Saturday, September 6, 2008

Institutional Investments

OK this was originally a video by Xenix2012 at youtube, and it appears that he's removed himself (or been removed) from the website. I will try and paraphrase his points below.

Large financial institutions tend to work alongside lenders, namely banks and the Fed, therefore they hold enough capital to sometimes impose their will upon the markets (except for "Black Swan", low probability events). So exchange price fluctuations mostly result from their orders.

They do not apply the so-called mainstream analysis of historical prices. Only semi "useful" thing I've found deriving from price has been historical volatility, and even this calculation remains limited in forecasting directional bias.

They buy low, and sell high, based on hints from the banks or the Fed. This is probably why monitoring credit conditions (e.g. LIBOR spreads, CDS yield, bond rates... and etc.) remain important in assessing equity markets, for the retail traders.

Here's something that we all know already (deep down). The institutions usually take opposite positions as those pushed through media outlets they own. E.g. when Goldman Sachs announced oil prices likely to hit $200 several months ago when it was $145, GS sold its positions instead to dumb money who take "infotainment" as truth (See article for details) . Today, I think oil is at $95/barrel.

*Whoever commented on the video disappearing, thank you!

2 Reflections:

Anonymous said...

Looks like the video is gone (as well as Xenix2012's account)... =\

Anonymous said...

The US government probably has him now.

Unless he was working for them already...