The rise of rich man's subprime

A good piece on a not so good trend in the industry. It's always important to know how the people helping you with your finances stand to profit. 

http://fortune.com/2014/12/10/securities-based-lending-banks/

Growth of Solar Power this Century

This link has a great graphic on the growth of solar power in the US between 2001-2013. While solar is still a minor player in the US energy sector, it's hard to believe the weakness in oil and natural gas prices can't be due at least a little in part to the growing adoption of alternative energy. 

http://i.imgur.com/WiEIsVV.gif

Alternative energy in Germany

An interesting read on Germany's switch to alternative energy. It also include a great graph which breaks down how various countries consume energy. It will be interesting to see how traditional utility companies cope with this change.

http://www.nytimes.com/2014/09/14/science/earth/sun-and-wind-alter-german-landscape-leaving-utilities-behind.html?_r=0 

Taking the long view on the S&P

I came across the chart above recently. It plots the 10 year return on a rolling basis for the S&P 500 since inception back in 1937. So if you had held the S&P for 10 years, it gives you the return per year. The chart isn't the easiest to read, but it gives a pretty blunt message. If you are in the market for 10 years or more, there is a very good chance you will have a great return on investment. In fact the average 10 year return is 120%. To date the 10 year return is 64%. 

'Flash Boys' and understanding HFT

I’m a big Michael Lewis fan, and have been looking forward to his latest book. While I still look forward to reading “Flash Boys,” his interview on 60 Minutes Sunday night left me quite disappointed. When describing the mechanics of high frequency trading, or HFT, he said it was “too complex for individual investors to understand.”

When someone opts not to describe something as too complex to understand, it makes me think they may not fully understand it themselves. Within the trading community high frequency trading encompasses a large universes of different strategies and tactics. I fully agree with Mr. Lewis that front running, the process of buying or selling in front of a similar order that is not yet seen by the public, to the detriment of that order, should be banned.

However there are a host of other practices that rely on public information, available to all, that are used by traders who look to makes ‘pennies’ on extraordinarily short time frames. Some of these practices, while purely speculative, add liquidity to the markets. I’ve always thought that liquidity, along with transparency, are the cornerstones of a healthy market. This makes intuitive sense..if you buy something, you’d like to know you’re making an informed decision, and one that you can extricate yourself from if need be. An illiquid market where certain people have privileged information is not one you want to be involved in. 

Without a good definition of what HFT really is though, it is impossible to regulate the practice to ensure that practices like front running are removed, while other potentially beneficial practices are allowed to continue.

Without a doubt the financial markets can be complex and arcane, but not so much as for anyone to throw up their hands in exhaustion after a 90 second google search and proclaim, “it’s just too complicated.”

The markets are too important to all us to be misunderstood in such fashion.