All In, All Out, Why Not?

Mish

A Chinese quant-trading firm made 108% this year by selling every stock bought the previous day.

As long as the Fed is willing to promote gambling, guess what? People will gamble. 

Please consider Quant Fund Gains 108% by Dumping China Stocks a Day After Buying

Zhang Ruiqi, the 34-year-old chairman of Shenzhen Qianhai United Fortune Fund Management Co., screens about a dozen mainland-listed stocks every day for their turnover, momentum and volatility. He then does it all over again the following day. That strategy, which he calls the “all-in-all-out” method, helped his flagship $5 million fund gain 108% this year through June, according to data provider Simuwang.com.

“Our strategy allows us to make money from stocks that have the strongest market sentiment on a day-to-day basis -- and that has turned out to be overwhelmingly successful so far this year,” said Zhang in a phone interview from his office in Shenzhen.

“As long as the trading volume remains above 400 billion yuan per day, this strategy will still be effective,” said Zhang, noting the upcoming revamp of the Shanghai Composite Index and ChiNext market reforms. “Volumes are unlikely to drop.”

Money's Cheap, Why Not Gamble?

Hedge funds typically take 20% of the profits. 

If they can make 100% profits with Other People's Money (OPM) everyone is happy. If and when these strategies blow up the founders still make their 20%. 

Attract $2 billion with these short term returns and the hedge fund just made $400 million off of OPM with no risk. 

Not Just Quant Funds

I have a friend who is now day trading options, and short term ones at that. He does not know what a straddle is or even what a limit order is. 

Day trading is inaccurate because the size of his account, under $25K, restricts him to a limited number of trades. 

So far, he has done OK with long bets on Apple and Tesla. But how long can this last?

I had a long talk with him this past weekend. He is out of a job and out of money.

No Other Choice

"I have no other choice he told me". 

He wants to come by this week for me to explain more about options.

This is what the Fed has promoted. 

Related Articles

  1. The Fed Promotes a Quickening that Takes Many Years
  2. The Recovery Will Have Many Shapes, Not One
  3. Unemployment is Much Worse Than it Looks

Mish

Comments (45)
No. 1-16
ToInfinityandBeyond
ToInfinityandBeyond

The Fed is prompting this behavior by removing all vestiges of moral hazard. Hard to see what will bring the markets back to some sense of normalcy. I for one am sitting on the sidelines other than a 10% allocation to gold bullion and precious metals miners.

UrbanDigs
UrbanDigs

This is like fall 1999. And the end well be worse. I never thought my day trader experiences back then would ever come back but here we are. I've learned a lot since then, and I'm genuinely worried about what may happen in years to come when this ends for new traders who only know this fed induced melt up

Realist
Realist

Somehow, this story reminds me of 2006-2008, when people were buying houses to make money to offset losing their job, or to retire and make their fortune in real estate.

Montana33
Montana33

A broken clock is accurate twice a day. I’ve seen these strategies before and they always end in tears. Even a random day trader can get lucky a few times but then they guess wrong the next few times and they implode. These guys can’t guess the next moves by Fed and Congress so they will likely fail soon enough.

numike
numike

Federal Regulators Are Mortgaging The Country To Wall Street
What could possibly go wrong?

Cocoa
Cocoa

The equity and debt markets only purpose now is to breed new credits. Has nothing to do with investing, access to money. Even companies with money borrow cheap, buy back shares with cash, make equities float higher and CEO can sell some shares at higher prices. It's price management system using debt. How bad is your financial system where you cannot allow stocks to find any price discovery without imploding everything around it. Dumb

anoop
anoop

I am actually more concerned that the fed’s policies are gutting the real economy. When more and more corporations, small and large, realize that they can make money without producing anything, we will have a massive problem on our hands.

Casual_Observer
Casual_Observer

This amounts to going to a casino daily for these hedge funds and cashing out poker chips. And now the Trump administration wants more people to have access to hedge and privaty equity funds in their 401k.

The Fed is so out of touch with main street that they are going to create an economy based on nothing but people sitting at home and trading stocks on their computer. I think about 40% of the country already relies on this for primary or supplemental income.

Tony Bennett
Tony Bennett

"This is what the Fed has promoted."

...

For now. Actions taken were to allow TPTB to take to the lifeboats.

Buffet sitting on $130+ billion in cash.

Portnoy calling him out as a "has been" not to be taken lightly.

Oh, did I mention the Federal Reserve's balance sheet has now shrunk not once, not twice, but 3 straight weeks?

One more thing. An ever escalating stock market only improves DJT's re-election chances. Do the TPTB want THAT??

tokidoki
tokidoki

Not jealous. I too have a trading strategy. It's called "EASY COME EASY GO"

Someday a lot of people will lose their shirts, and that's about it.

RonJ
RonJ

"He wants to come by this week for me to explain more about options.
This is what the Fed has promoted."

It wasn't the FED that shut down the economy, throwing him out of a job.

Fl0yd
Fl0yd

Seems as the Fed has been rather consistent and predictable at inflating asset prices. Those who bet (gambled) on the Fed in 2010 have made profits (nominally) in a 10 year time window. Not a short time.

Would it be reasonable to expect that this pattern will persist for another 5-10 years?

ColoradoAccountant
ColoradoAccountant

Interest rates tell us that there is nothing to invest in that will grow the economy (with the exception of the flying car). Powell is trapped, he has to save the pension funds by inflating assets, and depreciating the currency.

libertea
libertea

Wouldn’t this strategy get hit hard with fees? Most of the hedge funds I worked with did 2 week - 3 month positions.

bradw2k
bradw2k

Picking up quarters
in front of a steam roller
on the Titanic

TaxHaven
TaxHaven

Duh...it took until TODAY to realize that gambling is all that is left?? When money becomes so cheap and overprinted such that its very meaning and definition comes into question, why "invest"? Growth has been squashed down to nearly nothing...all that has been left for most of twenty years is speculation...aka BETTING. ME too...why actually risk producing anything? Why get a (highly-taxed) actual job? Why sell your labour for peanuts?

Much easier to speculate...in stocks, in gold, in collectibles, in real estate. Hoarding. Speculating. I buy canned goods, non-perishables with every spare paper dollar...what did David Stockman say about ten years ago about tins of baked beans being better stores of value than paper...?


Global Economics

FEATURED
COMMUNITY