue) and orders, positions, PNL, inventory, inventory movements, market research and analysis, and general business reports... yes, very expensive systems backing them... and they had to be done on Excel manually and synced daily to make sure if the main systems (absurdly complex) got out of sync, either one could be repaired as a failsafe.

Most commodities markets get really thin a few years out the curve as well, so if you're a large producer wanting to hedge your production the next few years it may still be pretty tough without lots of slippage.

lol those fees

I understand your concern and do appreciate your point, but can you elaborate on why you think the definition is so black and white? Simple illegality oftentimes makes wrongdoing less clear, for example with insider trading.

John Arnold (former Enron energy trader) also posted something on Bloomberg View, and the main gist of the article was:

Front-running is profitable against traditional orders entered by humans. But with spoofers in the mix, the picture looks quite different: When the front-running HFT algorithm jumps ahead of a spoof order, the front-runner gets fooled and loses money. The HFT’s front-running algorithm can't easily distinguish between legitimate orders and spoofs. Suddenly the front-runner faces real market risk and makes the rational choice to do less front-running. In short, spoofing poses the risk of making front-running unprofitable. Because spoofing is only profitable if front-running exists, allowing both would ensure that neither is widespread.

http://www.bloombergview.com/articles/2015-01-23/high-freque...

wilmott