The Correction in the US Equities Markets Nobody Wants to Talk About

Posted on March 17, 2013. Filed under: Companies, Debt Ceiling, Economy, Financial Crisis, Fiscal Cliff, Securities | Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , |

Edgar Perez, Author, The Speed Traders, and Knightmare on Wall Street

Edgar Perez, Author, The Speed Traders, and Knightmare on Wall Street

Stocks in the US markets slipped on Friday, ending the Dow Jones Industrial Average’s (DJIA) longest winning streak since 1996, just after snapping a 10-day run. Data from Thomson Reuters’ Lipper service showed that investors in U.S.-based funds had poured $11.26 billion of new cash into stock funds this last week, the most since late January. The DJIA slipped 25.03 points, or 0.17 percent, to 14,514.11 at the close. Meanwhile, it was announced that the fewest workers on record were fired in January and job openings rebounded, showing employers were gaining confidence the U.S. expansion would be sustained.

According to some pundits, recent market activity is essentially driven by positive corporate earnings. The S&P500 Price/Earnings (PE) ratio is currently slightly high at 16.5, if we compare with past indicators. The median S&P500 Trailing Twelve Months (TTM) PE ratio has been about 14.5 over the last 100 years; average is around 16. It was during much of 2009 when the disconnect between price and TTM earnings was so extreme that the P/E ratio was in triple digits, as high as the 120s. Going back to the 1870’s, the average P/E ratio has been about 15; therefore, the US equity markets are not excessively valued, leaving some room for further growth.

Other pundits point to the Federal Reserve’s determination to continue stimulating the economy with increased liquidity. Mohammed Apabhai, head of Asia trading at Citigroup Global Markets, favors this train of thought. He has noted that there is a 70 percent correlation between stock market performance and liquidity, “whether it’s through the promise of lower rates, QE (Quantitative Easing) or promise of more QE.” The Federal Reserve has launched three rounds of Quantitative Easing since the financial crisis hit in 2008.

More likely, both factors are in play, very good corporate earnings and monetary policy that pushes investors to take risks in equities. So is the earnings momentum sustainable? Unfortunately, savings from the smaller share of the pie from labor, government spending and earnings coming from emerging markets (EM) outside the US are all factors that will be curtailed at some moment. Is the Fed eager to continue being the huge player in this equation? Some of its members are increasingly worried about the effectiveness of the continued QE; if the labor market recovers, as the January numbers showed, the Fed most probably might be ending its bond purchases soon.

As pointed out by James Saft, wages in the US have taken a smaller and smaller piece of the pie; now below 44pc of GDP and dropping, down several percentage points since 1999. That is in part the consequence of globalization and the offshoring of jobs. However, the labor which can be offshored largely has already been and the likely trend is for new manufacturing technologies to start pushing jobs back into the US. As has been of national knowledge as well, there is a real danger of declining government spending. A dollar spent by the government is a dollar that supports household income, and consumption, and of course corporate profits; there will be less dollars starting this month thank to the sequester, a series of spending cuts and tax increases aimed at reducing the budget deficit.

Emerging markets are looking overstretched heading into the second quarter, Barclays Capital said in a report dated March 15, pointing out that the cyclical recoveries in EM have slowed down. Consensus growth forecasts (according to Bloomberg) have been revised down by 0.75 percentage points on average since mid-2012.  EM equities have been slow to react to these developments due partly to the continued inflows into the asset class from retail clients. The correction has started recently and the performance by country year to date has been mixed, but the most pronounced selloffs have been associated with the largest revisions to GDP growth forecasts. Adding to this dire situation, the economies of emerging markets grew at a slower pace in February than the month before, according to HSBC’s monthly purchasing managers’ index. The PMI recorded a level of 52.3, down from 53.8 in January, its lowest since August. The index covers 16 leading emerging markets, including India, Brazil and China, which all saw their rate of growth fall. Investors had been questioning whether emerging markets, whose growth depends in part on exports to mature markets, could continue to expand at fast rates of almost 10% in some cases.

What the equity markets want indeed is stable and/or predictably increasing US profits and the Fed to stay in the bond markets. Saft ironically suggested that markets’ best hope might be a cut in government spending deep enough to kill job growth and indefinitely extend QE, something that nobody else would agree with. Instead, markets would be happy with a bit of positive news today followed by another bit of negative news tomorrow. Unfortunately for the markets, profits will start showing stagnation starting with first quarter results. Federal Reserve said in September 2012, when QE3 was announced, that it would start pumping $40 billion a month to purchase agency mortgage-backed securities (MBS) until the labor market improves substantially. When will the Fed determine that the job market has made enough progress to reduce stimulus? The numbers for February will prove paramount in this regard. As these two important factors converge in a nightmarish scenario, equities markets should beware of the ensuing correction, coming as early as in the second quarter.

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Edgar Perez, The Speed Traders Workshop 2012 Sao Paulo, Quoted by CNBC on Can ‘Trading on Tweets’ Really Make Money?

Posted on January 24, 2012. Filed under: Exchanges, Flash Crash, Practitioners, Strategies, Technology | Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , |

Edgar Perez, Adjunct Professor at the Polytechnic Institute of New York University and presenter at The Speed Traders Workshop 2012 Sao Paulo: How High Frequency Traders Leverage Profitable Strategies to Find Alpha in Equities, Options, Futures and FX

Edgar Perez, Adjunct Professor at the Polytechnic Institute of New York University

Edgar Perez, Adjunct Professor at the Polytechnic Institute of New York University and presenter at The Speed Traders Workshop 2012 Sao Paulo: How High Frequency Traders Leverage Profitable Strategies to Find Alpha in Equities, Options, Futures and FX, February 8th, BM&FBovespa, was quoted by CNBC.com on the note “Can ‘Trading on Tweets’ Really Make Money?“.

CNBC’s Antonya Allen pointed out that social media websites like Twitter and Facebook have become increasingly important to high frequency traders looking to anticipate market moves before they happen; however, she asked, could they eventually become as significant as traditional business news providers in the world of high speed trading?

Edgar Perez, author of The Speed Traders: An Insider’s Look at the New High-Frequency Trading Phenomenon That Is Transforming the Investing World, said he has not come across a trader who had made money from information supplied on social networking sites. In his book, Edgar Perez follows six high speed traders and examines how ultra fast trading could develop in the future.

“I would be very interested in seeing cases where people actually made money using information from Twitter. Remember there’s a lag there of time and with high frequency trading you want to make sure you connect directly and don’t have any third party providers for information,” Perez explained.

Mr. Perez is widely regarded as the preeminent speaker and networker in the specialized area of high-frequency trading. He has been featured on CNBC Cash Flow (with Oriel Morrison), CNBC Squawk Box (with Geoff Cutmore), BNN Business Day (with Kim Parlee), TheStreet.com (with Gregg Greenberg), Channel NewsAsia Asia Business Tonight and Cents & Sensibilities (with Lin Xue Ling), NHK World, iMoney Hong Kong, Hedge Fund Brief, The Wall Street Journal, The New York Times, Dallas Morning News, Los Angeles Times, TODAY Online, Oriental Daily News and Business Times. He has been engaged as speaker at Harvard Business School’s 17th Annual Venture Capital & Private Equity Conference, High-Frequency Trading Leaders Forum 2011 (New York, Chicago, Hong Kong, Sao Paulo, Singapore), CFA Singapore, Hong Kong Securities Institute, Courant Institute of Mathematical Sciences at New York University (New York), Global Growth Markets Forum (London), Technical Analysis Society (Singapore), TradeTech Asia (Singapore), FIXGlobal Face2Face (Seoul), and 2nd Private Equity Convention Russia, CIS & Eurasia (London), among other global forums.

The Speed Traders Workshop 2012 Sao Paulo will reveal how high-frequency trading players are succeeding in the global markets and driving the development of algorithmic trading at breakneck speeds from the U.S. and Europe to India, Singapore and Brazil. The Speed Traders Workshop 2012 Sao Paulo kicks off a series of presentations in the world’s most important financial centers: Dubai, January 25; Seoul, South Korea, March 28; Kuala Lumpur, Malaysia, April 11; Warsaw, Poland, May 11; Kiev, Ukraine, May 18; Singapore, May 26; Shanghai, China, June 6; Jakarta, Indonesia, June 13; Mexico City, Mexico, July 27; Hong Kong, August 4, and Moscow, Russia, August 10.

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Edgar Perez, Author of The Speed Traders, to Host High-Frequency Trading Happy Hour Chicago Tuesday 26

Posted on July 23, 2011. Filed under: Event Announcements, Exchanges, Flash Crash, Technology | Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , |

The Speed Traders: An Insider’s Look at the New High-Frequency Trading Phenomenon That is Transforming the Investing WorldEdgar Perez, author of The Speed Traders, An Insider’s Look at the New High-Frequency Trading Phenomenon That is Transforming the Investing World (http://www.thespeedtraders.com), will host High-Frequency Trading Happy Hour Chicago (http://hfthappyhourchicago.eventbrite.com), at Public House this Tuesday July 26, from 6:00 p.m. to 9:00 p.m. Traders, quants, investors, managers, and industry professionals will be in attendance at High-Frequency Trading Happy Hour Chicago, which follows recent presentations by Mr. Perez in New York, Hong Kong, and Singapore.

The Speed Traders, published by McGraw-Hill Inc., is the most comprehensive, revealing work available on the most important development in trading in generations. High-frequency trading will no doubt play an ever larger role as computer technology advances and the global exchanges embrace fast electronic access. The Speed Traders explains everything there is to know about how today’s high-frequency traders make millions—one cent at a time. In this new title, The Speed Traders, Mr. Perez opens the door to the secretive world of high-frequency trading. Inside, prominent figures drop their guard and speak with unprecedented candidness about their trade.

Mr. Perez has recently been featured on CNBC, TheStreet.com and Channel NewsAsia, and engaged as speaker at Harvard Business School’s 17th Annual Venture Capital & Private Equity Conference, Columbia Business School’s Career Management Center and Alumni Club of New York, High-Frequency Trading Leaders Forum 2011, CFA Singapore, Hong Kong Securities Institute, News and Sentiment Trading, Waters USA 2011, among other prestigious global forums.

RSVP for High-Frequency Trading Happy Hour Chicago at http://hfthappyhourchicago.eventbrite.com.

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Edgar Perez, The Speed Traders, Keynote Speaker at High-Frequency Trading Leaders Forum 2011 Hong Kong, September 19-21

Posted on July 10, 2011. Filed under: Event Announcements, Flash Crash, Securities | Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , |

Edgar Perez, The Speed Traders, Keynote Speaker at High-Frequency Trading Leaders Forum 2011 Hong Kong

Edgar Perez, The Speed Traders, presenting at Hong Kong Securities Institute

Edgar Perez, author of The Speed Traders: An Insider’s Look at the New High-Frequency Trading Phenomenon That is Transforming the Investing World (http://www.TheSpeedTraders.com), will give the keynote address at upcoming High-Frequency Trading Leaders Forum 2011 Hong Kong, “How Speed Traders Leverage Cutting-Edge Strategies in the Post-Flash Crash World”, September, 19-21, (http://www.HFTLeadersForum.com).

Edgar, who recently presented to a full room at the Hong Kong Securities Institute, is widely regarded as the pre-eminent networker in the specialized area of high-frequency trading. Edgar has recently been interviewed by CNBC Cash Flow (with Oriel Morrison), TheStreet.com (with Gregg Greenberg), Channel NewsAsia (with Lin Xue Ling), iMoney, Bloomberg, and Thomson Reuters, and engaged as speaker at Harvard Business School’s 17th Annual Venture Capital & Private Equity Conference, Columbia Business School’s Career Management Center and Alumni Club of New York, High-Frequency Trading Leaders Forum 2011, CFA Singapore, Hong Kong Securities Institute, News and Sentiment Trading, and Waters USA 2011, among other prestigious global forums.

Mr. Perez is one of the great business networkers and motivators on the lecture circuit; he is available worldwide for the following speaking engagements: Present and Future of High-Frequency Trading, The Real Story behind the “Flash Crash”, Networking for Financial Executives, and Business Networking for Success.

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