6 AM Pacific

Is Everyone a Day Trader

[Cross-posted on the Gridstone Blog].

Ft.com has a nice widget that is very recent by my reckoning. If you hover over the name of a public company in any article on ft.com, a nice “chartlet” pops up. If you click on the company it takes you to the company in the Company Research part of their website.

I thought the pop-up was quite cool. It performs well, looks nice. It could even have been useful to readers. If I have one problem with it, it is the choice of the chart – a daily price chart. More »

Risk and Investment Banking Compensation

The erstwhile bosses at financial majors Citigroup, Merrill Lynch and Countrywide, were in Washington at Congressional hearings, defending their erstwhile pay packages. The New York times reports it here.

I have written before about the challenges in setting CEO compensation before [link]. In the capital markets it gets even more complex. More »

The Dharma Indexes

Stock indexes are an important part of the stock markets. A Wikipedia entry here will give you a good overview. Last month Dow Jones launched a family of indexes called the Dow Jones Dharma Indexes, in association with Dharma Investments. More »

Thomas Weisel Shutters Discovery Research

Last week Thomas Weisel Partners announced that it is shutting down its small cap research offering, Discovery Research. The 8-K filing says

Thomas Weisel Partners Group, Inc. (“Registrant”) announced today that it would discontinue its Discovery Research coverage of U.S. equities. That coverage is being discontinued as a result of the recruitment of key Discovery Research personnel to BNP Paribas Securities (Asia) Limited, a BNP Paribas affiliate. Thomas Weisel Partners is pursuing its legal remedies in connection with these departures. Discovery Research, a subscription-based research product, was produced out of Thomas Weisel Partners’ office in Mumbai, India. Thomas Weisel Partners intends to continue to conduct other business and operations through its Mumbai, India office.

There are two different reasons why I find this news interesting. More »

I am Never Wrong – Just Ahead of My Time

After last week’s post, here’s another one based upon a gem from Nassim Taleb’s Fooled by Randomness. It’s called the bias against self-contradiction and it goes like this - if you make a bet that the market will go a certain way and it doesn’t, you tend to stick with your bet and your viewpoint a good bit longer than you would have, had you been a perfectly rational person. Over time, this will likely lower your performance as an investor. According to Taleb, some investors that he has great respect for – people like George Soros – change their minds often. More »

Pricing Sell-Side Research – Reading the Tea Leaves

Sell-side Research has had some very trying times in the past few years. And it’s not over yet. Unbundling brokerage services (trade execution) from research services has not only compressed research fees, it has also raised important questions like “What is this research really worth?” There seems to be no easy way to measure the value of research. So how does one price the service?

Expertise, which is what a sell-side firm has to offer, is sold in many other industries. There are primarily two pricing models that are common. Law firms and management consulting firms like McKinsey price their services by time. Technology research firms like Gartner sell their research through subscription based pricing models. There are other models of course (investment banks price their services as a % of the transaction value) but these are the two primary ones. More »

Don’t Believe Everything You Read

On May 16, Engadget, a blog on consumer electronics, posted breaking news that Apple’s iPhone and Leopard OS were going to be delayed. This was based upon an internal Apple email that they had been able to lay their hands on.Within a few minutes, AAPL had lost 3% off its market cap. Techcrunch has a blow by blow account here. Paul Kedrosky has another interesting take on the episode here.

My interest in this episode is in connecting it with other recent developments in text analysis based algorithmic trading to see what this might augur for the future. More »

The Napsterization of Sell-Side Research

Cross-posted on the Gridstone Blog.

Candace Browning, Head of Research at Merrill Lynch posted an open letter last week that talked about the “Napsterization” of sell-side research, justifying why Merrill Lynch would have to take control of the distribution of their research. More »

The Fortress IPO

The IPO of Fortress (NYSE: FIG) on Friday closed at $31 or 70% above the IPO price on the first day of trading. It was the largest first day jump in a while. The fact that the forward P/E is now at 40x speaks to the frothiness of anything associated with hedge funds and private equity. But another interesting question that needs to be asked is – should a hedge fund be a public company? More »

The Rise and Rise of Private Equity

This week rumours were rife about what could be the biggest private equity deal ever – the buyout of Home Depot. The company later quashed the rumours that they were talking to private equity firms.

These are sweet times for private equity. The deals are bigger and more numerous. Capital is easy to raise. So is debt, that is needed to leverage the buyouts. A recent Fortune article paints a very rosy picture of the private equity business. Here’s a different perspective on it from NPR (audio).
More »