The Big Picture

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• 10 Weekend Reads
• Schools and Stimulus
• Blurred Lines vs. Got to Give it Up
• Succinct Summation for Week’s Events 3.27.15
• Shifting Sands in Middle East
• Interest Rates Aren’t Going Anywhere . . .
• Survey Says…
• 10 Friday AM Reads

10 Weekend Reads Posted: 28 Mar 2015 03:30 AM PDT Welcome to the weekend. Pour yourself a mug of Guatemalan Antigua Valley coffee, settle in for our long form Saturday morning reads: • At Kodak, Clinging to a Future Beyond Film (NYT) • Stanford’s Most Popular Class Isn’t Computer Science—It’s Something Much More Important It’s Called “Designing Your Life,” A Course That’s Part Throwback, Part Foreshadowing Of Higher Education’s Future. (Fast Company) • The Deadly Global War for Sand (Wired) • How Chicago has used Financial Engineering to Paper over its Massive Budget Gap (Medium) • The Brain's Empathy Gap: Can mapping neural pathways help us make friends with our enemies? (NYT Magazine) • Apple’s Tim Cook leads different (Fortune) • Is Newark the Next Brooklyn? The "homeless billionaire," a world-renowned architect and the future of Brick City. (Politico) • 'They Didn't Believe the Camels Were Ours': What a journalist's seven-year walk around the world reveals about global policing. (Marshall Project) • How one man's utopian vision for the Internet conquered, and then warped, Silicon Valley (Washington Post) • Death, Redesigned: A legendary design firm, a corporate executive, and a Buddhist-hospice director take on the end of life. (California Sunday) see also Who Lives and Who Dies: Who survives? (London Review of Books) Be sure to check out our Masters in Business radio show with Charley Ellis, Chair of Yale Endowment, and author of Winning the Loser’s Game: Timeless Strategies for Successful Investing.   How Wall Street Middlemen Help Silicon Valley Employees Cash In Early Source: WSJ

Schools and Stimulus Posted: 28 Mar 2015 02:00 AM PDT

Blurred Lines vs. Got to Give it Up Posted: 27 Mar 2015 05:00 PM PDT Check out the two songs side by side: Their are some sonic, but not melodic, similarities: Its a bum jury decision . . .

Succinct Summation for Week’s Events 3.27.15 Posted: 27 Mar 2015 01:00 PM PDT Succinct Summations of week ending March 27th Positives: 1. Markit's Eurozone PMI rose to 54.1, the highest levels since May 2011. 2. Consumer prices rose 0.2% in February, in line with expectations. 3. Initial jobless claims fell to 282k, 8k less than expected. 4. New home sales came in at an annualized rate of 539k vs the 464k expected. They grew at 7.8% vs an expected decline of -3.5%, the fastest pace since March 2008 5. US CPI was flat y/o/y vs expectations of a 0.1% drop. Core CPI grew 1.7%, in line with expectations. 6. MBA mortgage application composite rose 9.5%, up from the 3.9% drop in the prior week. Negatives: 1. Durable goods fell 1.4% m/o/m vs expectations of a 0.2% rise. 2. The Richmond Fed came in at -8 vs 3 expected. 3. Q4 GDP remained at 2.2% vs expectations of 2.4% growth. 4. Japanese manufacturing PMI fell to 50.4 vs expectations of 52. 5. Existing home sales came in at 4.88M annualized vs expectations of 4.9M 6. U.S. stocks fell and are now negative on the year.     Thanks, Mike

Shifting Sands in Middle East Posted: 27 Mar 2015 11:30 AM PDT Interesting collection of shifting alliances in the Middle East:   Source: WSJ

Interest Rates Aren’t Going Anywhere . . . Posted: 27 Mar 2015 07:00 AM PDT Source: BAML, Fiscal Times     I have been fairly agnostic on several issues related to where interest rates are heading. It has never been my job to forecast where the 10-year yield will be in six months. Not predicting and not caring are two very different things, however. Rates matter a great deal — to investors, to the economy and most of all to debtors of every kind. You would be hard-pressed to find anyone in finance who would ever admit to believing that rates don't matter. Despite the importance of bond yields and borrowing costs, few seem to have any idea how to analyze them in a way that provides a helpful conclusion. And while many are quick to point out how disruptive the Federal Reserve programs of quantitative easing and zero-interest rates have been to stock and bond prices, that’s a terrible excuse. One would think that something so big, so contentious and so transparent would be easy to insert into traditional economic models. But no. As it turns out, most of the economic community on Wall Street has gotten this terribly wrong. Some have disagreed, such as Jeff Gundlach and Gary Shilling (see this and this) but they are notable exceptions.  There are many indicators that keep suggesting that our low, low, low rate world is going to stay this way for a long time. Some of these are turning out to be more significant than many had expected. First . . .   Continues here

Survey Says… Posted: 27 Mar 2015 06:15 AM PDT Joseph Saluzzi (jsaluzzi-at-ThemisTrading.com) and Sal L. Arnuk (sarnuk-at-ThemisTrading.com) are co-heads of the equity trading desk at Themis Trading LLC (www.themistrading.com), an independent, no conflict agency brokerage firm specializing in trading listed and OTC equities for institutions. Prior to founding Themis, Sal and Joe worked for more than 10 years at Instinet Corporation, pioneers in the field of electronic trading, and at Morgan Stanley. ~~~     Surveys are a data collection tool often used to gather information about individuals, and their opinions on topics. Surveys are generally standardized to ensure that they have validity. Hopefully they are large enough to be statistically meaningful, and hopefully they are created and analyzed objectively – and not subjectively. Often, great care is used in constructing and wording questions, so that they are not leading, and that the responses they elicit are meaningful. Often great care is exercised to make sure the surveys are not biased. Questions need to be asked correctly! For example, the following two questions deal with the same subject matter – and they might yield different results: 1)    Do you agree or disagree that current equity market structure is for the most part fair? 2)    Current equity market structure has portions that are unfair. Do you agree or disagree? Surveys are nice. They allow us to gauge how we feel versus some other representative group. And approaching the one year anniversary of the release of Michael Lewis's Flash Boys, a lot of market structure surveys have been floating around. This morning we want to alert you to three of them: Tabb's Grand Bargain Survey (Mostowfi), Convergex's US Equity Market Structure Flashback Survey, and Liquidnet's Institutional Voice 2015. Tabb's Grand Bargain Survey:       Sayena Mostowfi has been working on this survey for many months. Click on that link to the survey from January. Mostowfi doesn't just ask the questions, She tells you what she and Tabb thinks before you take the survey! In completing the survey, we ask that you consider the following TABB observations:  1. Best Execution vs. Regulation NMS – Any changes to Reg NMS's Order Protection Rule ("trade through rule") and/or access fee caps would not impact a broker's obligation to seek the best price for their customer, although it may complicate it. 2. Fragmentation –US stock exchange ownership is not highly fragmented. 3.  Price Discovery: Quotes and Trades – Post-trade transparency exists in real time for all US equity volume, on- and off-exchange.   Similar to off-exchange venues, pre-trade transparency does not exist for hidden orders on exchanges. 4. Targeted Regulation vs. Market Forces –It is important to treat the cause and not the symptoms of market structure issues and allow market forces to take their course, aided by uniform transparency measures and updates to broker-dealer best execution obligations. 5. Perfect Solutions Not Required –It is worth repeating Chair White's sentiment that, "while we do not require perfect solutions, our regulatory changes must be informed by clear-eyed, unbiased, and fact-based assessments of the likely impacts — positive and negative — on market quality for investors and issuers. Continued engagement by all market participants on these issues is critical." We thank you in advance for your participation in our first 2015 Equity Market Structure Reform Survey. From Tabb's website, the results are summarized by the statement "Let's Not Throw the Baby out with the Bath Water." According to Trader's Magazine, Mostowfi surveyed 140 industry participants that included bulge brokers, buyside, exchanges, academics, and vendors and consultants that sell technology. 14% of the survey respondents were actually buyside – 20 people. Those are the opinions Themis would especially care about in the Tabb survey.  I apologize in advance for not spending $3,000 to find out what those 20 buyside traders think. You are welcome to – here is the link. Convergex'sUS Equity Market Structure Flashback Survey  Eric Noll summarizes the survey on the first page: While our industry continues to grapple with a complex and challenging market structure, volatility has remained at historically low levels, the S&P 500 is up 12% since this time last year and we've seen the largest IPO ever go off without a hitch. And as the results of our new U.S. Equity Market Structure "Flashback" Survey show, fewer people now believe that "the house is on fire". Away from the hype and the headlines, we hope that the results of this survey help you understand how the industry currently views the market structure debate, and that together we can find the right solutions for you. Generally, Eric points out that you all feel a little better today than versus one year ago. Perhaps it is because the SEC has done much more fining – including fining Convergex. Perhaps it is because an intense regulatory focus on dark pools in the last year has had the effect of cleaning up a thing or two. Or perhaps, according to Nanex, it is because Convergex interviewed fewer buyside traders this year versus last year:     Liquidnet's Survey: Institutional Voice 2015 Liquidnet's surveyed 115 of its own buyside customers, and found that: -       75% of them are concerned about conflicts of interest in the industry -       88% of them are concerned about predatory traders in dark pools. -       76% of them believe that HFT strategies can hurt them, sometimes. Each of these surveys has different degrees of usefulness, from our perspective. We tend to like the ones that talk to more buyside traders rather than fewer. Convergex spoke to 140 (240 a year ago). Liquidnet spoke to 115. Tabb spoke to 20. If you feel better today than you did right after the release of Flash Boys, ask yourselves why. Is it because you made changes to how you trade? Is it because you have asked for, and received, more transparency around your order routing? Is it because the Regulators have been very busy this past year, and are likely to be "shining more light" in the next year?  Is your increased confidence in market structure today proof positive that concerns have been overblow in the past, or that your concerns are starting to get addressed! Enjoy the surveys, and as always, make your own judgements.

10 Friday AM Reads Posted: 27 Mar 2015 04:45 AM PDT Where does the time go? Its already Friday, and we present the finest morning train reads in the land: • In US Small-Caps, Quality Is on Sale (AB Global) see also This is nothing like the 2000 dot-com bubble (MarketWatch) • Hedge Funds: Don't Call Us a Hedge Fund (WSJ) • Silicon Valley is seizing the customers: Instead of building for others, companies are doing more for themselves (FT) • Fed Shouldn't Raise Rates Yet Because Job Market Still Ailing (Real Time Economics) see also As Dollar Heats Up Overseas, U.S. Manufacturers Feel a Chill (NYT) • Meet Periscope, Twitter's New Live Video App (Buzzfeed) Continues here

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