tt1254's blog

This negative article on bitcoin indirectly brought together a few disparate thoughts for me. The article's position/bias is clear - the digital currency, which has grown significantly vs. the dollar is a speculatively bubble:

What is even more interesting, however, is the set of comments which mostly defend bitcoin. These online comments, to me, show exactly the misconceptions which drives bitcoin, gold and many arguments about US monetary policy. Let us begin!

1) Misconception: Bitcoin is a valid and perhaps best currency because it is not manipulated, transparent and free from government control.

After taking a position in ING US (NYSE: VOYA) at about the $25/share level, I have been fortunate to participate in the rise to above $30. The original target was around the 40-50$, with stop around $20, the ipo price. The recent rise and earnings report make this a good time to reevaluate the thesis.

The firm posted an operating gain of $0.71/share, but on a net basis lost $0.56/share. Why? In a phrase, variable annuities (p134-135). Variable annuities took a (408.4) million capital (loss) related to hedging. How can such "hedging" turn a respectable gain into a loss that reduced book value by a billion+?

I've been pretty negative on gold miners (GDX), both because of the perceived weak hands involved on the long side and the terrible capital allocation policies/rising breakeven costs of the miners. At the risk of falling into confirmation bias, the recent articles about renewed gold hedging could be the next catalyst for further gold weakness (this month's strength notwithstanding).

While the exact magnitude and effect of such selling may be difficult to predict, it is something that I believe will grow in intensity the longer gold stagnates and/or remains volatile. Taking the analogy of a new speculator who has taken multiple large illiquid long positions (and indeed higher forward buying), gold miners would rather not lock in mediocre profitability (or indeed loss) going forward. If the analogy holds, the components of GDX will hedge more if/as gold falls more as the pain grows, exacerbating the fall and creating that reflexivity that Soros speaks of.

Perhaps it is actually harder to pick a manager than to pick investments. The general statistics against active management are well-known. In 2012, for example, 63% of large cap mutual funds failed to match the market (even worse for hedge funds).

As a result, the full choice set for selecting investments includes both asset class as well as manager, and the probability of choosing a good asset class And a good manager is less than a good asset class itself. Given that most investors usually time managers incorrectly, are there some nontraditional metrics which would work?

Edward Lampert's credentials are impeccable- Yale Skull & Bones, Goldman Sachs risk arbitrage under Robert Rubin (Secretary of the Treasury under Clinton), and of course the billion dollar hedge fund ESL Investments that he founded. Billionaire at 41, he even talked his way out of a kidnapping during negotiations to take over Kmart. Before 2007, his culminating merger of K-Mart and Sears was applauded by both the markets and many commentators.

Misaligned incentives seem to be a common trait in selling financial products. After issuer-paid credit ratings and stock exchanges which cater to high frequency traders, even data releases are not immune to such practices. Thomson Reuters is now under investigation for releasing a well-known customer confidence surveytwo secondsearlier to select clients for a $6K/month fee. In terms of information fairness, they issue is clear - high frequency traders have a huge advantage other short term traders without such information. However, what is the alternative?

I originally got interested in single-family rentals with the spinoffs of Silver Bay Realty (SBY) and Altisource Residential (RESI) in the last half year or so. These companies buy single-family homes with the intention of renting them out. Given that mortgage rates (<5%) are less than rental yields (>5%), it is typically cheaper to own than rent. On face, these companies provide a compelling statement - they effectively arbitrage low mortgage rates with the fed with tight credit standards for mortgages and have an implicit put in stabilizing housing prices.

But how much does this translate to company profits? Rental yields are usually < 10% to begin with pre-leverage (RESI presentation, slide 13) and mortgage/upkeep are ongoing while renters may leave and so profits depend on 1) maintaining a steady stream of renters while 2) keeping costs low.

I'm surprised that the recent Shibor spike hasn't (Shibor is the Chinese version of LIBOR) sparked more concern. After staying at less than 4% for the last year, the 3-month rate has surged to above 5%. The overnight rate has spiked even further to 13%. To put things in perspective, 2011's top five banks by profits included four chinese banks. What is happening?

One major explanation being posited is that this is just the next step in the Chinese government's attempt reduce credit expansion/leverage in the system. However, what if this is a different signal - that of a funding crisis? Such a crisis was prelude to the US-led recession of 2008.

2016 Full-time IB Recruiting Timeline MegathreadIt's that time of year again, folks. Time to polish those resumes, fire up the LinkedIn and WSO search functions, and bug the hell out of the career advisers at your schools. It's recruiting time!
We are all looking for information on timelines and deadlines for every bank...

Cost Estimators: The Bankers of the Construction IndustryRecently guys I have started a career in the construction industry as a project manager and cost estimator for a local company (boutique) and have seen the underlying similarities to the bankers of the financial world.
It's also a career most finance and business guys haven't heard...

The ‘Business Cycle’ frameworkThis post is a follow-up to <a href="http://www.wallstreetoasis.com/blog/stop-reading-the-news-thoughtlessly-and-develop-a-macro-framework">one of my earlier posts, ‘Stop reading the news thoughtlessly and develop a macro framework’</a> which had generated some interest...

2016 Summer Analyst IB Recruiting Timeline Megathread<em>Mod Note (Andy): Make sure to bookmark this page as this will be the cumulative thread for 2016 SA <span class='keyword_link'><a href="http://www.wallstreetoasis.com/finance-dictionary/what-is-investment-banking-division-IBD">IBD</a></span>...

CFA Results - 2015Today is the big day we've been waiting for/dreading since early June, when we peeled out of the testing center parking lots, burned our books, and went off to get drunk with our long lost friends.
Level I & II results will be released via email today after 9:00 A.M ET. Level III...

McKinsey Who?Stumbled across this Forbes article from 1999 (link at bottom of post). When reading the first few paragraphs, you could easily think it was written yesterday (aside from the salary #'s). Makes the dotcom bubble of yore feel eerily familiar....
[quote]" <strong>7/26/1999...

Forum Topics

Soho (NYC) SubletTo anyone in need of an apartment / roommate, I've got a furnished bedroom in my apartment available. Shoot me a PM if interested. The Craigslist post below has the details.http://newyork....

Why I Enjoy Networking with CandidatesI thought I'd write a networking post from a different perspective. We often see advice on WSO from people who are undergrads or recent hires with advice on how to network into the industry (good...

CFAIf working in commodities which is becoming streamlined and narrowed as a broker / trader, how valuable will the CFA be. Understand its v broad therefore it would provide an in depth financial...

Consulting vs Tech Industry careerLooking for impartial career advice for a 24 yo needing to make a big life decision in the next couple of months.
Background:
-UG: noname Eastern European Uni + 2 exchanges abroad
-1 yr FT internship...

West Michigan Undergrad SeniorHello Wall Street,
I am a little torn as to how to map out my final year as an undergrad at a non-target midwest state school. I will be beginning my senior year in exactly 29 days from this post. My...

RejectionMod Note (Andy): Make sure to check out the comment inside the post by @M- Weintraub
So, it's been a while since I've provided content to this wonderful website (sorry Patrick). But, I figure now...

Loan Offer At Cheap Rate.Do you need a loan? have you been looking for how to get access to a private lender? If yes, Here is the opportunity to get a cheap loan. We offer loan at low rate of 3% and we are contacted at...

IB vs quant equity?Guys, first post here (hi all). I'm turning to WSO because I'm at a cross road. I've spent ~3 years in IB but have since left for quant equity funds as a research analyst because of the crazy...

Review Resume please!!Hi there, I would appreciate a quick review to my profile. Almost three years of transfer pricing experience in a B4 working in 2 different countries, CFA Level III Candidate. I'm trying to switch to...

Sign up for the webinar notification email listI've heard from some people that they had trouble finding out how to sign up for this list. Add your name/email to the form below and you'll be notified of future webinars. FYI I email 30min before...

Recruiting seasonality ?I just graduated this past June and am still looking for jobs. I am wondering whether more opportunities will come up in September/October ? Anyone been in the same boat ?