Casino Bankers more important than GDP?

Loughton_Monkey

No big deal, but I was pleased to learn that Final Q3 GDP was "upped" from 1.5% to 1.9% to the surprise of the pundits.

http://www.bbc.co.uk/news/business-25461227

Hoping that this would bring a tad of comfort to the FTSE, I glanced at a graph showing an earlier rise of 30 points almost totally wiped out at 10:15. Was GDP 'leaked' and for reasons unknown not liked by the markets I wondered?

A bit of research tells me no. Simply the result of the "Casino" again.

http://uk.reuters.com/article/2013/12/20/uk-markets-britain-stocks-idUKBRE8710BE20131220

(Reuters) - Britain's FTSE 100 trimmed its gains on Friday after the expiry of December options as market makers offloaded their hedging positions on the index.

Traders said banks, which write options, were offloading long FTSE positions that they were holding as a hedge against the "put" options they had written on the index, and which have now expired.

Around 760,160 options to sell the index at 6,600, equal to 2.5 percent of the total open interest in puts, expired at around 1015 GMT, according to Liffe data, with the index still trading above that level at around 6,612.

The FTSE then dropped to 6,597 points after the expiry, leaving it still up 0.2 on the day.

"If you had a hedge on, you would basically be taking it off… so I am sure there is a lot of open interest there and that's why it gapped down to that level," said Nick Xanders, strategist at BTIG.

A small blow for us fundamentalists.

We used to think that the FTSE was a mathematical number, derived purely from the 100 prices of the 100 companies making up the index. They still maintain it is. But trading in derivatives (of the FTSE100) is actually driving the physical share prices. A bit of tail wagging the dog.

Seems to me that little boys zapping their joysticks at each other in the back-rooms of our respected bankers is having far more effect on the health of our pension schemes than the profitability (or otherwise) of Balfour Beatty.

With (I'm guessing) 193 such little 'games' being performed every day in EC1 and elsewhere, I just wonder how much "dosh" was trousered by these spotty youths and their masters which might otherwise have shown up in the portfolios of hard-pressed pensioners trying to make a shilling or two to support future purchases of life's essentials to keep them alive.....

michaels

Come off it, this is just some talking head trying to explain random variations, if the market really did fall due to the closing of futures contracts then presumably this could have been prdicted asnd the profit arbitraged to the point where no correection would have happened.

Far more likely that the market received some unexpected information - like those surprise GDP figures - that would have led to a slight move forward in expections of interest rate rise dates.

Loughton_Monkey

michaels wrote: »

Come off it, this is just some talking head trying to explain random variations, ......

Maybe so, but what with the thread about why no bankers have been banged up, I'm just in banker-thrashing mode today. Some have hinted that I might display a tad of cynicism occasionally.

Cameron & Co. seem to me to be a bit slow in forcing the split between normal and casino banking. This can't come soon enough for me. Then we can relieve the taxpayer of any future liability to bail out the casinos employing those millionnaire little "derivateens" who make bitcoins look like a currency of last resort.

They may be minor "fluctuations" but that's a word I learned not to use in Korea or China - what with their pronunciation....

I'll calm down later when the sun goes over the yardarm, the FSTE ends "up" on the day, and I have a large gin & tonic in my hand....

Thrugelmir

Loughton_Monkey wrote: »

Cameron & Co. seem to me to be a bit slow in forcing the split between normal and casino banking. This can't come soon enough for me. Then we can relieve the taxpayer of any future liability to bail out the casinos employing those millionnaire little "derivateens" who make bitcoins look like a currency of last resort.

The hedge funds of Mayfair are now the big players.

Kennyboy66

michaels wrote: »

Come off it, this is just some talking head trying to explain random variations, if the market really did fall due to the closing of futures contracts then presumably this could have been prdicted asnd the profit arbitraged to the point where no correection would have happened.

Far more likely that the market received some unexpected information - like those surprise GDP figures - that would have led to a slight move forward in expections of interest rate rise dates.

This nails it and is the perfect example of how we like narrative to explain the random, and how newspapers and analysts feel obliged to provide that narrative.

Loughton_Monkey

Kennyboy66 wrote: »

This nails it and is the perfect example of how we like narrative to explain the random, and how newspapers and analysts feel obliged to provide that narrative.

Surely the narrative is equally random. Journalists use this....

http://www.dack.com/web/bullshot.html

Edit: The censorship police have intervened! Change the last o to i

Generali

michaels wrote: »

Come off it, this is just some talking head trying to explain random variations, if the market really did fall due to the closing of futures contracts then presumably this could have been prdicted asnd the profit arbitraged to the point where no correection would have happened.

Far more likely that the market received some unexpected information - like those surprise GDP figures - that would have led to a slight move forward in expections of interest rate rise dates.

Just as an alternative hypothesis, there are plenty of 'momentum traders' out there: they just follow the trend. The trend is your friend as they say.

Prices falling can lead to further price falls.

There are other things that can cause price changes for technical reasons: a stock entering or leaving the FTSE100 for example.

Having said that, most market commentary is a big pile of testicles stuffed into a massive jam donut which we're all expected to chow down on. My favourite is, "There were more buyers than sellers today". Oh right. Who were these people buying from then? Number of shares bought = number of shares sold by definition.

http://www.arabianmoney.net/us-stocks/2013/02/06/nine-times-more-sellers-than-buyers-as-insiders-dump-stocks-over-the-past-week/

Nine times more sellers than buyers as US insiders dump stocks over the past week

Mmmm. Testicle donuts.

grizzly1911

Generali wrote: »

Just as an alternative hypothesis, there are plenty of 'momentum traders' out there: they just follow the trend. The trend is your friend as they say.

Prices falling can lead to further price falls.

There are other things that can cause price changes for technical reasons: a stock entering or leaving the FTSE100 for example.

Having said that, most market commentary is a big pile of testicles stuffed into a massive jam donut which we're all expected to chow down on. My favourite is, "There were more buyers than sellers today". Oh right. Who were these people buying from then? Number of shares bought = number of shares sold by definition.

http://www.arabianmoney.net/us-stocks/2013/02/06/nine-times-more-sellers-than-buyers-as-insiders-dump-stocks-over-the-past-week/



Mmmm. Testicle donuts.

There could be 10x1 buying and 1x10 selling?

Just a thought.

Generali

grizzly1911 wrote: »

There could be 10x1 buying and 1x10 selling?

Just a thought.

Wouldn't cause a change in price though.

Generali

Scrootum wrote: »

If someone owned say 90% of a type of stock and dumped the whole lot in one go, surely that would affect the price.

Yes it would. The price would very likely fall rapidly.

There still wouldn't me more shares bought than sold though.

Generali

Scrootum wrote: »

Wasn't the discussion about more buyers then sellers though?

No, the discussion was about poor writing about the financial markets. I merely gave an example which has been seized upon for no apparent reason.