Alphacution Feed

Dodd-Frank in Douchebagistan (During the Age of Radical Innovation)

Here's an Inauguration Day rant for you: They hadn't even finished counting the ballots for the new POTUS when, on November 10, 2016, one of the great poster-children for modern-day douchebaggery, Alan Greenspan (@realGREENSPAN)  said to CNBC "I'd love to see Dodd-Frank disappear; a "disastrous mistake." Hasn't this guy figured out that he is way past his sell-by date? Anyway, just bookmark the timing of that statement while I set up today's metaphor: Roll back the clock a few decades to the early 1980's - height of the Reagan days - when those in the halls of power concluded that they could sell increasing levels of consumption to more of the masses (the "American Dream) by helping them lever their assets. The federal government played the game, too - of course. This was the real-life birth of the Avengers Initiative. Collectively, we The People, asked (or allowed) our representatives in capitol buildings across the land to help make it easier for banks to engage in financial engineering so that people on Main St. could consume more fancy stuff with [...]

By | 2017-04-28T09:40:52+00:00 January 20th, 2017|Alphacution Feed|

@VirtuFinancial: Valor #HFT Morghulis

If you read Part 1 to this post (from December 15, 2016) then you know that at least as of the end of 2015, financial reports from HFT bellwether Virtu Financial illustrated strong and even increasing profitability. Our surprise from these impressive figures came from the countervailing hypothesis that HFT was already well past its prime (given the evidence of prop shop closings and consolidations over the past 5 years or so). Apparently, Virtu didn’t get that memo. However, upon closer inspection of the most recent quarterly reports – which as of now yields details over 11 quarters starting in calendar Q1 2014 (March) and ending in calendar Q3 2016 (September) – even this bellwether may have seen its best days. Exhibit 1 (below) is one perspective of what this recent turn of fortune looks like: Some translation: After spiking in Q4-2014 and peaking in Q1-2015 at an annualized (adjusted net trading) revenue per employee (RPE) of over $4.1 million, trading revenue as of the end of Q3-2016 has returned to somewhat less [...]

By | 2017-04-28T10:17:25+00:00 January 12th, 2017|Alphacution Feed|

Investors Beware: #Robo-Blindness Ahead

I'm on the fence when it comes to the "robo-advisory" craze. Clearly, given the gush of venture money and subsequent marketing buzz behind automated trading and investing methods for the masses, lots of very smart folks think that "robots" managing your money (on an highly automated or assisted basis) are here to stay. Note that in 2016 Betterment and Personal Capital bagged rounds of $100 million and $75 million, respectively. Here's the first shoe: Quantitative methods for retail investors were always inevitable once a sufficient level of maturity in the underlying mechanisms had been achieved. In an earlier generation of quantitative trading strategy development (ie - late 1990's), we used say, "You can either fish or sell bait." Meaning, simply, that you can either use your trading signals on a proprietary basis or sell your modeling output for a fee. For those who were good at it, the profitability in the beginning was - or at least could be - far too juicy to sell for a fixed fee. And, frankly, these methods were in a far too formative [...]

By | 2017-01-12T09:43:26+00:00 January 10th, 2017|Alphacution Feed|

@VirtuFinancial: Let the good #HFT times roll!

It's March 25, 2016 - and I crack open the newly minted 10-K from our friends at Virtu Financial. The equivalent of that new car smell wafts northward from its fresh digital pages. The anticipation is palpable. With years of intense focus and vigorous debate on the mechanics of #HFT - and the jealous wonderment surrounding its stratospheric profitability - it is both rare and puzzling that the public should get a real, data-driven look inside to support or debunk the mythology of this ultra-secretive corner of the global financial landscape. Searching within this fresh set of data, I update our model - and the output creates one of those WTF cognitive dissonance moments. After all, isn't the heyday of HFT over?! Haven't numerous high-speed shops consolidated or folded? As a refresher, the vid below is what we were saying back in July 2013 (while at Tabb Group): Hello from 2013! Struggling is not what's going on here. By the looks of things at Virtu - at least as of the [...]

By | 2016-12-14T15:22:44+00:00 December 15th, 2016|Alphacution Feed|

Top Hedge Funds: AUM per Employee = Trading Strategy?

We have been playing with some new equations; looking to see if anything interesting can be learned from benchmarking assets per employee across various firms. (It turns out that adding this analytic to our suite of other "per employee" metrics yields significant insights.) In the figure below, we took the top 10 hedge funds ranked by assets under management (AUM) and then re-ranked that list by AUM per employee. We also tossed in Virtu Financial and KCG (Getco) for giggles - and to test the extremes. Notice anything interesting? Based on what you might know about these trading companies, how would you label the X-axis? Here's some additional data to consider: The correlation between assets and headcount is not perfect by any stretch, but it is signal-worthy. Also, this trick works best on mature, ongoing firms whose operations and business are relatively consistent. Headcount level doesn't seem to matter. Albeit at the extremes of tradings firms, Virtu Financial generated nearly US$800 million in revenue (2015) with 148 employees - so [...]

By | 2017-02-06T20:34:57+00:00 December 14th, 2016|Alphacution Feed|

Digital Noise in the Fintech Space – Numerix Video Blog Series

In this FIFTH and final installment of a five-part video blog series Jim Jockle, CMO of Numerix sits down with Paul Rowady, Director of Research at Alphacution to discuss the recent FinTech Revolution. They discuss how firms are gearing themselves towards a digital culture, and how companies are working to distinguish themselves in this new age. The five videos cover the following: Part 1: Paralysis by Analysis: Preparation & Analyzation for Digital Disruption Part 2: IT Outsourcing and Transformation Part 3: Revolutionizing FinTech: Looking into the World of Data Automation Part 4: Technological Implications of Cultural Transformation Part 5: Digital Noise in the FinTech Space Jim Jockle (Host): There’s so much noise, right. And whether its hitting the trades or the New York Post, you know, this company’s going to take down Bloomberg, this company’s going to disrupt payments for the next rest of the world. I’m now dealing with Apple Pay, you know, just naming names not pointing fingers. How do you cut through the noise? Paul Rowady (Guest): [...]

By | 2016-12-10T22:06:55+00:00 December 6th, 2016|Alphacution Feed|

Technological Implications of Cultural Transformation – Numerix Video Blog Series

In this FOURTH of a five-part video blog series Jim Jockle, CMO of Numerix sits down with Paul Rowady, Director of Research at Alphacution to discuss the recent FinTech Revolution. They discuss how firms are gearing themselves towards a digital culture, and how companies are working to distinguish themselves in this new age. The five videos cover the following: Part 1: Paralysis by Analysis: Preparation & Analyzation for Digital Disruption Part 2: IT Outsourcing and Transformation Part 3: Revolutionizing FinTech: Looking into the World of Data Automation Part 4: Technological Implications of Cultural Transformation Part 5: Digital Noise in the FinTech Space Jim Jockle (Host): So let me go to your research. You know you suggested a little bit, there’s the differentiators in terms of maximizing our opportunity and then there’s a congested middle-of-the-pack. Transitioning, so yes you had the Fords, who arguably have done very well in that or a transitionary period of time but you also saw the Hondas and Toyotas come out of nowhere and things of [...]

By | 2016-12-10T22:00:00+00:00 December 5th, 2016|Alphacution Feed|

Revolutionizing FinTech and the World of Data Automation – Numerix Video Blog Series

In this THIRD of a five-part video blog series Jim Jockle, CMO of Numerix sits down with Paul Rowady, Director of Research at Alphacution to discuss the recent FinTech Revolution. They discuss how firms are gearing themselves towards a digital culture, and how companies are working to distinguish themselves in this new age. The five videos cover the following: Part 1: Paralysis by Analysis: Preparation & Analyzation for Digital Disruption Part 2: IT Outsourcing and Transformation Part 3: Revolutionizing Fintech: Looking into the World of Data Automation Part 4: Technological Implications of Cultural Transformation Part 5: Digital Noise in the FinTech Space Jim Jockle (Host): So, you know, you bring up one of the big pain fear factors though, is giving up the data, right. So, one of the biggest barriers to the cloud and you know we’ve seen this from different companies, you know and I don’t want Google, I don’t want Microsoft to have my data. I don’t want Goldman to have my data. How much, you know [...]

By | 2016-12-10T21:52:39+00:00 December 4th, 2016|Alphacution Feed|

IT Outsourcing and Transformation – Numerix Video Blog Series

In this SECOND of a five-part video blog series Jim Jockle, CMO of Numerix sits down with Paul Rowady, Director of Research at Alphacution to discuss the recent FinTech Revolution. They discuss how firms are gearing themselves towards a digital culture, and how companies are working to distinguish themselves in this new age. The five videos cover the following: Part 1: Paralysis by Analysis: Preparation & Analyzation for Digital Disruption Part 2: IT Outsourcing and Transformation Part 3: Revolutionizing Fintech: Looking into the world of Data Automation Part 4: Technological Implications of Cultural Transformation Part 5: Digital Noise in the Fintech Space Jim Jockle (Host): What is the role of outsourcing? In the sense of at the end of the day traders are paid to trade. Financial advisors are paid to give advice and on the benefit and breadth of their customer base. Banks are meant to control and manage deposits. There’s still a fundamental core business but yet technology and the risk profile of all these institutions is the [...]

By | 2016-12-10T21:44:07+00:00 December 3rd, 2016|Alphacution Feed|

Paralysis by Analysis for Digital Disruption – Numerix Video Blog Series

In this FIRST of a five-part video blog series Jim Jockle, CMO of Numerix sits down with Paul Rowady, Director of Research at Alphacution to discuss the recent FinTech Revolution. They discuss how firms are gearing themselves towards a digital culture, and how companies are working to distinguish themselves in this new age. The five videos cover the following: Part 1: Paralysis by Analysis: Preparation & Analyzation for Digital Disruption Part 2: IT Outsourcing and Transformation Part 3: Revolutionizing Fintech: Looking into the world of Data Automation Part 4: Technological Implications of Cultural Transformation Part 5: Digital Noise in the Fintech Space Jim Jockle (Host): Hi, welcome to Numerix video blog, I'm your host Jim Jockle. Joining me today is Director of Research at Alphacution, Paul Rowady. Paul, thanks for joining us again. Paul Rowady (Guest): Great to be here, Jim. Jockle:  So, want to talk again a little bit more about the Fintech Revolution and digital disruption trend that so much is being discussed on. But I think we [...]

By | 2016-12-10T21:36:27+00:00 December 2nd, 2016|Alphacution Feed|