Ep38 Algo Trading Conspiracies and more on Nissan and Carlos Ghosn
[Watch this episode on Youtube]
Moving words from a President for a US President
Yesterday US markets were closed. The funeral for recently passed away President George W. H. Bush moved the world. In particular, former President George W. Bush’s eulogy for his father was worthy of a U.S. President for U.S. President. The whole world gathered to express condolences to the whole family.
Back to the financial world, Asian and European markets were open for business. According to news, investors are getting increasingly nervous approaching the end of this year. A flattening yield curve, and an unresolved trade conflict, despite Chinese efforts to calm down emotions, investors feel that big change to one of the longest bull market is about to bite.
The German Stock Index DAX was down 1.19%. Japan closed in the red the same day and today booked another red day with Softbank down almost 5%. As if to play a bad prank on retail investors in regards to its pending IPO, the entire Softbank mobile network has been disrupted for hours. Apparently, they need the money to make some major infrastructure investments.
With Asia and Europe down, today’s US futures indicate a weak opening for today’s (December 6th) trading session,
These days there is a lot to worry about for investors, for each region, there are some big topics on the agenda. Trade dispute, tariffs on key industries and regional instability, whether we are talking about Ukraine or the Middle East.
Algo Trading Conspiracies and Computer Bot Traders
Market experts, blame algo trading behind the steep declines this Tuesday following the bullish opening Monday. Well, what does algo trading mean? It means computerized trading whether directly influenced by human managers or completely standalone trading by programs that work like robots just for trading. The market transaction they control use advanced mathematical models to make high-speed trading decisions.
According to the same experts, 80% of daily moves in U.S. stocks are machine-led. They blame these trading activities for the erratic market moves because they won’t digest market news in the same we humans do. Sorry, to say that – so, what? These days, all trades are executed by computers and the arguments that robots are responsible for ups and downs is complete BS and irrelevant. Shall we slow down computer executions and trading just to simulate human imperfections of deep thinking before each trade? Have you filled out a trading order by hand recently or deeply discussed a market-moving news with the rest of the world or even within your trading community? The good old times, gentlemen clubs with cigars and Wall Street Journals, are over!
Portfolio managers whether mutual funds or ETFs have to balance their portfolios every day to provide liquidity or fine-tune their respective portfolios according to set parameters. And this applies to the whole world which trades the same stocks at the same time. All this is done by computer programs to ensure organized and efficient trading at the highest speeds and lowest cost possible. The volatile is just a side effect of massive order flows due to new innovative products, changed trading strategies and market making.
Don’t put the responsibility away from what is still a market-based human-led system. We are responsible for implementing and monitoring these systems and we are responsible for accumulating massive amounts of trades at the same time and at the split of a second.
The more important reason why we see these fluctuations in a split of a second is much deeper and complex to analyze. Global macroeconomic parameters have been changing and most investors are slow to digest them, as the still existing liquidity is used to cash out some of the smart money. Starting from interest rate changes, less liquidity, increased protectionism and less inclination to take unnecessary risks are driving factors that split the global investors’ community. Some are more capable to adapt than others.
The Nissan/Carlos Ghosn Saga Continued
Even After more than two weeks, Ghosn is still in confinement held by Tokyo Prosecutors. They have extended the arrest from 72 hours without formally charging him of any crime. This is perfectly legal as the Japanese legal system works very differently to the US. Prosecutors can extend detention by as much as 20 days with court approval. So Carlos Ghosn could still be in jail for a few more days (even over Christmas) before a decision will be published. Right now, we don’t hear anything from Ghosn directly and it has a good reason. Most likely on the advice of his legal team, he is ordered to remain silent to make any unforced error in this high stakes poker game. In Japan, anything he says could be used against him at court. For Ghosn, it is like a marathon run he needs to endure a few more days – that means denying any allegations brought forward.
Unfortunately, the odds are against him. From past high-level cases in Japan, more than 99% of people who were charged were eventually convicted. Ghosn could face up to 10 years in Japanese prison if formally convicted. So it’s in his best interest to remain silent and wait for the official charges that can be better combated by his legal team. We will follow this case closely as business continues as usual at Renault and Nissan.
In this regards, French President Macron and Prime Minister Abe of Japan met at the G20 meeting where Macron expressed great concerns over the remaining fragile alliance. But according to Japanese press Abe seems to be less involved than his French counterpart in this saga. He reassured Macro to be neutral in this whole incident to let markets and the parties involved to find a solution. For Macron much more is at stake. For him Renault is of French national interest, that needs to be protected and if necessary nurtured to old strength. More on this case will follow shortly.
Softbank IPO Blog post and Video:
