The worst stock market crash since Black Monday during October of 1987 occurred during the first week of August of 2007. But nobody noticed.
On the morning of August 6th 2007, investment professionals were baffled with unprecedented stock patterns. Mining sector stocks were up +18% but manufacturing stocks were down -14%. It was an extreme sector skew yet the S&P index was unchanged at +0.5% on the day. The next few days would continue with excessive volatility. MBI Insurance, a stock that had rarely attracted speculation would finish up +15% on Aug 6th, followed by another +7% on Aug 7th, and then finish down -22% over the subsequent two days. The brief rally in MBI was short lived.
Only weeks later would investors begin to have insights on the dispersion patterns. Prominent hedge funds that had never had a negative annual performance began disclosing excessive trading loses with many notable firms reporting several hundred millions were lost – in a single day. Hedge funds were hemorrhaging in excess of 30% of their assets when the S&P index was unchanged. The market dispersion was the side effects of the synchronous unwind ignited by the hordes of “computerized” strategies that were caught off guard when history didn’t repeat. It was the industry’s first world wide panic – by machines.
Over the past decade, computerized (or black-box) trading has had a coming of age. Black-box firms use mathematical formulas to buy and sell stocks. The industry attracts the likes of mathematicians, astrophysics and robot scientists. They describe their investment strategy as a marriage of economics and science. Their proliferation has been on the back of success, black-boxfirms have been among the best performing funds over the past decade, the marquee firms have generated double-digit performance with few if any months of negative returns.
Through their coming of age, these obscure mathematicians have joined the ranks of traditional buy-n-hold investors in their influence of market valuations. A rally into the market close is just as likely the byproduct of a technical signal as an earnings revision. They are speculated to represent a one third of all market volume albeit their influence to the day-to-day gyrations goes largely unnoticed. CNBC rarely comments on the sentiments of computerized investors.
Conventional wisdom suggests that markets are efficient, random walks and that stock prices rise and fall with the fundamentals of the company. How then have black-box traders prospered and how do they exploit market inefficiencies? Are their strategies on their last legs or will they adapt to the new landscape amidst the global financial crisis?
Chasing the Same Signals is a unique chronicle of the black-box industry’s rise to prominence and their influence on the market place. This is not a story about what signals they chase, but rather a story on how they chase and compete for the same signals.
About the Author
Brian R. Brown
Brian R. Brown is a Senior Search Consultant and Natural with Covario, the leader in SEO & SEM software & services, serving the online marketing needs of leading brands through natural search technology & professional services. Brian provides thought leadership on SEO best practices to premier online brands.
He also manages his own web presence development practice, Identity Developments, a full service, web-standards based web presence company serving the needs of small to mid-sized businesses with domain management, web hosting, xHTML/CSS web design, & natural search marketing.
Brian has worked with both B2B & B2C focused, pure-online and brick-&-mortar clients spanning a myriad of industries & categories, including: cooking, health & food; apparel, department store, shoes & accessories; real estate, construction & related services; furniture & home improvement; outdoor recreation, pet & equine; IT & tech, web hosting, electronics, manufacturing & industrial supply; online printing, greeting cards, invitations & gifts; political, business & professional services, content publishing & events; and niche products.
Chicago: A Novel, spins the life stories of a cast of Americans and Egyptians, whose lives collide in a world of desires and needs for love, friendship and ambition, post-9/11. At a college campus, a relationship between an anti-establishment professor and an African-American woman becomes a target for intolerance; a veiled PhD candidate’s beliefs in her traditional principles is shaken by her exposure to the American society; an émigré’s fervent desire to embrace his American identity is tested; an informant who spouts religious doctrines while yearning for power and money; and a dissident student who seeks finance for his literary aspirations finds beyond that. Beautiful and engrossing, Chicago offers an illuminating portrait of America - its complex and contradictory triumphs and failures, opportunities and oppressions, lust and love.
Alaa Al Aswany’s earlier novel,The Yacoubian Building follows the fortunes of the inhabitants of a dilapidated mansion block in Cairo, and is at once an impassioned celebration and a ruthless dissection of a society dominated by bribery and corruption. His latest book,Friendly Fire, has both a novella and a collection of short stories. Born in 1957, Alaa Al Aswany is a dentist by profession, based in Cairo.
The 3 winners of this contest has been picked and they are :
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E-mails will be sent out to the winners within this week.
The books are sponsored, courtesy of MPH Distributors Sdn Bhd.
Thank you everyone for your entries.
Happy Chinese New Year & Lovely Valentine’s Day to all of you !! ♥
Bernard Lawrence “Bernie” Madoff (born April 29, 1938) is the former Chairman of the NASDAQ stock exchange and the admitted operator of a Ponzi scheme. In March 2009, Madoff pleaded guilty to 11 felonies and admitted to turning his wealth management business into a massive Ponzi scheme that defrauded thousands of investors of billions of dollars. Madoff said he began the Ponzi scheme in the early 1990s. However, federal investigators believe the fraud began as early as the 1980s, and the investment operation may never have been legitimate. The amount missing from client accounts, including fabricated gains, was almost $65 billion. The court appointed trustee estimated actual losses to investors of $18 billion. On June 29, 2009, he was sentenced to 150 years in prison, the maximum allowed.
Madoff founded the Wall Street firm Bernard L. Madoff Investment Securities LLC in 1960, and was its chairman until his arrest on December 11, 2008. The firm was one of the top market maker businesses on Wall Street, which bypassed “specialist” firms by directly executing orders over the counter from retail brokers.
On December 10, 2008, Madoff’s sons told authorities that their father had just confessed to them that the asset management arm of his firm was a massive Ponzi scheme, and quoting him as saying it was “one big lie.” The following day, FBI agents arrested Madoff and charged him with one count of securities fraud. The U.S. Securities and Exchange Commission (SEC) had previously conducted several investigations into Madoff’s business practices since 1992, which critics contend were incompetently handled.
Investment Scandal
Concerns about Madoff’s business surfaced as early as 1999, when financial analyst-whistleblower Harry Markopolos informed the U.S. Securities and Exchange Commission (SEC) that he believed it was legally and mathematically impossible to achieve the gains Madoff claimed to deliver. He was ignored by the Boston SEC in 2000 and 2001, as well as by Meaghan Cheung at the New York SEC in 2005 and 2007 when he presented further evidence. Others also contended it was inconceivable that the growing volume of Madoff accounts could be competently and legitimately serviced by his documented accounting/auditing firm, a three-person firm with only one active accountant.
The Federal Bureau of Investigation complaint says that during the first week of December 2008, Madoff confided to a senior employee, identified by Bloomberg News as one of his sons, that he said he was struggling to meet $7 billion in redemptions. According to the sons, Madoff told Mark Madoff on Dec. 9 that he planned to pay out $173 million in bonuses two months early. Madoff said that “he had recently made profits through business operations, and that now was a good time to distribute it.”Mark told Andrew Madoff, and the next morning they asked their father to explain how he could pay bonuses if he was having trouble paying clients. They went to Madoff’s apartment, with Ruth Madoff nearby. Madoff told them he was “finished,” that he had “absolutely nothing” left, that his investment fund was “just one big lie” and “a giant Ponzi scheme.”According to their attorney, Madoff’s sons then reported their father to federal authorities. On December 11, he was arrested and charged with securities fraud.
Under 24-hour monitoring and house arrest in his Upper East Side penthouse apartment after posting bail in December 2008, Judge Denny Chin, after accepting his plea, revoked Madoff’s $10 million bail and remanded him to the Metropolitan Correctional Center on March 12, 2009 after accepting Madoff’s plea. Chin claimed Madoff was a flight risk, due to his age, wealth, and the prospect of spending the rest of his life in prison. Prosecutors filed two asset forfeiture pleadings which include lists of valuable real and personal property as well as financial interests and entities.
Madoff’s lawyer, Ira Sorkin filed an appeal, and prosecutors responded with a notice of opposition. On March 20, 2009, an appellate court denied Madoff’s request to be released from jail and returned to home confinement until his June 29, 2009 sentencing. On June 22, 2009, Sorkin hand-delivered a customary pre-sentencing letter to the judge requesting a sentence of 12 years, due to tables cited from the Social Security Administration that his life span is predicted to be 13 years.
On June 26, 2009, Chin ordered Madoff to forfeit $170 billion in assets. Prosecutors asked Chin to sentence Madoff to the maximum: 150 years in prison. Irving Picard indicated that “Mr. Madoff has not provided meaningful cooperation or assistance.”
In settlement with federal prosecutors, Madoff’s wife Ruth agreed to forfeit her claim to US$85 million in assets, leaving her with $2.5 million in cash. The order allowed the SEC and Court appointed trustee Irving Picard to pursue Ruth Madoff’s funds. Massachusetts regulators also accused her of withdrawing $15 million from company-related accounts shortly before he confessed.
In February 2009, Madoff reached an agreement with the SEC, banning him from the securities industry for life.
Picard has sued Madoff’s sons, Mark and Andrew, his brother Peter, and Peter’s daughter, Shana, for negligence and breach of fiduciary duty, for $198 million. The defendants had received over $80 million in compensation since 2001 and “used the bank account at BLMIS like a personal piggy bank.” The trustee believes they knew about the fraud because of their personal investments in the scheme, the longevity of the fraud, and because of their work at the company including roles as corporate and compliance officers. Since 1995, Peter Madoff had invested only $14, but withdrew over $16 million. Mark and Andrew Madoff withdrew more than $35 million from a small original investment.
Affinity fraud
Madoff’s Ponzi scheme preyed heavily on his fellow Jews, destroying the fortunes of numerous Jewish charities and institutions. Affected institutions include Yeshiva University, the Women’s Zionist Organization of America, and Steven Spielberg’s Wunderkinder Foundation. Jewish federations and hospitals have lost millions of dollars, forcing some organizations to close. The Lappin Foundation, for instance, was temporarily forced to halt operations because it had invested its entire $8 million endowment with Madoff.
Size of loss to investors
David Sheehan, chief counsel to trustee Picard, stated on September 27, 2009, that about $36 billion was invested into the scam, returning $18 billion to investors, with $18 billion missing. About half of Madoff’s investors were “net winners,” earning more than their investment. The withdrawal amounts in the final six years are subject to “clawback” (return of money) lawsuits.
Former SEC Chairman Harvey Pitt has estimated the actual net fraud to be between $10 and $17 billion. Erin Arvedlund, who publicly questioned Madoff’s reported investment performance in 2001, stated that the actual amount of the fraud will never be known, but is likely between $12 and $20 billion.
Blowing the Whistle on Madoff
After blowing the cover off Bernie Madoff’s Ponzi scheme, Harry Markopolos, author of “No One Would Listen“, tells Michael Yoshikami of YCMNET Advisors, CNBC’s Karen Tso & Martin Soong to create public awareness on how to prevent this from happening again.
Elvis Aaron (or Aron) Presley (January 8, 1935 – August 16, 1977) was an American musician and actor. A cultural icon, he is widely known by the single name Elvis. He is often referred to as the “King of Rock and Roll” or simply “the King”.
Born in Tupelo, Mississippi, Presley at the age of 13 moved with his family to Memphis, Tennessee. He began his career there in 1954 when Sun Records owner Sam Phillips, eager to bring the sound of African American music to a wider audience, saw in Presley the means to realize his ambition. Accompanied by guitarist Scotty Moore and bassist Bill Black, Presley was one of the originators of rockabilly, an uptempo, backbeat-driven fusion of country and rhythm and blues. RCA Victor acquired his contract in a deal arranged by Colonel Tom Parker, who would manage the singer for over two decades. Presley’s first RCA single, “Heartbreak Hotel”, released in January 1956, was a number one hit. He became the leading figure of the newly popular sound of rock and roll with a series of network television appearances and chart-topping records. His energized interpretations of songs, many from African American sources, and his uninhibited performance style made him enormously popular—and controversial. In November 1956, he made his film debut in Love Me Tender.
Conscripted into military service in 1958, Presley relaunched his recording career two years later with some of his most commercially successful work. He staged few concerts, however, and, guided by Parker, proceeded to devote much of the 1960s to making Hollywood movies and soundtrack albums, most of them critically derided. In 1968, after seven years away from the stage, he returned to live performance in a celebrated comeback television special that led to an extended Las Vegas concert residency and a string of profitable tours. In 1973, Presley staged the first concert broadcast globally via satellite, Aloha from Hawaii, seen by approximately 1.5 billion viewers. Prescription drug abuse severely compromised his health, and he died suddenly in 1977 at the age of 42.
Presley is regarded as one of the most important figures of 20th-century popular culture. He had a versatile voice and unusually wide success encompassing many genres, including country, pop ballads, gospel, and blues. He is the best-selling solo artist in the history of popular music. Nominated for 14 competitive Grammys, he won three, and received the Grammy Lifetime Achievement Award at age 36. He has been inducted into four music halls of fame.
Master MBA key concepts without stepping foot in a classroom
Save yourself the thousands of dollars it cost for an MBA education. Dr. Milo Sobel presents core concepts taught in prestigious MBA programs such as Harvard, Wharton, and Stanford—without the heavy price tag and heavier classroom hours.
With MBA in a Nutshell, you can quickly and easily implement essential MBA core curriculum into your professional life—stripping away useless theory and focusing on practical application, which is what you really need to be successful in business. In MBA in a Nutshell, you’ll learn how to:
Accelerate and increase incoming cash flow
Assess and rank investment opportunities
Evaluate company performance using financial statements
Follow step-by-step instruction to draft strategic business plans
Turn uncertain business forecasts into reliable estimates
Find ways to increase revenue and profit while dramatically reducing costs
Chock-full of practical examples, formulas, and concepts and skills that can be immediately used and implemented, MBA in a Nutshell is a must-read to build skills to enhance your career and help your company grow and succeed.
An essential resource for anyone who has a close relationship with a person who is bipolar
This book provides a much-needed resource for family and friends of the more than 5 million American adults suffering from bipolar disorder. From psychotic behavior that requires medication to milder mood swings with disturbing ups and down, this book offers a warm and often humorous user-friend guide for coping with bipolar loved ones, colleagues, and friends.
The book includes
Guidance for identifying bipolar disorder symptoms and how to get the diagnosis confirmed
Strategies for dealing with rants, attacks, blame, depression, mania and other behaviors
Crucial information on medication and its effectiveness and potential side-effects
Techniques for dealing with attempts to self-medicate with drugs and alcohol
How many people with bipolar disorders can care for themselves, get help, feel supported and go on with their own lives
This important book contains real-life illustrative examples and a wealth of helpful strategies and coping mechanisms that can be put into action immediately.
Calling all BlackBerry users Are you a BlackBerry addict? Or worse still – do you live or work with one? You know who we’re talking about… eye always on their palm, little leather case always on the table… sound familiar? From the Blackberry Whine to the Blackberry Crumble, this little guide will help you recognise the seven major symptoms and, more importantly, tell you what to do about them.
Your alternative BlackBerry helpdesk
Whether you want to break the cycle of abuse, or you just want to break someone’s phone, you’ll find this book more effective than self-hypnosis, less painful than repetitive strain injury and cheaper than a divorce.
So you’ve got the drive to start a business. You might even have the Big Idea all mapped out. But then you realise that you’ve got no money to take it to the next stage. Back to the day job? No way. That’s where Freesourcing comes in. Believe it or not, you don’t need money to start a business. There’s an entire industry out there waiting to help you take your idea and make it happen… for free. All you need to know is where to find the help and how to get your hands on it.
Freesourcingis the definitive guide to free business start up resources, showing you exactly where to go and who to talk to when you’re starting a business on a shoestring. Freesourcers don’t just think outside the box – they find out where they can get the box for free too.
Back in 1971, the Booker Prize was revamped to honour the best novel of the year based on its year of publications. In doing so, many books published in 1970 were left out in the dark with no opportunity of winning a Booker Prize… until this year. The Lost Man Booker Prize is the brainchild of Peter Straus, honorary archivist to the Booker Prize Foundation.
A panel of 3 judges has been appointed to select a shortlist of 6 novels from a longlist of 22 books published during that period. They are Rachel Cooke, Katie Derham and Tobias Hill. These books would have been eligible and are still in print today. They are:
The shortlist will be announced in March but, as with the Best of the Booker in 2008, the international reading public will decide the winner by voting via the Man Booker Prize website. The overall winner will be announced in May.
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