Tagged: Berkshire Hathaway

Exchanges Depend on Arbitrage

What if some mathematical calculations in the market are just there to get a reaction?

Traders have not to my knowledge named them “Charlie Sheen.” But alert reader Walt Schuplak at the Market Intelligence Group in New York sent an item about rogue algorithms. Our friend Joe Saluzzi at Themis Trading wrote on it yesterday.

Joe explains that certain trading practices create arbitrage opportunity. Profiting from divergence isn’t bad of itself, Joe notes. But if the chance to profit is fostered where divergence could not or would not occur on its own, it raises fundamental questions.

Bloomberg writer Nina Mehta wrote today about the Australian government’s initial rejection of the Singapore Exchange’s effort to buy the Oz stock market. Singapore is a shareholder-owned exchange. The Deutsche Bourse is public. Same with the InterContinental Exchange, throwing in with the Nasdaq on a bid for the NYSE, both of which are public too. The London and Toronto markets are run by public companies. BATS may IPO. (more…)

Citigroup on Liquidity

Would you shrink your share base by 90%? What if it cleared noise out of your trading?

NOTE: See the update on the Issuer Data Initiative at bottom.

Citigroup, market cap $129 billion, plans to trim its 29 billion shares with a 1-for-10 reverse split. Citi float mushroomed from 5.5 billion shares when the U.S. government injected cash through warrants that converted to shares, which the Treasury then unloaded through Morgan Stanley while the Fed quantitatively eased the markets to solid gains.

Resisting the gravitational pull to ask rhetorically why government has power to print monopoly money, pump up its own outcomes, and put paper into one bank but not another, let’s make this Part Two of “lessons in liquidity.”

Last week we discussed the very antimatter to Citigroup, Berkshire Hathaway. BRK.A trades about 500 shares per day, mostly on the NYSE, without high-frequency trading (HFT), for about $127,000 each. There are 1.6 million shares out. Its beta coefficient, a measure of volatility, is lower than every Dow Jones Industrial component save Wal-Mart. (more…)

The Ides of March today carries an air of foreboding that dates to Julius Caesar’s demise in 44 BC. Before Brutus colored the day red, Romans did on the Ides what any other urbane culture might: They feted Mars, god of war. It feels lately like Mars has been trudging along the tectonic plates.

We still have $200 here for the first person to correctly answer last week’s two critical IR questions: Where do your shares trade? Which brokers trade them?

Speaking of the Issuer Data Initiative: Thank you, NIRI CEO Jeff Morgan, for sliding it across your desk today and out via the weekly NIRI email (note: Register for NIRI National by Friday for the early bird discount). Public companies, please commit your support so every IRO will have answers to the questions above.

Reading Dick Johnson’s noteworthy blog about Warren Buffett’s view of IR prompted a way to show why good issuer data matters. Berkshire Hathaway Class A shares (BRK.A) trade about 500 shares daily, over about the same number of trades per day. On rare occasions, a trade occurs off the NYSE, but most times if Mr. Buffett wants to know which brokers executed trades, that information is available because the trades occurred at his listing exchange. (more…)