The whole “Fed is failing” narrative baffles me. Just two years ago we were staring at a financial, economic and humanitarian abyss, and extremely strong action helped prevent an even worse cataclysm. If price is high single digit inflation for a few years that seems worth it? Should they have tightened earlier? Perhaps. But I struggle to see how a Fed hiking sooner would have done much if anything to dampen the inflationary forces we’re seeing now. And people forget the bond market until recently was 💯agreeing with Fed.

Interesting piece on Chinese deleveraging risks from Morgan Stanley overnight. Short thread. “First, is there a risk of a financial shock?”

The FT paywall is down today! So here is some of the ace work of me and my colleagues for you to sample (and perhaps consider a full subscription). #FTfreetoday In awe of a lot of the stuff produced by my colleagues over the past year, and I’m a bit worried about leaving some sterling stuff out. So here is a *very* brief, non-comprehensive list of articles I remember off the top of my head, a mix of my own work and others.

The frenzied private capital party is totally understandable, but will leave many investors bitterly disappointed and could cause broader long-term economic problems. on.ft.com/3ma2ihc I hate to be *this guy* but…

This is WILD. If equity fund flow continue at the current pace, this year will see greater net inflows than the preceding 20 years COMBINED. Best first half for global stock market in nearly four decades, and the seventh best of the past century.

The spark behind the birth of Vanguard passed away earlier this month, aged 88. Nick Thorndike might not be as famous as Jack Bogle, Vanguard’s actual founder, but he (inadvertently) played a pivotal role in its genesis. Short thread of recondite financial history: 1/n Back in the 1950s, Nick Thorndike was a precocious fund manager at Fidelity, mentored by Ned Johnson himself. In 1960 he and three Bostonian friends set up their own shop, Thorndike, Doran, Paine and Lewis, which kicked arse in the “go-go” boom of the 1960s.

Just $93m is enough to lift bitcoin price by 1%, estimates Bank of America. Gold needs about 20x that net inflow. The smattering of institutional investor/corporate announcements over the past year have helped pump the price of bitcoin, but Grayscale remains the dominant holder.

“Indexing doesn’t constitute any real threat to professional managers because its goal is mediocre performance.” Cleaning up some of my book research notes, and there are some 👀 quotes there. (From the Boston Globe, august 24, 1976)

Retail investors now accounts for almost as much US trading as all mutual funds and hedge funds *combined*. Our deep dive into the frenzy, how it differs from past retail trading booms, and whether this will prove a lasting phenomenon. ft.com/content/7a91e3… Go home US stock trading volumes, you're drunk.

Good piece on a really cool idea that unfortunately fizzled. Short thread on what I thought might have been the Achilles heel (which I didn’t appreciate enough when I wrote about the phenomenon a few years ago on.ft.com/3696uEP )

https://twitter.com/justinaknope/status/1339231403465117697

Basically, I think I (and Quantopian obviously) underestimated the compounding power of collaboration and institutional knowledge. Essentially, you probably had thousands of people independently coding very similar algos on large cap US equities.

HELP! Can't decide what US cover to go with for my upcoming book on the history of index funds (out sept 2021) so I thought I'd throw it out to the hive mind. Poll below, and feel free to comments to explain (or to ask for smaller font, make fun of my weird name, etc etc). What cover?

“We’ve created a caste system for credit. It’s significant, because its basis is entirely a function of size, not quality.” Our big read on how is better to be a bad but big company than a good but small one - and what it might mean for the US recovery. ft.com/content/1ae439… I think the increasingly bifurcated corporate access to credit is a big, underappreciated issue in the US. It is the big downside to the size and vibrancy of the American bond market - if you're too small to tap it, then you're kinda screwed.

This is great, as you’d expect. But IMO the missing part of a lot of the discussion around the hedge fund basis trade unwind in March is what *could* have happened. 1/n

https://twitter.com/adam_tooze/status/1335841472944304128

Yes, hedge fund selling of Treasuries was in pure nominal quantity certainly less impactful than the broad, global “dash for cash” that led foreign central banks and mutual funds to dump Treasuries.

*The machines are listening.* Executives are now engaged in a cat and mouse game with AI-powered trading algorithms, and constantly changing how they talk to avoid negative words, phrases and verbal tics that the algos might react to. on.ft.com/3mFkFIO There’s been an explosion of high-frequency machine downloads of US regulatory filings in recent years, as quant hedge funds simply train algorithms to instantaneously read and trade thousands of reports - volumes that no human portfolio manager could ever hope to read.

I only have one Valéry Giscard d’Estaing anecdote, from a conference at an Irish castle back in 2012. ft.com/content/b44c1c… He was on a panel with a host of bigwigs, like @paulkrugman and Peter Mandelson. The Eurozone crisis was raging, and Giscard d’Estaing proposed that Greece take a two-year "holiday"from the euro to sort itself out.

Welcome to the "Omnirally". The development of Covid vaccines has helped nurture the single biggest monthly gain for global equities on record. But is the euphoria obscuring some festering economic challenges? My latest big read: ft.com/content/d78563… For sure, the global economy has bounced far more strongly than we dared hope earlier this year, and corporate profits will follow next year.

Quants continue to ramp up the use of machine learning, according to a Morgan Stanley survey of clients. Risk of overfitting (ML finding spurious correlations from data mining) is the biggest risk.

With vaccine news adding even more fizz to financial markets, we are now approaching "full bull", according to Bank of America's Michael Hartnett. The love for emerging markets is certainly pretty fulsome. cc @AllThatIsSolid

I have a new big read out, on the renewed challenges that active fund managers have had in fulfilling their promise to outperform in rockier markets - and the implications of that. ft.com/content/621d51… There's now north of $12tn in index funds and ETFs, after a decade of breakneck growth.

Since I know that what everyone *really* wants right now is the take of financial analysts, I’m going to share some of the first notes to hit my inbox. First up is Goldman Sachs, which thinks Biden will still get a $1tn stimulus package despite GOP-controlled Senate. Here’s Oxford Economics, which warns that Biden is inheriting a “frail” economy.

We recently revealed Masayoshi Son's SoftBank as the "Nasdaq Whale" that created a splash in the US options market, and contributed to the summer stock market melt-up. But there are millions of "Mini Masas" that in aggregate likely dwarf its impact. ft.com/content/b330e0… As the previous chart shows (a massive thanks to @jasongoepfert for the data), the volume of call premiums being traded in small retail-sized lots (10 contracts or less) has gone absolutely PARABOLIC lately.