Happy New Year! We're delighted that all the vacationing and decking of halls with boughs of holly is finally past, so we can get back to data.
We'll talk 2008 Trends next (if you're a NIRI member, see my column on key '08 IR trends in the January IR Update), but, for now, let's look at January trading.
We think institutional value investors, catalyzed by a small but influential active set on December 31, prompted the current equity retreat.
Their tiptoes in the market catalyzed widespread changes to automated trading systems, and it's now obvious in the data that asset-allocation models have moved away from equities, too, particularly January 4th.
We're also seeing a shakeup among firms driving key elements of order flow such as hedging strategies and programs.
Losers, it appears to us, are Bear Stearns and Credit Suisse, and surprisingly, Lehman Brothers.
It also looks like winners thus far include BofA and some smaller trading platforms including high-frequency shop Fox River Execution and risk-management expert Lightspeed Trading.
What do these things mean, IROs? We think it's calculated, short-term movement of capital from one broad asset category (equities in general but especially ones that performed well in December) to others.
Based on what we see, this money will return as alpha is exhausted elsewhere and the risks in other instruments - commodities, currencies and so on - rise.
So tell your management teams not to worry overmuch.
Caution: we've said for the past quarter or more that the equity markets are fragile because risk management and trading costs rank #1 and #2 as buyside priorities now, ahead of the general notion of "good investments.
" The smallest tremors breed avalanches.
We'll talk 2008 Trends next (if you're a NIRI member, see my column on key '08 IR trends in the January IR Update), but, for now, let's look at January trading.
We think institutional value investors, catalyzed by a small but influential active set on December 31, prompted the current equity retreat.
Their tiptoes in the market catalyzed widespread changes to automated trading systems, and it's now obvious in the data that asset-allocation models have moved away from equities, too, particularly January 4th.
We're also seeing a shakeup among firms driving key elements of order flow such as hedging strategies and programs.
Losers, it appears to us, are Bear Stearns and Credit Suisse, and surprisingly, Lehman Brothers.
It also looks like winners thus far include BofA and some smaller trading platforms including high-frequency shop Fox River Execution and risk-management expert Lightspeed Trading.
What do these things mean, IROs? We think it's calculated, short-term movement of capital from one broad asset category (equities in general but especially ones that performed well in December) to others.
Based on what we see, this money will return as alpha is exhausted elsewhere and the risks in other instruments - commodities, currencies and so on - rise.
So tell your management teams not to worry overmuch.
Caution: we've said for the past quarter or more that the equity markets are fragile because risk management and trading costs rank #1 and #2 as buyside priorities now, ahead of the general notion of "good investments.
" The smallest tremors breed avalanches.