Opening Bell: 2.7.17
Silicon Valley Hedge Fund Takes On Wall Street With AI Trader (BBG)
The walls of Sentient's San Francisco office are dotted with posters for robots-come-alive movies such as "Terminator." Inside a small windowless trading room, the only light emanates from computer screens and a virtual fire on a big-screen TV. Two guys are quietly monitoring the machine's trades—just in case the system needs to be shut down. “If all hell breaks loose," Hodjat says, "there is a red button."
A Quiet Giant of Investing Weighs In on Trump (NYT)
“The big picture for investors is this: Trump is high volatility, and investors generally abhor volatility and shun uncertainty,” he wrote. “Not only is Trump shockingly unpredictable, he’s apparently deliberately so; he says it’s part of his plan.” While Mr. Klarman clearly is hoping for the best, he warned, “If things go wrong, we could find ourselves at the beginning of a lengthy decline in dollar hegemony, a rapid rise in interest rates and inflation, and global angst.”
A Morality Tale of Stocks, Vice and President Trump (WSJ)
The Catholic Values Fund has made 9.6% since the election, including dividends, with its November and December performance accounting for the bulk of those gains. The Vice Fund, which specializes in alcohol, tobacco, guns and gambling, is up only 1.7%, far behind the wider market. “You would never have thought it,” says Gerry Sullivan, the Vice Fund’s manager, who is Catholic himself.
White House memo confuses Wall Street on fate of fiduciary rule (Reuters)
President Donald Trump's Friday memorandum ordered the Labor Department to review the so-called "fiduciary" rule. But that call for a review was significantly weaker than an earlier draft, seen by Reuters, that requested a 180-day delay in the scheduled April 10 effective date of the rule, which is already on the books. Trump's memo did not go as far as White House early guidance to reporters that the memo would ask the department to "defer implementation" of the rule.
“Sexy” companies like Snap tend to be bad investments (FT)
You aren’t supposed to be able to systematically earn more money for taking less risk, yet this is what seems to be happening in the period (1978-2013) studied by Lee and Li. According to any commonsense definition, the companies most likely to raise equity under their framework seem a lot riskier than the ones least likely to raise equity. [...]Lee and Li argue that companies with “sexy” products can lure people into repeatedly overpaying for stakes.
What everyone gets wrong about the 'fear index' (Yahoo)
“The misrepresentation of the VIX as a fear gauge signaling future market weakness is just plain wrong,” Citi’s Tobias Levkovich said in a note to clients on Friday. “Widely available indicators provide little investment ‘edge’ even if the consensus narrative is overly focused on this volatility metric despite its poor predictive power. Indeed, the S&P 500 has been higher 84%-88% of the time 12 months later when VIX readings were between 10 and 20 or between 30 and 40; hence, low or high VIX levels are not nearly as useful as advertised.”
French political turmoil hits bond spreads (FT)
“Markets underpriced the political risks in 2016 and they are determined not to do the same again,” said James Athey, investment manager at Aberdeen Asset Management. “Investors want greater rewards for the risks they see in French, Dutch, German and possibly Italian elections this year to destabilise the region.”
Richard vs Barack - kiteboard and foilboard challenge (Virgin)
One of the first stories Barack told me when he and Michelle arrived on Moskito Island was how, just before he became President, he had been surfing on a dangerous break in Hawaii. When he came in from an exhilarating session, the new head of his security team turned to him and said: “This will be the last time you surf for eight years.” For the next eight years he didn’t have the chance to surf, enjoy watersports or do many of the things he loved. So it was tremendous to offer him the chance to learn to kitesurf.
