This is impossible to read as every other sentence sounds like it was written by an LLM. I had to stop after a few paragraphs.
455 karma · joined December 12, 2017
Millennium and Citadel are both hedge funds, who do not engage in market making at all. They are most similar to other multi-strategy hedge funds like Balyasny or Point72.
You may be thinking of Citadel Securities, who are a market making firm and do engage in high frequency trading. Other large and well known HFT firms include Hudson River Trading, Tower Research, Jump Trading, Virtu, IMC and Optiver.
Ok, so you added high-frequency random noise to the estimated averages to make it feel more realistic. To me, this makes it feel less realistic.
Anyway, don't mean to gripe, this is a cool project!
- Ruhlman's 20 by Michael Ruhlman
- How to Cook Everything by Mark Bittman
The less glib answer is that what I said above applies to managing your own money as a part time investor. If you are managing other people's money as well as your own, and doing it full time, with access to huge datasets and sophisticated models, then you are playing a totally different game.
Your central premise is flawed -- in particular
> Last 3 years has shown that to be a good investor you need to know macroeconomics
This is not true. It is true that 'macro' events (central bank actions, supply/demand shocks, wars, pandemics) affect prices, but it's not true that you need to be a macroeconomic expert to be a good investor:
1. Any understanding of macro you get from reading in your spare time is unlikely to be good enough to use as the basis for an investment strategy (although you may think it is -- but this will just lead to you making bad, or at best random, market timing decisions)
2. Even if you could become an expert, there isn't a clear mapping from macroeconomic outcomes to asset prices. So you not only need to be right about the macro picture, you need to be right about the effect it will have on asset prices (including the second- and third-order effects, e.g. central bank and other investor reactions to the macro outcomes)
3. Even if you do become a macro expert, and you have the correct mapping from macro outcomes to asset prices, it's not enough. You don't only need to be right about the macro outcomes, you need to be more right than the market. The market is made up of a huge number of diverse actors, many of whom have access to vast resources and spent literally all of their waking time trying to use macro data to predict asset prices. Are you better than them?
4. Even if the above can all be overcome -- is this really the highest return use of your time (compared to e.g. getting better at your day job and increasing your income, or starting a company in your area of expertise and getting rich that way)
That all sounds daunting, but fortunately there's a solution! Simply buy a diversified set of investments in a tax-efficient wrapper for a total cost of < 10 basis points annually, and add capital to the pot regularly, and you will get great investment results over any 25-30 year time horizon, with essentially zero effort.
There is always someone predicting an upcoming market crash. People like Grantham (cited in the post) have been predicting a mega crash for most of the last decade. Market crashes occur every 10-20 years but the thing is, over that 10-20 year cycle the market is always net up, so if you sit out the cycle because of worries about an upcoming crash you could easily miss out on 5-10 years of great returns.
The post author frequently compares flow variables (eg earnings, GDP) to stock variables (eg market cap). That’s not necessarily terrible, but the ratio is always sensitive to interest rates (because the stock variable discounts future values of the flow variable, and when rates are low the discounting has less of an effect). Market cap/earnings and market cap/GDP are high now because interest rates are low (asp because growth expectations are high, but that’s not necessarily incorrect). Before the dot com crash US interest rates were 6%, compared to 0.25% now — of course that skews the statistics.
Michael Burry is cited as “someone with a proven track record of predicting market crashes” but in fact he predicted exactly one crash. Well, so did John Paulson, and the ensuing decade proved that it was just luck. Mark Cuban “predicted” the dot com crash. It doesn’t mean they are geniuses, it means they got lucky once.
Growth in margin debt is cited as a reason to worry. But margin debt has grown because assets have grown. The S&P 500 has double since the lows of March 2020, so the fact that margin debt has doubled is not a cause for concern. As a percentage of assets, margin debt has been stable for the last decade.
This post is pointless fearmongering, nothing more. Of course, there will be a crash at some point. It could be in six months, a year, five years or ten years. This guy can’t predict it any better than anyone else can.
It's a massive money laundering red flag, it's not at all surprising that Stripe doesn't want to deal with you.
The FCA has now placed restrictions on BML which remove its ability to carry out those regulated activities -- however BML was not actually doing any business in the UK so the effect of this is limited.
The FCA also issued a consumer warning which, among other other things, reiterated that no entities in the Binance group are registered with the FCA and therefore cannot carry out regulated activity in the UK. Again, the impact of this is limited since the entity that you interact with when using the Binance.com website is not based in the UK, and the FCA does not have jurisdiction over it.
A possibly outcome is that Binance will be a bit more circumspect about offering derivatives trading to UK retail because they want to build a more substantial UK business in the future. We saw this with Bybit a while ago, where they do not allow UK retail to use their website (although they have an exception for sophisticated investors, who can self-certify as an eligible counterparty and continue to trade on Bybit). I wouldn't be surprised to see this.
The entity that the FCA has acted against is Binance Markets Limited (BML) which the parent Binance Group acquired earlier this year, in part because of its existing registration with the FCA which allowed it to carry out a limited range of regulated activities in the UK.
The FCA has now placed restrictions on BML which remove its ability to carry out those regulated activities -- however BML was not actually doing any business in the UK so the effect of this is limited.
The FCA also issued a consumer warning which, among other other things, reiterated that no entities in Binance Group are registered with the FCA and therefore cannot carry out regulated activity in the UK. Again, the impact of this is limited since the entity that you interact with when using the Binance.com website is not based in the UK, and the FCA does not have jurisdiction over it.
A possibly outcome is that Binance will be a bit more circumspect about offering derivatives trading to UK retail because they want to build a more substantial UK business in the future. We saw this with Bybit a while ago, where they do not allow UK retail to use their website (although they have an exception for sophisticated investors, who can self-certify as an eligible counterparty and continue to trade on Bybit). I wouldn't be surprised to see this.
In Bitcoin futures - about 7,000 contracts.
In S&P 500 futures - about 1.9 million contracts.
The terrible economic data (high unemployment, low growth) already showed up in stock market returns in the first three weeks of March. What we have seen in April/May represents improving expectations for the economy in the future (as in, a few months to a few years... in theory the market discounts future earnings to infinity, but in practice it is not looking ahead more than 3-5 years most of the time, which is why it is so volatile).