Technology has made us all lazy
I am sick to death of it. Every month, the same thirty figures, Bloomberg canvasses the opinions of 30 or so 'high quality analysts' to come up with a consensus estimate - next it gives us a lovely little table to follow.
We sit there, slaves to figures that don't mean that much apart from a self-fulfilling prophecy. Every trading floor I've sat in, I see guys left right and centre fingers nervously hovering above the mouse clicker ready to buy or sell something on an announcement.
The room goes quite...... Non farm pay rolls come out......
"What was that?! Better than consensus ??? BUY BUY BUY BUY BUY!"
The futures all tick up and traders either have a jolly old giggle or a little moan and then await the next figure.
What does it all mean?!!! Im sorry to say this but F all. We've got so used to data that we just take everything at face value and these numbers that come out every month dictate exactly what we feel about the economy, despite the fact that outliers commonly occur and despite the fact that the revision can sometimes be huge!
Take UK GDP it has an error of 1.2%!! So when the UK GDP has shrunk 0.3%, it could equally have grown 0.9%, yet people still react to the drop.
So what if one month jobs figures come in worse than expected, so what if it's two months. These are just numbers and we are comparing them to numbers that we ourselves have created. It's definitely below expectations they say, yet NO ONE HAS A MODEL WHERE THIS NUMBER HAS ACTUALLY ALTERED ONE VALUATION (I am generalising here). Did anyone even bother to check if these figures have a bearing on the product they trade? I did, they don't. Three months, six months, nine months, I'm afraid there isn't one profitable strategy following these indicators, yet WE ALL DO IT.
Why is it we still follow these numbers like these are the pinnacles of fact? Can we not come up with our own opinion? When was the last time you can remember a colleague actually digging into something beyond the firm labelled research that is passed around the city like Paris Hilton's thighs? When was the last time you actually saw someone lend so much importance to the non farm payrolls then actually go to the Bureau of Labour Statistics and see which cohorts were improving and seeing where strengths and weaknesses were found?
I'm afraid ladies and gentlemen we are now part of the summary generation. Just tell me the three important bullet points on the economy so I can follow those without question.
Am I the only one who is thinking this or have I just had a bad day in the office (my figure was worse than expected :D)
RedRut 1percentblog www.1percentblog.com
Depends on your investment thesis - if you believe the numbers are noise, you'd stick to your thesis. Else you could try to game the market by predicting contrarian moves after such a reaction, and make that your strategy. If you're in HFT, I don't think you'd have a directional view. My point - in the end it really boils down to your strategy/investment thesis. But yeah, I do agree markets' reaction to news is ridiculous and almost boring tbh. Everyone 'discovers' the same news and tries to place a trade predicting the same direction. I professor of mine who ran his own CTA actually built a model that trades automatically on news on more than a 1000 stocks. That was cool.
Couldn't agree more
The problem not only lies in the fact that people think that the numbers that come out are the end all be all, people don't know how to actually conduct their own research.
Foreign Policy analysts were in consensus that Bin Laden's death didn't really decrease terrorism danger (e.g. conflicting effects of terrorists's decreased morale vs. increased hatred/need for revenge) but the market had a huge rally anyway. Why? Because nobody gives a fuck what uber-prestigious Brooking's Institute research says. Not big enough to fight basic market sentiment.
So if other traders in your product react to bullshit gov numbers, than that makes those numbers relevant. All the research in the world won't change that (not without a soapbox in the vein of Einhorn, Buffett or Gross- and even then maybe not).
If they react to Clinton freeing Korean hostages, a country relevant to their product winning the world cup, that royal douche+cunt wedding in the UK, or whatever else- then it matters. Timing when/if an overreaction wears off, isolated from a hundred other possible factors, so that you can place a successful short- THAT'S the interesting part.
Worlds tiniest violin bro.
Trading is about making money, not having well thought out ideas or being able to decipher an earnings/NFP report. Im not sure what gives you the idea that this generation has become the summary generation (you probably weren't even a sperm when your director started trading so not sure what makes you think its just new guys) but when rates are flying and usdjpy is moving 15 pips every blink, the last thing I care about is what the components were other than headline and revisions. There is nothing wrong with reading the report and taking away a few bigger points, but that is not the same as making money or managing risk, and I often find that those complaining about how some obscure indicator runs counter to the price action are likely those who have lost money and are trying to justify their position instead of stopping out.
Its about making money, not whether the data is "bullshit" or not. And honestly whether the data is good/relevant or bad doesn't matter when you are paying 2/20, if your guy performs like Paulson partners then it doesn't matter how well he reads a 10-k, he is still giving away your principal.
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