The Big Picture

Look Who Is Blogging: The New York Fed
Free ‘Angry Birds’ app at Amazon App Store
How to Protect Yourself (Generally)
Louise Yamada on Dollar, Trade Opportunity
Media Appearance: CNBC Fast Money (3.22.11)
HFT, Reverse Splits and Hidden Signals
The Blog Economy
Market Cap as a % of Nominal GDP
GMail Issues?
Here Comes eBook Lending

Posted: 23 Mar 2011 03:00 AM PDT

This morning, we welcome to the blogosphere the NY Fed, who just launched Liberty Street Economics (the NY Fed’s street address is 33 Liberty Street):

Free ‘Angry Birds’ app at Amazon App Store

Posted: 22 Mar 2011 06:32 PM PDT

If you have an Android device, then you must grab this addictive game (free) from Amazon’s new App store/litigation factory:

How to Protect Yourself (Generally)

Posted: 22 Mar 2011 06:23 PM PDT

On Twitter, Pete Rozin asks: “If we are topping, give us a strategy to protect our longs!!!”

Well, that is the strategy you should have in place already. Regardless of what markets are doing, you need an exit plan before things get dicey. The strategy should not depend upon any twist or turn in the markets.

Pete, let me suggest these readings to get you started:

• Protect Your Backside Limiting losses in 'disaster' stocks is a crucial element of money management.

• The Stop-Loss Breakdown We review several other stop-loss strategies you can use to prevent losses from getting out of hand.

• The Stock Pre-Nup Before getting emotional and the dishes start flying, consider a pre-nuptial agreement for stocks.

See if there are any things in those that are of help . . .

Louise Yamada on Dollar, Trade Opportunity

Posted: 22 Mar 2011 04:48 PM PDT

A weak dollar could provide investors with an opportunity to cash in. Louise Yamada, Managing Director, Louise Yamada Technical Research Advisors, LLC lays out a strategy.

Airtime: Tues. Mar. 22 2011 | 4:40 PM ET

Media Appearance: CNBC Fast Money (3.22.11)

Posted: 22 Mar 2011 01:30 PM PDT

Special Market Topping Edition!

Tonight I will be on Fast Money on CNBC at 5:30 pm discussing the overall quality of the market rally, following the selloff and snapback post Japan:

• Markets tend to wobble when hit with these externalities, then resume their prior action.

• Stocks seemed to be starting a topping formation — a 3-9 month process — prior to the crack.

• The complacency about Japan (Barron’s cover, Economist, everyone on TV) is somewhat concerning

• Watch the S&P500 1310-1315 level — that could be key resistance where this rally fails

• Sectors that look especially ugly are retail and consumer discretionary.

~~~

Video posted here

HFT, Reverse Splits and Hidden Signals

Posted: 22 Mar 2011 12:00 PM PDT

Jay Saluzzi
Themis Trading LLC
10 Town Square, Suite 100
Chatham, NJ 07928
973-665-9600
www.ThemisTrading.com

There is sadness in the HFT world today as they are about to lose their poster boy, Citigroup. Yesterday, Citigroup announced that they will attempt to get their stock price higher and try a 1 for 10 reverse split. We don't know if it will work but we do know that close to half a billion shares of meaningless volume is about to exit the market. The WSJ had this quote:

"It's going to sting," said Joseph Mazzella, managing director for equities trading at Knight Capital Group. For high-frequency traders, in particular, he said, "it's going to have a big impact."

We are not exactly feeling sorry for the HFT guys as we are sure they are cooking up some ways right now to offset this lost income.

Speaking of HFT, we found a very interesting recently published academic study titled "A Dysfunctional Role of High Frequency Trading in Electronic Markets". Click here to read paper Obviously, the title grabbed our attention as we finally found an academic study which could not have been funded by an exchange or large brokerage firm since the conclusion was not that HFT was great since it shrinks spreads and increases liquidity. The authors, Jarrow and Protter, are two very distinguished Cornell professors that have a long history of research in the financial field (unlike the Brogaard study which was published by a "candidate" for a finance PhD). Here are some highlights of their report:

-High frequency traders can create a mispricing that they knowingly exploit to the disadvantage of ordinary investors.

-High frequency traders see a common signal that they then transact instantaneously on before the signal is incorporated into the market price.

-Since all HFT sees the same signal, they all do the same trades at the same time. They create their own momentum which generates profitable returns.

-High frequency traders's trades cause the price movement creating a self-fulfilling profit.

-The authors liken this activity to market manipulation from large traders except that with HFT profits are unknowingly generated via a market signal.

The authors appear to be saying that when HFT sees a signal in the market, they all act immediately and simultaneously to trade off the signal. However, the authors don't tell us what the signal is that HFT is using to extract there profits. They say the signal could be the difference between the futures and forward prices of a stock index but don't say exactly for sure. We have some ideas on this that we will share with you in future posts.

~~~

This entry was written by jsaluzzi, posted on March 22, 2011 at 9:00 am, here

The Blog Economy

Posted: 22 Mar 2011 11:30 AM PDT

Yet another venture into Blogonomics, this time, via the Grasshopper group‘s bigass graphic:

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click for bigass graphic

Market Cap as a % of Nominal GDP

Posted: 22 Mar 2011 08:30 AM PDT

Is it that time already? Here is an updated look at NYSE/Nasdaq Market as a percentage of nominal GDP, via The Chart Store:
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click for larger graphic