The Daily Alpha: Alternative Thinking on “2 and 20”, Economic Data Leaks, and Bitcoin Origins

The Daily Alpha: Alternative Thinking on “2 and 20”, Economic Data Leaks, and Bitcoin Origins

Garrett Baldwin

May 3, 2016

The Daily Alpha: Alternative Thinking on "2 and 20", Economic Data Leaks, Bitcoin Origins and U.K. Gambling Standards

“Two and 20 is dead. People have to understand that.”

CalSTRS Chief Investment Officer Christopher Ailman had some pointed words for hedge fund managers. In an interview with CNBC on Monday, Ailman explained that the nation’s second-largest pension fund has a size advantage that is helping it negotiate down the performance terms of hedge funds.

Needless to say, it’s a tough time for the industry. Over the first three months of the quarter, investors pulled $15 billion out of hedge funds. That’s the worst decline in seven years.

“Key U.S. economic information may have been leaked ahead of its release, judging from the price moves in key equity and bond futures contracts, according to a study released Monday.”

This is a pretty disturbing story. 

Steve Goldstein at MarketWatch breaks down evidence that domestic data reports are being leaked. The European Central Bank just released a working paper that suggests seven of the 21 data announcements that really move markets are being compromised.

They see evidence of “substantial informed trading” before these reports are released by U.S. agencies.

The seven?

Writes Goldstein: “The Conference Board’s consumer confidence index; the National Association of Realtors’ existing-home sales report and pending-home sales report; the Commerce Department’s preliminary GDP report; the Federal Reserve’s industrial production report; and the Institute for Supply Management’s manufacturing and nonmanufacturing index.”

There are a few different metrics here that I am curious about, and it's a story that I'm going to be exploring over the summer. With the case of Existing Home Sales and New Home Sales, I'm curious if investors are finding alternative data streams that can provide a proxy for these sales figures. 

At a recent Fintech conference in Chicago, a data company spoke about the ability to use satellite images and other data tools to effectively recreate a measurement of economic growth in the nation -- real-time. 

Apparently, Zillow has a wide swath of data on home sales. After all, that's what Zillow does. If you can tap into Zillow's data stream -- and you can -- weeks before the national monthly sales numbers are released, wouldn't that possibly create a situation ripe for the futures activity that the study cites?

I have mixed view on whether U.S. data reports are being leaked out of Washington.

I once interviewed at the USDA, and it was like a fortress. That said, it’s possible. But in the age of information inequality, there could be another explanation, and that requires some deep investigation.

“There’s been a lot of brain damage in the last five weeks, working with the board to fix the problems.”

Bill Ackman’s blues continue.

In Fortune, Lucinda Shen does a deeper dive into the testimony of Valeant’s leadership, and explains that Ackman is regretting his decision to get involved with the Canadian company.

There was a time when Ackman suggested that Valeant had the potential to be the next Berkshire Hathaway.

Now, Berkshire Hathaway’s Charlie Munger has some choice words for the company that leveraged and leveraged and has taken on billions in debt. He called it… “a sewer.”

Still Ackman defended the company from Munger’s statement.

“We’ve made a lot of changes in the last few weeks,” he said. “The company has made some mistakes, but I think where Munger is wrong is to indict a company on the basis of a few mistakes and a leader [Pearson] that is no longer with the business now… I think this is a great company.”

The great Michael Lewitt suggests otherwise: “The more I look at VRX, the more convinced I become that the company is a likely bankruptcy candidate,” he wrote last week.

Looks like there’s a possibility of more pain for Ackman.

And by the way, “Bill Ackman’s Blues” would be a great name for a Blues Bar in Downtown Chicago by CBOE.

“At this point, it doesn’t matter who created it…”

That’s Barry Silbert, founder and CEO of the Digital Currency Group.

Barry was a key contributor to Modern Trader’s Bitcoin issue a few months ago, and he certainly is the go-to expert on this industry.

So, what is Silbert referring to about who created Bitcoin?

Over the weekend, Australian investor Craig Steven Wright claimed that he was the founder of the  crypto-currency under the mysterious pseudonym Satoshi Nakamoto.

While some experts are doubting his claims, Silbert says that the only thing that really matters is whether Wright plans to sell the $450 million stake in Bitcoins that he owns.

Meanwhile, be sure to check out Modern Trader’s recent Fintech issue, in which we explore the biggest trend in Bitcoin: The evolution of the Blockchain and an interview with ItBit CEO Chad Cascarilla.

“The first rule of bookmaking is ‘never say never’, and we broke that rule last August.”

Finally, the impossible has happened.

Leicester City has won the English Premier League and it will cost British bookies their biggest loss in history. That’s because the team was a 5,000 to 1 shot to win the league.

The total tab is £25 million.

This is the most dramatic underdog win in all of sports history. ESPN has been covering the gambling angle (I know, right?) for months, and there isn’t anything remotely close to the long-odds that this team will pay off.

Even under the most extreme sports conditions – like the St. Louis Cardinals’ dramatic comeback in September 2011 to win the World Series from nine games back, the odds were 999-1.

This victory is so significant that U.K. bookies are changing their gambling policies. Never again will odds of a sports team to win a championship surpass 1,000 to 1.

In fact, until this year, there was only one other long 5,000 to 1 bet that you could consistently make: Whether Elvis Presley is still alive.


Getting in on the Groundfloor

Dara Albright

Alternative Thinking on Today's Market Events

The Daily Alpha - 09.21.15

Garrett Baldwin

Assume Breach

Garrett Baldwin


The Week Ahead for Forex


Alternative Thinking

The Daily Alpha - 09.18.15

Garrett Baldwin

Alternative Thinking on Today's Market Events

The Daily Alpha - 09.17.15

Garrett Baldwin

Alternative Thinking on Today's Market Events

The Daily Alpha - 09.16.15

Garrett Baldwin

Modern Trader

Rise of the Ethical Hacker

Garrett Baldwin


Quotes of the Day

Garrett Baldwin

Modern Trader

Why are Hedge Funds Hiring Poker Pros?

Garrett Baldwin

Gambling and Gaming

Wall Street Casino

Garrett Baldwin

Gambling and Gaming

Investing: A Pretentious Word for Gambling?

Doug Litowitz

Gambling and Gaming

Gambling and Gaming: A Common Thread of Risk

Michael Stegemoller, Baylor University


Where Gambling Meets Trading

Modern Trader, William Ziemba


Fire-sale: Were Three Leading Organizations Hit By A Global Cyber-Attack?

Dr. Timothy Summers and Dr. Joseph Wall

Real Talk

CNBC Demystified

Doug Litowitz

Modern Trader

False prophets

Garrett Baldwin, Illustrated by Mario Zucca


Why OTC is Back in Vogue

Edward Lopez

Modern Trader Magazine

Does Your Alma Mater?

TAP Innovation Series

Alpha Pages Innovation Series: Acorns

Garrett Baldwin

Alternative Energy

Yield Cos? More like Yield Can’ts!

Bryan Birsic

Vice Spending

April Vice Index Shows Strong Rebound

Andrew Zatlin

Disruptive Technology

Part II: Possible Hedges Against the Robot Apocalypse

Garrett Baldwin

Disruptive Technology

Part I: Possible Hedges Against the Robot Apocalypse

Garrett Baldwin

Water Investment

Rick Rule: Time to Change California’s Water Policy

Global AgInvesting

Insider Trading

Why The Second Circuit Refuses to Reconsider Its Newman Decision

Jonathan N. Halpern, Ehren M. Fournier

Futures Magazine



Art, Antiques & Collectibles • Forestry • Film Investments • Alternative ETFs • Wine, Spirits & Cannabis • Hard Assets • Sports & Exotic Wagering • Oil & Gas Exploration • Startup Investing • Private Equity • Treasure Recovery • Commodities • Digital Currencies • Peer-to-Peer Lending • Venture Capital • Hedge Funds • Private Real Estate • Managed Futures & CTAs • Forex & Derivatives Trading • Alternative Energy • Futures & Options