Recession, recession, we told you so!

I've been reading recession predictions in the press and media for at least six months, together with the routine liquidity crisis commentaries and financial apocalypse scenarios (Side note: how many banks filed for bankruptcy in the US in 2007? Answer: 3). The one-month economists are always there to pound the medias in times of fear, always. They then quietly fade-out when the market unexplainable starts rising again. Oh well, we are in a bear rally is one of those sentences used by the last permabear standing. Well, this bear rally started 5 years ago and is now seeing a renewed batch of positive indicators: retails sales, production, technology and leading indicators were all up in March. Even real-estate is showing positive returns YTD.

Reality is, all recessions and major financial shocks occurred in times of economic euphorias and excess optimism. The major recessions starting in 1929 and 2000 developed in a climate of high speculative interest and widespread gains, in other words when demand was exhausted. Supply and demand, the basic mechanism regulating all markets, is still the most important indicator today if you believe in modern capitalism and the last 100 years of economic history. Other than that, nothing has changed in my view, except the ability of public financial authorities to regulate liquidity, thus affecting the currency markets. As per emerging economies, risk lowers, does not rises, when the economy expands by creating diversification.

I've been bullish on the economy for the last 5 years and I don't see signs of recession as of yet. My equity portfolios have been recovering the losses suffered during the liquidity crisis and I am looking to close another year with gains in excess of 10%. Money flows and sector trends (commodities in particular) have been very helpful in determining my model allocations, as I wrote in a January post.


Technorati Tags: investing

Rydex alternative strategies fund (RYFOX)

Good article on allaboutalpha.com describing the new Rydex Alternative Strategies Allocation Fund (RYFOX). According to Rydex, the offering is aimed at retail investors in search for assets and strategies diversification:

The fund invests in a diversified portfolio of hedge funds and futures funds spanning the universe of absolute return, commodities, currency arbitrage, global macro, managed futures and real estate strategies, according to the firm.

But, allaboutalpha.com says, where is the limit between hedge fund "replication" and attempts to actually run a quant hedge fund?


Technorati Tags: investing, alternative strategies

IT spending on market data infrastructures to reach USD 7.8B by the end of 2010

According to this report by Aite, trading systems growth is set to continue at around 1B a year for the next 3 years. Among the factors challenging vendors, Aite mentions markets fragmentation and a further increase in data volume, which in most cases is already at a critical level for most of today's OM/ES platforms (believe me, I know something about it):

"Trading systems have not kept up with the growth in data coming at them," says Brad Bailey, senior analyst with Aite Group and co-author of this report. "The complexity of the high-performance infrastructure and the rapidity with which it evolves has created opportunities for specialized vendors."


Technorati Tags: trading systems

Majestic Research

The trading strategies in the Demo account look for patterns based on information collected from standard K1 and Q1 filings and price/volume data. I always thought about developing a model based on an alternative data set and Majestic Research seems to offer that option. Their databases includes industry-specific historical data, such as "Yield per RPM" and "Passenger revenue estimates" for airline companies, and "Cancellation rates" and "Planned inventory trends" for homebuilders.


Technorati Tags: investing

India IT salary growth

In a previous post I wrote about IT India off-shore costs rising and how the open source model offers a better alternative to infrastructures savings. Today I came across this article on Forbes putting some figures on Indian IT salary growth:

As the fight for talent intensified last year, salary hikes rose from
the previous year’s average of 14.4%, according to the study. In 2008,
compensation is expected to increase by an average of 15.2%, making it
the fifth consecutive year that salaries have risen in excess of 10%.

Real estate salaries grew by an average of 25.2%, compared with 17.6% in retail and 16.4% in banking and finance.

Clearly, the IT off-shoring model can not be sustained with these numbers in mind. A mixed software development model is emerging, where commercial code representing significant, core competitive advantage follows the classic copyrighted model, while larger parts of the development effort is released as open source for the benefit of higher quality service and lower infrastructure costs. Nothing new really under the sun: major innovators such as Apple, Google and Yahoo have followed this path for years now, with the introduction of operating systems and search engines based on open source code. Microsoft and Oracle are following: here and here.

New software players like Trolltech and MySQL have adopted a dual licensing model, where open source code can be either used in commercial applications for a fee, or else modifications to the original code must be released with the same open-source license.


Technorati Tags: open source, off-shoring