Friday 10, December 2021
Citadel, Robinhood and payment for order flow (PFOF)
Matt Levine wrote about this topic the other day. If you sign up for his newsletter, you can read it, but it’s behind a paywall on the web, here. If you don’t visit the site much, or talk your browser into hiding how often, you can probably read it for free. Anyway, it’s very interesting to see how spreads have been crushed by technology. In the old days, spreads on small cap stocks were so wide “you could drive a bus through them.” Now, spreads are close, and if you use a broker like Interactive Brokers (and probably a bazillion others) you can just enter a limit order in the middle of the spread and probably get it filled pretty quickly. So, the extent to which market makers are ripping off retail traders is probably lower than it has ever been. Sure, a lot of subscale brokers have been driven out of business, but who ever cried over a stockbroker losing money?
But it might not be nothing, and, eventually, when all the competition is ground into the dust, it might start to get really expensive and by that time it will be much too late to expect competition to fix things.
Wrap
US inflation hit a 39-year high today. Headline CPI hit 6.8%. Inflation is kryptonite for long-dated Treasuries but guess what? Yep, yields decreased. The 10Y went down, admittedly by only 1.5bp, which is not a huge amount. The reason was, of course, that high inflation was expected, so the figure was already in the price.
The dollar went down a bit, as one would expect, and shares rallied even more. “Consumable” commodities (energy and agricultural) generally went up, but Dr Copper dropped 1%.
Apple continued rising. It will not go down until the broader index enters a bear market. That, or Apple will end up as 99% of the broader market.
At some point net buying by the Fed will stop. My guess is that will be mid 2022. Only then will the momentum be checked, in my view.
Cool Tweets
It takes a special talent to make Bloomberg's Top 50 people who defined business in 2021. Congrats Toni Petersson of $OTLY #Oatly for obliterating $5bn+ of shareholder value. Don't think a short seller has ever made this list.. hmmm https://t.co/VuoJ4RuxvP
— Spruce Point Capital (@sprucepointcap) December 2, 2021
Suicided 17 years ago today pic.twitter.com/nxNxk07Me4
— Stalingrad & Poorski (@Stalingrad_Poor) December 10, 2021
The DOJ at work@ResearchCitron pic.twitter.com/tNDdYTHStP
— The Market Dog 🎅🏻💧 (@TheMarketDog) December 10, 2021
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