Paul Rowady – Page 40 – Alphacution Research Conservatory

IBM Hides Watson Under a Red Hat

IBM Hides Watson Under a Red Hat

A charitable assessment might have called it an experiment, really; an experiment to find out if the headwinds on the hardware and infrastructure services side of the house could be mitigated to some meaningful extent by perceived tailwinds on the software side of the house. A less charitable assessment might have called it a gamble... But now, with the (Sunday evening) October 28, 2018 announcement that it will be acquiring open source software leader, Red Hat for an astounding multiple of nearly 12x FY2018 revenue, or $34 billion, IBM signals that the promise of the high-profile experiment / gamble within their software group - relabeled, Cognitive Solutions in 2015, and where "Watson" became the poster child for the recent hyperbolic expectations of artificial intelligence (AI) - was not likely to arrive soon enough to stem the internal bleeding caused by competitive threats within the cloud infrastructure services market. With Red Hat, IBM now turns to defend its 3rd fiddle position in the cloud market (just ahead of Google) - which [...]

By Paul Rowady|2020-10-05T21:23:58-04:00November 12th, 2018|Open|

When #ETFs Ate The Beta

When #ETFs Ate The Beta

These days, making a point - and then creating enough initial magnetism to draw folks' attention further down into that point-making exercise - has become quite an art form. Would anyone even notice if a piece of writing had already been published under a different image and title? Perhaps someday we will perform that exercise. ;-) In any case, this post completes the natural progression of our tour of the three primary segments of Alphacution's asset management ecosystem "map" and our attempt to illustrate the overarching driver that is impacting each of them: automation. We started this tour back in July with the highly popular post, When Market Makers Ate Their Own, wherein we showcased how advancements in technical performance by a declining roster of players had led to the current self-destructive extremes of consolidation and concentration within the market-making zone of our map (since relabeled, structural alpha zone). Following on the heals of that came the post When Hedge Funds Ate Their Own wherein we introduced the hypothesis that [...]

By Paul Rowady|2020-08-17T07:14:06-04:00November 11th, 2018|For Subscribers|

@VirtuFinancial: Yes, There Are More Acquisitions on the Way!

@VirtuFinancial: Yes, There Are More Acquisitions on the Way!

No problem can be solved from the same level of consciousness that created it. - Albert Einstein On October 4, news broke on all the major market news outlets that - after feasting on a meal formerly known as KCG Holdings, Inc. (KCG) in 2017, which itself was a combo platter made up of GETCO and Knight Capital - Virtu Financial, Inc. (Virtu) was returning to the all-you-can-eat buffet to consider the total consumption of multinational agency brokerage and financial markets technology firm, Investment Technology Group, Inc. (ITG). Of course, this news generated a chuckle around here because it seemed that it was not too long ago that someone was predicting that this kind of pairing would make sense for Virtu - if conditions were such that they needed to bolt something else onto their expanded frame. Oh, wait a sec, that was us... To wit, from Alphacution's post "Virtu Financial: More Acquisitions on the Way, If..." (March 27, 2018): "One other notable move for significant growth for a firm [...]

By Paul Rowady|2020-08-17T07:14:06-04:00October 31st, 2018|For Subscribers|

Adventures in Speed: @VirtuFinancial, @FlowTraders

Adventures in Speed: @VirtuFinancial, @FlowTraders

“Study the science of art. Study the art of science. Develop your senses — especially learn how to see. Realize that everything connects to everything else.” — Leonardo Da Vinci (~1500) It has been a little while - since here - that we updated our analysis on the market making and high-speed trading strategy end of the playing field. And, during that time it came to our attention that our friends at Flow Traders N.V. (FT) had begun to feel a little left out of the fun. After all, it seemed we had inadvertently given that impression by showcasing our thoughts on Virtu's progress and outlook as if it were the only remaining stand-alone public market making firm - now that the KCG acquisition had closed. (For those of you who are just joining us, you might refresh the thread on prior work around this topic, most notably, here...) Personally, I don't think Virtu will mind sharing a bit of the spotlight. With the Panthers near the basement of the NHL's Atlantic division, [...]

By Paul Rowady|2020-08-17T07:14:06-04:00October 23rd, 2018|For Subscribers|

Vision and the Pace of Innovation: A Little Perspective…

Vision and the Pace of Innovation: A Little Perspective…

“Study the science of art. Study the art of science. Develop your senses — especially learn how to see. Realize that everything connects to everything else.” — Leonardo Da Vinci Da Vinci is now known to have been able to "see things" that he had the tools to make real in the period, and see some that he couldn't. For those visions he couldn't bring into reality, that disconnect - I have concluded - was mainly a function of the underlying pace of innovation. Da Vinci simply would not live long enough for the pace of certain innovations to intersect with his lifespan. Today, the pace of innovation is so severe, it's difficult to imagine what might not intersect with our own lifespans. Food for thought...

By Paul Rowady|2020-10-05T21:23:35-04:00October 18th, 2018|Open|

The Privatization of Alpha

The Privatization of Alpha

“Study the science of art. Study the art of science. Develop your senses — especially learn how to see. Realize that everything connects to everything else.” — Leonardo Da Vinci (~1500) "Hedge funds — there are too many of them and most of them are lousy." - Stevie Cohen (2016) The highest Sharpe Ratios - which, for the uninitiated, is a measure of risk-adjusted returns for specific strategies and financial portfolios - now live behind a declining roster of gilded gates. And the impacts of this "privatization of alpha" are enormous for the asset management industry and its stakeholders. Alphacution expects additional consolidation, concentration, re-engineering, disruption, disintermediation, and exits to be on the menu for this group along the road ahead. Here's the setup: Continuing on the overarching and transformational theme for how information technology impacts the constellations of strategies, players and markets in the financial universe, Alphacution has been leveraging its growing model library to focus on the development of a comprehensive asset management ecosystem "map" to demonstrate, along with many other [...]

By Paul Rowady|2020-10-14T21:50:51-04:00October 17th, 2018|Open|

Does Big #FinTech Innovate? Introducing Alphacution’s #BigFinTech Index

Does Big #FinTech Innovate? Introducing Alphacution’s #BigFinTech Index

Jensen Huang, CEO, Nvidia: "Software is eating the world, but AI is going to eat software..." One of the most fascinating aspects of innovation is its resistance to scaling. At least this is one observer's interpretation. Those trying to innovate at increasing scale - like, inside a large enterprise - might prefer to describe it as frustrating, to say the least. The rabid interest in startups - small groups of visionaries and entrepreneurs that are able to deliver radical levels of change to the provision of solutions for unmet market needs - is a reaction to this resistance. During the post-global financial crisis (GFC) hangover, it became vogue for large banks to establish externalized "innovation laboratories" to protect relevant and critical innovations from the harsh bureaucracies and incumbent politics inherent to large enterprises. Best case, they keep the proximity of innovation close; worst case, the messaging serves as a marketing tool. Of course, #fintech innovation has been a raging hotbed of innovation for the past few years, and many expect [...]

By Paul Rowady|2020-10-05T21:23:11-04:00October 10th, 2018|Open|

When #Hedgefunds Ate Their Own

When #Hedgefunds Ate Their Own

If you have bought into our arguments that the capacity of alpha is finite and that the leading managers of automated trading methods can achieve "winner-take-all" performance characteristics in the sources of alpha that they target, then it stands to reason that the causes for where assets are concentrating and which funds are closing are related. Without even looking at track records, these two facts lead to the conclusion that systematic strategies are more consistent than, and therefore, winning a battle over allocations to traditional, fundamentally-oriented and "manual" strategies in modern markets. Something amazing - and, potentially terrifying - is happening at the crossroad of asset management and global markets. The drumbeat of clues in support of this theme is increasing and those observers with keen insights into market dynamics are beginning to notice. Alphacution has played a small role in giving voice and illustration to this theme by placing a bow around a unique interpretation of unprecedented market phenomena worth paying attention to, most relevantly to this part of [...]

By Paul Rowady|2020-08-17T07:14:06-04:00October 10th, 2018|For Subscribers|

#Hedgefunds: Is the Capacity of Alpha Unlimited?

#Hedgefunds: Is the Capacity of Alpha Unlimited?

Like the financial markets equivalent of "dude", or "bro" or the many satisfying derivations of "F**K," the term "alpha" seems to pepper our market discourse in a way that has few peers. Rightly or wrongly, there isn't an investment or trading context into which it is not shoehorned. We hear it everywhere, at all times, and in numerous forms: Achieving alpha... Delivering alpha... Portable alpha... (A strategy that had its heyday around 2006 and has recently tried to make a comeback.) Tainted alpha... (Not gonna go there right now.) And, my personal favorite (for its level of misguidedness), generating alpha... There are conferences named after it, like the CNBC and Institutional Investor ANNUAL Delivering Alpha Conference, now apparently in its 8th year. And, of course, some of the most brilliant and creative companies of all time have been named after it! - and, I'm not necessarily talking about firms like Visible Alpha or AlphaSense or the defunct quant strategy development platform, Alphacet... To be fair, the list of common usages [...]

By Paul Rowady|2020-10-05T21:22:58-04:00September 23rd, 2018|Open|

Alphacution Podcast Series Ep4 – Technology for Financial Services: Hyped vs. Overhyped

Alphacution Podcast Series Ep4 – Technology for Financial Services: Hyped vs. Overhyped

Many thanks to Clare Rhodes, Managing Director, Articulate Communications for hosting this podcast series. Here is a link to Episode 4 of the series - Technology for Financial Services: Hyped vs. Overhyped (September 19, 2018) where the podcast series was originally published.

By Paul Rowady|2020-12-03T21:15:41-05:00September 23rd, 2018|Podcasts|