
Wall Street’s Trading Desks Endure Worst First Half in a Decade - sikim
https://www.bloomberg.com/news/articles/2019-07-18/wall-street-s-trading-desks-face-worst-first-half-in-a-decade
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lefstathiou
A lot of our clients work in investment banks. There’s been a long (since the
election) and growing narrative that the market will correct any second now...
any second. Meanwhile the market has gone up up up. Part of that, I believe,
is because most of these trading desks sit in one place - NYC, a super liberal
anti trump environment - so it’s hard not to buy into the narrative and go
risk off which means you would have missed all the market growth. Almost
everyone one of my friends that work at hedge funds have underperformed the
market over the past 24 months.

For the market to be at an all time high, somebody is making money. The good
news is that most capital exists in pension funds which are effectively owned
by “the people” so most 401ks should be doing well.

~~~
cm2187
We are back in a market manipulated by central banks. I call it “junkie mode”,
you can tell because when there is bad economic news the market goes up, as it
expects central banks to pour more liquidity/lower rates, lifting asset
prices, like a junkie waiting for its fix. A healthy market goes down on bad
economic news.

I think you shouldn’t forget December last year, which was a pretty clear
warning shot. The last 6 months of gains could be reversed very quickly.

~~~
jdjntnowln
Yeah, the market will act on its own when the news is both powerful enough and
outside the market’s perception of the central bank’s expectations; i.e. the
Fed is “stabilizing” which reduces competition and efficiency.

Moreover, it’s inequitable. The economic instability is what allow upward
mobility. The Fed’s stability goal equates to a goal of preserving entrenched
wealth from competitive pressures.

~~~
roenxi
What the central banks do is profoundly anti-free-market.

'Reduces competition and efficiency' is a phrase that really suffers because
it doesn't capture the scale of the problem. For markets to rise on bad news
indicates that the entire economic signalling apparatus is being disabled.

The people who think that disabling economic signals is a good idea are
actually dangerous. Real wealth cannot be created by optimism and hope.
Economies are supposed to purge themselves of idiot capitalists who can't
create new wealth.

~~~
skybrian
You're making assertions without evidence. Which economic signals aren't
working? Seems like some retailers going bankrupt lately are a sign that there
is plenty of competition, in some sectors, anyway?

~~~
anm89
We are on an internet forum. What do you want him to do? Get his post peer
reviewed?

~~~
skybrian
Maybe link to a news article or two?

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dmix
> And technological advancements have narrowed spreads in many areas of
> trading.

> “Part of the problem is that it’s too late to hedge interest-rate
> volatility, there’s not currency volatility to hedge. Speculators need
> volatility to hedge and enter the market.”

Sounds like a good thing to me.

> New rules limited lenders’ ability and willingness to make principal bets
> with their own money

Anyone know what regulation this is referring to?

One of Steve Mnuchin's stated goals was to reduce the domination of the 5
mega-banks and help bring back a healthy market of smaller banks that got
squeezed out by new rules added after the financial crisis. Rules that were
designed with the bigger banks in mind. So I wonder how the smaller players
are doing.

~~~
mruts
The rule they are talking about is the Volcker Rule. Prevents certain banks
from proprietary trading. They are only allowed to buy and sell for the
purpose of market making.

This, of course, is an incredibly stupid rule. There’s not really a big
difference between market making and proprietary trading in the first place.

~~~
kweinber
Proprietary trading is trading your own money with no obligation to transact
or do any business with others.

Market making is offering public liquidity as part of a market function. They
are designated market participants with rules and responsibilities.

They are not the same.

~~~
mruts
There's not a market maker in America that's selling and buying in order to
provide liquidity.

You buy low, and sell high, that's the end of the story, for both proprietary
trading, trading for clients, and market making. There's no fundamental,
categorical difference between these functions.

The difference between prop trading and market making is fundamentally about
the time horizon of exposure. Market makers are aiming to zero out their
exposure through frequent trading, while prop trading attempts to express a
view on the market in the long-term (seconds for market making vs
minutes/day/years for prop trading).

I'm a professional quant, and I don't see much of difference, at least as far
as the government is concerned.

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xiphias2
,,we haven’t seen a lot of people repositioning their portfolios, we haven’t
seen leverage increase.”

Maybe people are starting to realize that changing portfolios all the time
without a computer making the calculations is not the best way to make money
(quite the opposite)

~~~
benj111
You're not wrong, but this seems to be focussing on the institutional share
holders, whose job it is to trade, not trading so much. For them trading _is_
the best way to make money, thus the layoffs.

I wonder how much of this is a short term blip, and how much is the new
normal, and if it is the new normal, where does it all end up, is buying and
holding going to get more expensive, or will the active investing core
maintain the same cost structure, but just shrink. Will we be seeing more
Lehman Bros, or more Deutsche Banks?

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ilaksh
Dumb question: so is this about trading that the large banks arrange for their
clients and get commission on? And if so, how is this problem different from
MGM, Wynn, Aria complaining that Las Vegas is having a couple of slow months?

Why do we need the banks for the trading anyway? Aren't there ways to handle
it with technology rather than paying whatever fees the cartels want?

Maybe I am a little bit cynical in general about this stuff.

~~~
bboreham
This is a piece in Bloomberg, it’s written for people who work in the banks
and money managers, so naturally they are interested it’s a slow period, jobs
will be cut.

There is a vast amount of technology involved, but someone sets the strategy
and that person takes home millions if it works. They are supported by
thousands of other workers who also, in total, take home millions.

Small correction: way more money is made by actually buying and selling than
by taking a commission on someone else’s trade. These roles are called
“dealer” vs “broker”.

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dmix
[http://archive.is/rSS5h](http://archive.is/rSS5h)

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sabujp
oh no, jpm only got 10.7 billion instead of 12, i guess it's time to close
shop

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mruts
The harder you think it’s going to be the market, the less you are going to
trade. You need your confidence interval to reach a certain point before you
are going to trade since you’lol have a negative expected value if you don’t
have an edge (50/50)

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ThePadawan
Off-topic discussion below.

This is the most vile dark pattern I have seen in recent times.

On loading this page, there is an auto-playing, muted video. When you press
its pause button, it is unmuted and keeps playing. Only when you press the
pause button AGAIN does it actually stop playing.

At some point when implementing that feature someone said "Sure, I'm OK with
that". What went wrong there?

~~~
Iv
Advertisement is a cancer. It is time we forbid it instead of making it fund
every website in existence.

~~~
kanokun
It will end only when there is a viable alternative and as of now there is
none.

~~~
mishu2
What about all the projects being posted lately (quid, Mozilla with scroll,
brave Browser, etc)?

I think the friction of getting started, both as creator and as contributor is
still too high. I created a proof of concept site about this as well
([https://news.ycombinator.com/item?id=20448087](https://news.ycombinator.com/item?id=20448087)),
but I don't think that's an ideal solution either, just maybe a little easier
to get started. Any feedback is welcome, of course.

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unixhero
"Oh how fast the sun can drop." Pearl Jam

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thestartup
I'm going to lay everything I have on the line next week by trying to catch a
short position on index futures by Monday morning, July 22, 2019. My guess for
Sunday is a big dip down, followed by dead cat bounce for somewhere at or near
the open Monday morning.

Sell the rallies as long as we are below ES ~8,000 / NQ ~3,000. Would be
interesting to see MSFT, for instance, take a 70%-75% haircut in the next X
years. [SPX 666 <\- 10 years | 3,000 -> ??]

This is not investment advice.

~~~
thestartup
Short now

