RenTec's James Simons Stony Brook Interview Video, Other Interview Links

Mathematician James Simons, head of hedge fund Renaissance Technologies, made $2.5 billion last year making him the highest paid hedge fund manager of 2008. Below is a 60 minute Stony Brook video interview with James Simons and physicist C. N. Yang on March 28, 2008. Simons testified before congress along with hedge fund managers Paulson, Griffin, Falcone and Soros in late 2008 during the credit crisis.



More articles on James Simons:

Simon's Doesn't Say: Meet The Man Whose 1990s Returns Are Better Than George Soros (Financial World 1996 PDF)

The Secret World of Jim Simons (Institutional Investor, Nov 2000)

Interview with James Simons: The billionaire hedge fund manager discusses the impact of mathematics on his former life in academia and his new one in finance. (Seed Magazine 2006)

Btw, Zero Hedge has interesting posts about RenTec, Renaissance
.

SPY Is Defying Gravity For Now (Aug S&P ETF 3 Year Chart)

From escaping a black hole to defying gravity pretty much sums up the past year in the SPY. Looking a few weeks back the 20 week moving average crossed above the 50 week moving average which was a bullish sign. Look how the 20 crossed below the 50 in the beginning of 2008. At some point the S&P will price in all of the stimulus steroids, positive (less negative) economic data and bottom line improvement and reach a new orbit (trading channel). Even in bull markets there are <10% corrections just like the June '09 correction (previous posts with charts: June 2, June 16). Unless of course there is a currency crisis (Jim Rogers: Dow could go to 20-30,000 during currency crisis).

Technicals: SPY broke above the 38.2% Fibonacci retracement level and is right around the pre-Lehman break down in 2008. It might want to fill that gap. If SPY gets another steroid injection with year end fundamental support, the 50% retracement level 109 is not out of the question and eventually the 61.8% retracement / 3 year downtrend resistance level around 120. Looking at a previous post about the 1929-30 bear market rally the Dow rallied hard and retraced 50% of its losses before selling off (not saying that is a definite comparable). Get ready for September folks.


SPY (Courtesy of Stockcharts.com)

Distressed Volatility Clears 11,000 Page Views In August!

Distressed Volatility cleared 11,000 page views in August. Without transparent data, the Internet, Google and Twitter followers this blog would not exist.


GLD Call Options Active at Dec, March $100 Strike

I noticed 21,594 December GLD Calls traded at the $100 strike today with 12,363 open. According to this Reuters article there was also a large $100 - $120 call spread on GLD expiring in March 2010. GLD is at a critical inflection point on the chart and I'm sure option players are positioning for a move. It is taking a while for the actual breakout/breakdown to occur... Look at the 2 yr chart you can see the inflection point on the long term pennant or short term symmetrical triangle whatever you are looking at. If these players are betting on a breakout, Robert Prechter (video) is taking the other side of the trade. Whatever happens there will be big price movement on judgment day. Currency issues, inflation and geopolitical events could affect gold going forward.


GLD 2 Year Chart

Watch GLD stream




GLD DEC Option Chain (Courtesy of Yahoo Finance)
GLD MAR '010 Option Chain (Courtesy of Yahoo Finance)


Posts on SPDR GLD:

John Paulson Keeps GLD Investment, Watching Symmetrical Triangle (August 13)
GLD Trade Setting Up Here + UUP, AUDJPY Pre FOMC (August 12)
Paulson Buys GLD, GDX (May 20)

FDIC 2nd Quarter Results (Sheila Bair Presentation Video, Slides)

Sheila Bair spoke at the FDIC Quarterly Banking Profile Press Conference on August 27, 2009. The full 60 minute video with Q&A can be found at events.vcall.com (takes you to the exact video). FDIC senior staff members make presentations after Bair. I provided her speech and slides below.


FDIC 2nd Quarter Results (Video Link)

Source: FDIC.gov Press Releases

Statement by FDIC Chairman Sheila Bair at the Quarterly Banking Profile Press Conference
August 27, 2009


Good morning everybody, and welcome to our briefing on industry results for the second quarter.

We've all seen the good news that has come out on the economy in the past few weeks. While challenges remain, evidence is building that the American economy is starting to grow again. But no matter how challenging the environment ... the FDIC has ample resources to continue protecting insured depositors as we have for the last 75 years. No insured depositor has ever lost a penny of insured deposits ... and no one ever will.

One of the themes of today's quarterly profile is that banking industry performance is -- as always -- a lagging indicator. The banking industry, too, can look forward to better times ahead. But, for now, the difficult and necessary process of recognizing loan losses and cleaning up balance sheets continues to be reflected in the industry's bottom line.

Insured institutions posted a $3.7 billion net loss in the second quarter. As this first chart shows, they earned $424 million in net operating income. But one-time losses and other items totaling $4.1 billion pulled the overall results into negative territory.

SLIDE 1

Positive net operating income was achieved even after a special assessment of about five and a half billion dollars to bolster the Deposit Insurance Fund.

Higher provisions push earnings lower


As this next chart shows, deteriorating loan quality is having the greatest impact on industry earnings, as insured institutions continue to set aside reserves to cover loan losses.

SLIDE 2

Of all the major earnings components, the amount that insured institutions added to their reserves for loan losses was, by far, the largest drag on industry earnings compared to a year ago. As you can see, loss provisions were $16.5 billion higher than a year ago. In all, banks and thrifts set aside $67 billion to cover bad loans in the second quarter.

Other factors that weighed on earnings included expenses stemming from write-downs of asset-backed commercial paper, which increased extraordinary losses ... and higher deposit insurance premiums. (Absent these premiums, non-interest expense would have declined, reflecting banks' efforts to cut costs.)

The upward trend in loan-loss provisions dates back to the second half of 2006. But while the early losses were related to residential loans and complex mortgage-related assets ... where the crisis really began ... we're now seeing problems with more conventional types of retail and commercial loans that have been hit hard by the recession.

This chart shows how loss provisions have grown as a share of the industry's net revenues.

SLIDE 3

In the second quarter, loss provisions were 10 times what they were three years ago. The obvious reason for this is the ongoing need to bolster reserves in the face of rising levels of troubled loans. These credit problems will outlast the recession by at least a couple of quarters.

Problem loans still increasing

This chart shows the amount of loans that have been written off each quarter (that's the blue segment) ... as well as the quarterly change in the amount of non-current loans remaining on banks' balance sheets (that's the red segment).

SLIDE 4

The chart shows that both charge-offs and non-current loan levels are still rising. The continued growth in these categories lifted the net charge-off rate and the non-current loan rate to historic highs in the second quarter. And as you can see from this next chart, the gap has also been growing between the level of non-current loans (that's the green line) ... and the industry's reserves (that's the blue line).

This widening gap is driving the high loss provisions. And it's the reason that we expect provisions to remain at elevated levels for some time.

SLIDE 5

Areas of improvement


Not all of the news in the second quarter was bad. While total non-current loans and net charge-offs continued to rise, the increase was smaller than in the first quarter. Also, non-current home equity and junior lien mortgages declined for the first time in six quarters. And the volume of loans that were 30 to 89 days past due, fell across all major loan categories.

Are these signs of a turning point in asset quality? This may turn out to be the case. But we're going to need another quarter or two to confirm a trend.

Another positive during the quarter was an improvement in net interest margins for community banks as well as for larger institutions. This is good news for community banks, since three-fourths of their revenues come from net interest income.

SLIDE 6

In many important respects, financial markets are returning to normal. Combined with the positive economic news in recent weeks, we're hopeful that this will lead to a moderation in credit problems in coming quarters. But, as our report shows, cleaning up balance sheets is a painful process that takes time. This process is absolutely necessary in order to restore the industry's profitability, and to strengthen its capacity to lend to businesses and consumers.

Problem list grows


As banks and thrifts continue cleaning up their balance sheets, more are coming onto our problem list. The number rose during the quarter to 416. This chart shows the trend since the Problem List hit an historic low in 2006, when bank profits were at record highs. Although the number continues to increase, it's still well below the levels seen during the last crisis.

SLIDE 7

As you know, the number of failures is also up. There have been 81 so far this year. We expect the numbers of problem banks and failures will remain elevated, even as the economy begins to recover. (Problem banks and bank failures also tend to be lagging economic indicators.)

DIF update

Now let me turn to how failures are affecting the Deposit Insurance Fund, or the DIF. First: failures cost money. And the costs are charged to the DIF. But one thing that you should know is that the DIF balance has already been adjusted downward for the cost of failures that are expected to occur over the next year. Just as banks set aside reserves for loan losses, we set aside reserves for anticipated bank failures.

Our total reserves -- consisting of both the DIF balance and a contingent loss reserve -- are available to absorb losses. The DIF balance reflects the net worth of the insurance fund. It's also a guide for setting deposit insurance premiums for our industry-funded system. So when a bank fails, to the extent that we have already reserved for a failure, the loss comes out of the contingent loss reserve. For example, when Colonial Bank failed two weeks ago ... there was no reduction in the fund because the estimated loss had already been reserved for.

We review the adequacy of the contingent loss reserve every quarter, and make adjustments as warranted. As illustrated in this chart, we have been shifting large sums to the contingent loss reserve as our failure projections have grown. The total reserves are now over $42 billion.

SLIDE 8

FDIC resources run deep


Our total reserves should be distinguished from the cash resources at our disposal to protect depositors. As this last chart shows ... our sources of liquidity to protect depositors in future failures include not only the $22 billion of cash and Treasury securities held by the DIF as of June 30, but also the ability to borrow up to $500 billion from the Treasury. To sum up, a decline in the fund balance does NOT diminish our ability to protect insured depositors.

SLIDE 9

Conclusion

The FDIC was created specifically for times such as these. Our resources are strong. Your insured deposits are safe. And again, no insured depositor has ever lost a penny of insured deposits ... and no one ever will. Thank you very much.


Bearish Butterfly Put Strategy on FXI - China 25 Index ETF

Interesting option action yesterday on the China ETF $FXI. A trader utilized a bearish butterfly put transaction using 40,000 October $FXI puts. Total cost was 61 cents. Traders are either long and hedging their arses off or speculating a breakdown to $36. Looking at the chart FXI is hanging onto uptrend support. I wrote about FXI put activity on August 17: FXI Put Protection, Andy Xie On China's Bubble so it is not surprising.

October VIX Future Trading at Big Premium To Cash, VXX

Check out today's Volatility Sonar report from optionMONSTER.com/Group 1 Trading. It seems like action is picking up in the VIX pit at the CBOE. There were some big out of the money call trades from 35-40. Also look at the VIX futures curve below and the 5 point gap between VIX cash and the October future. There has been a premium gap for some time now. Watching VIX to SPY.
  • 8/25- 80,000 Nov 40 Calls financed by a 20,000 Nov 25-27 strangle for 0.75
  • 8/25- 20,000 Sep 35 Calls for 0.65, then trader asked the crowd a quote on 150k, wtf?
  • 8/20- 50,000 Oct 37.50 for 1.55

Economist WalStreetPro On The $9 Trillion Projected Fiscal Deficit

I was wondering when WalStreetPro2 would mention this: White House raises 10-yr deficit forecast to 9 trillion dlrs (AFP). He breaks a few printers and a big bird rocking chair and provides debt/gdp and unemployment charts. Parental advisory, explicit content.



ht zero hedge

AAR August Weekly Rail Traffic Report + Monthly Indicators Video, $IYT

On August 21, 2009 the American Association of Railroads released their weekly rail traffic and carloading report and AAR has gone Web 2.0 with their "Rail Time Indicators Report" widget. Watch the video with AAR's economist. Also the total (intermodal, baseline, cyclical) industry traffic YoY% change chart from railfax.transmatch.com could be bottoming out. Just like the recent housing numbers show, we are seeing lower negative YoY numbers. Less bad means good at this point until it is fully priced into the market (NYSE:IYT - iShares Transports ETF chart below). In 2010 or 2011 hopefully we see positive growth compared to this years traffic data but will it still be below 2007-8 levels? To break out the total traffic data visit Railfax and you can also find charts on crushed stone and lumber/wood carload activity.

Michael Moore Takes On Capitalism (Trailer)

Capitalism: A Love Story (Trailer)


Prechter: S&P Will Break 2009 Lows, Likes Dollar Not Commodities

Prechter of Elliot Wave expects the market to break the March 2009 lows. Will the Elliot Wave overpower the printing press? He hit up all of the media outlets recently and I embedded videos from Tech Ticker and Bloomberg. I summarized some of his thoughts from the Tech Ticker interview below. I also found a chart of the South Sea bubble he was talking about.

QQQQ: 441,000 September $38 Puts Open, Watch $40 Support

I'm watching $QQQQ and the 40 support level here. If 40 breaks, we could head towards 38.50 support and then 37 from June imo. That's IF the Qs can break this strong uptrend. I noticed that 441,000 September $38 puts were open. That put strike dominates the option chain in September. The puts expire on September 18. We'll see if they were designed to hedge and/or make money very soon.

Obama Reappoints Bernanke As Fed Chairman (Video, Transcript)




THE WHITE HOUSE

Office of the Press Secretary
--------------------------------------------------------------------------
For Immediate Release August 25, 2009


REMARKS BY THE PRESIDENT AND BEN BERNANKE AT THE NOMINATION OF BEN BERNANKE FOR CHAIRMAN OF THE FEDERAL RESERVE
Oak Bluffs School Filing Center
Oak Bluffs, Massachusetts


8:55 A.M. EDT

THE PRESIDENT: Good morning, everybody. I apologize for interrupting the relaxing that I told all of you to do, but I have an important announcement to make concerning the Federal Reserve.

The man next to me, Ben Bernanke, has led the Fed through one of the worst financial crises that this nation and the world has ever faced. As an expert on the causes of the Great Depression, I'm sure Ben never imagined that he would be part of a team responsible for preventing another. But because of his background, his temperament, his courage, and his creativity, that's exactly what he has helped to achieve. And that is why I am re-appointing him to another term as Chairman of the Federal Reserve.

Ben approached a financial system on the verge of collapse with calm and wisdom; with bold action and out-of-the-box thinking that has helped put the brakes on our economic freefall. Almost none of the decisions that he or any of us made have been easy. The actions we've taken to stabilize our financial system, to repair our credit markets, restructure our auto industry, and pass a recovery package have all been steps of necessity, not choice. They've faced plenty of critics, some of whom argued that we should stay the course or do nothing at all. But taken together, this "bold, persistent experimentation" has brought our economy back from the brink. They're steps that are working. Our recovery plan has put tax cuts in people's pockets, extended health care and unemployment insurance to those who have borne the brunt of this recession, and is continuing to save and create jobs that otherwise would have been lost. Our auto industry is showing signs of life. Business investment is showing signs of stabilizing. Our housing market and credit markets have been saved from collapse.

Of course, as I've said before, we are a long way away from completely healthy financial systems and a full economic recovery. And I will not let up until those Americans who are looking for jobs can find them; until qualified businesses, large and small, who need capital to grow can find loans at a rate they can afford; and until all responsible mortgage-holders can stay in their homes. That's why we need Ben Bernanke to continue the work he's doing, and that's why I've said that we cannot go back to an economy based on overleveraged banks, inflated profits, and maxed-out credit cards.

For even as we've taken steps to rescue our financial system and our economy, we must now work to rebuild a new foundation for growth and prosperity. We have to build an economy that works for every American, and one that leads the world in innovation, in investments, and in experts -- exports.

Part of that foundation has to be a financial regulatory system that ensures we never face a crisis like this again. We've already seen how lax enforcement and weak regulation can lead to enormous wealth for a few and enormous pain for everybody else. And that's why even though there is some resistance on Wall Street from those who would prefer to keep things the way they are, we will pass the reforms necessary to protect consumers, investors, and the entire financial system. And we will continue to maintain a strong and independent Federal Reserve.

We will also keep working towards the reform of a health insurance system whose costs and discriminatory practices are bankrupting our families, our businesses, and our government. We will continue to build a clean energy economy that creates the jobs and industries of the future within our borders. And we will give our children and our workers the skills and training they need to compete for these jobs in the 21st century.

Much like the decisions we've made so far, the steps we take to build this new foundation will not be easy. Change never is. As Ben and I both know, it comes with debate and disagreement and resistance from those who prefer the status quo. And that's all right, because that's how democracy is supposed to work. But no matter how difficult change is, we will pursue it relentlessly because it is absolutely necessary to lift this country up and create an economy that leads to good jobs, broad growth, and a future our children can count on. That's what we're here to do, and that's what we will continue to do in the months ahead. So I want to congratulate Ben on the work that he's done so far, wish him continued success in the hard work that he has before him. Thank you so much, Ben.

CHAIRMAN BERNANKE: Thank you, Mr. President. I'd like to express my gratitude to President Obama for the confidence he's shown in me with this nomination, and for his unwavering support for a strong and independent Federal Reserve.

It has been a particular privilege for me to serve with the extraordinary colleagues throughout the Federal Reserve System. They have demonstrated remarkable resourcefulness, dedication, and stamina under trying conditions. Through the long nights and weekends and the time away from their families, they have never lost sight of the critical importance of the work of the Fed for the economic well-being of all Americans. I am deeply grateful for their efforts.

I especially want to thank my own family -- my wife Anna and our children, Joel and Alyssa. Without their support and sacrifice, I could not undertake this task.

The Federal Reserve, like other economic policymakers, has been challenged by the unprecedented events of the past few years. We have been bold or deliberate as circumstances demanded, but our objective remains constant: to restore a more stable financial and economic environment in which opportunity can again flourish and in which Americans' hard work and creativity can receive their proper rewards.

Mr. President, I commit today to you and to the American people that, if confirmed by the Senate, I will work to the utmost of my abilities -- with my colleagues at the Federal Reserve and alongside the Congress and the administration -- to help provide a solid foundation for growth and prosperity in an environment of price stability.

Thank you, sir.
THE PRESIDENT: Thank you. Great job.
CHAIRMAN BERNANKE: Thank you.
END
9:01 A.M. EDT

Source: Whitehouse.gov

TABB Group's Sussman on High Frequency Trading

Here is Adam Sussman, Director of Research at TABB Group talking about high frequency trading on Tech Ticker. Continued from previous post: Is Dark Pool Trading Transparent? (TABB Group Money:Tech 2008 Presentation)

Is Dark Pool Trading Transparent? (TABB Group Presentation)

What the hell goes on in these dark pools. I just read VWAP No More? at Zero Hedge and he said big volume could have been relayed through a dark pool. Shouldn't publicly traded companies be 100% transparent on a public exchange? Tyler also mentioned this article from thetradenews.com: Goldman Sachs Sonar algorithm can now access SIGMA - 11/28/2007. Here's an excerpt.
"The algorithm works in two modes, 'stealth' and 'dark'. Under stealth mode, it seeks liquidity while avoiding signalling risk. Dark mode enables the algorithm to make either a portion or the entire balance of an order available for non-displayed crossing using SIGMA as a trader-defined benchmark."

"The Sonar algorithm helps European traders reduce information leakage to the market and improve their execution performance. It combines the benefits of algorithmic trading, automation, and anonymity with the ability to source 'block' liquidity in the SIGMA dark pool," he continues." Source


It sounds like a big crack deal in a dark alley. I understand funds don't want to signal the market but how can big blocks of publicly traded shares cross internally without being displayed to the public. It looks like Goldman will report all volume traded in its Sigma X dark pool though (Goldman responds to calls for US dark pool transparency, US dark pools to accept new trade reporting standard). I also found a presentation by Larry Tabb of TABB Group at the O'Reilly Money:Tech Conference on February 8, 2008 talking about search, dark pools and disappearing traders. It is interesting technology.

BMO's Adornato on CRE, Capitalized REITs and Distressed Buys

Paul Adornato of BMO was on Bloomberg talking about the commercial real estate market.

"First to back up, we still see the fundamentals deteriorating throughout the commercial real estate sector. The backdrop that we're talking about is still one of rising vacancy and falling rents. But the publicly traded REITs have been successful in issuing equity this year, about $20 billion so far. They also have recycled capital by forming joint ventures with other institutional investors. They've also issued corporate unsecured debt, that market was really closed for many months but has now come back to life. And they've also been able to issue secured debt, traditional mortgage debt, which although it's more expensive than it has been, it's still available from the stronger banks."