Wondering if there are any of you analysts/PMs on here who do equities from a macro standpoint like Druckenmiller and Bessent. In a recent interview, SD says the algos are throwing off the signals he used to glean information from about trends.
Are you guys finding it incrementally more difficult to make money in this environment?
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Yes he is right. Price is no longer truth in markets. It’s ran by machines and quants now who do not know a lot about fundamentals.
Look at the Vix move in February. There’s no way a fundametnal guy looking at news would have seen that move. It was pure algos. Tightly run algos lifting stocks non-stop in January then puking out in 36 hrs in February.
Majority of money either doesn’t care (passive) or is ran by machines. With some of the multi-strats running on tight stops.
Markets just are not ran by guys like drunkenmiller anymore and therefore he’s getting fewer quality signals from guys like him doing smart things.
The crazy thing about the algos is we haven’t seen how they will trade in a crisis. We’ve seen what happens in February and October when relatively small shifts in fundamentals occurred but the marginal buyer shifted to seller. Haven’t seen them deal with a crisis.
right. i forgot that there was no algo trading in 2008 lmfao
Are you that dumb?
It’s abot percentage of market not about existence.
We have seen how algos trade in a crisis. There were shit tons of algorithmic funds and market makers in 2008. In fact, 2008 was the hayday.
Yes, there's been a big rise in passive funds but algorithms were still a massive component of the market during the financial crisis. They did..........pretty well. Equity algorithms blew up in August 2007, which was at a differentiated time from the rest of the financial crisis.
Your argument is mostly algorithm fear mongering that isn't really based on anything factual. There's little evidence that algorithms drove the sustained bull market. Your typical value/fundamental funds have been heavily net long. Active quant just surfs the patterns generated by fundamental market shifts. Active fundamental and active quant, together, suppress the effect of market pumping by passive inflows. To say it doesn't and that the market is completely out of whack on any kind of long-term basis seems silly. It might go out of whack temporarily for a combination of reasons but to say that over the long term markets are no longer efficient (price is no longer truth in markets) is astonishingly dumb
^this is spot on. The days of doing better work and front running the vanilla long only guys are over. "uninformed buyers" (the guys not doing fundamental work, aka ETFs and algos) dominate volume. It's really hard to fight a stock when an ETF is indiscriminately buying as it gets inflows. And the Quant funds are leading to violent factor moves you just never saw before.
It's much tougher to make money these days, which is just Micro 101: high profits lead to competition, which squeezes margins.
part of the issue too is the loss of well funded short term liquidity buyers. Chicago use to have a ton of point and click guys who we’re making a ton market making and then also capable of taking some position risks. Even moreso with bank prop desks that use to have guys who weren’t working on the lose 10% and fired at millennium. Some of those guys had some balls to step in on fundamental punts.
I feel like there should be a way to structure a fund to take care of this market structure. Issue is the moves are violent enough that you would need to take focused position on algo blow ups and really know your fundamentals in a bunch of asset classes.
Check out the natty gas move. I’m no expert on it but if you had some significant backing and could take a shot at it definitely would have some potential. https://www.themacrotourist.com/posts/2018/11/13/chipper/ It’s amazing the blow ups that are routine now.
You know that's an interesting point you make about being able to step in and take risks that will either have you -20% or +100%. Bessent himself was told this by someone (as an example of what you can do if you're running just your own money, but not if you're running other people's money).
Bessent also said of Druckenmiller that his position entry skills were so good he never used stop losses. Even if he was wrong on the call, he almost never lost money because of how he timed the entry (using technicals no less). Does that sound realistic to you guys?
why is this?
OP makes a really fair point, although his/her comments somewhat throw me for a loop since I heard from a friend (who is somewhat familiar with the matter) recently that the Duquesne family office is doing just fine. Perhaps that information is a bit outdated?
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