Tim Quast
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We're All HFTs Now

In this guest commentary, author Tim Quast looks back at the history of HFT and how the market has evolved to where many firms now fit the definition of high-frequency trader.

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April 30, 2002

On the Bubble Economy

By Kathryn M. Welling

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  • On the Bubble Economy

Expect Charles Peabody to speak his mind and you'll

never be disappointed. And, while that sterling character trait has discomfited any number of his former bosses on Wall Street, Charlie's current position is quite secure: He's his own boss these days, at Ventana Capital, a New York City-based independent banking research boutique he started in 1997. Independence clearly agrees with Charlie - and his clients.

His views on the market's current crop of financial foibles and follies are as pungent (and bearish) as ever. As for the housing bubble,' read on. -KMW

Are you having fun yet, Charlie?

I am, actually. We've been very, very lucky. This is the right time in the cycle to be an independent research boutique. Our clients have gone out of their way to support us and make sure that we succeed.

You couldn't be more right about this being prime time for independent analysts.

We try. We're not always right, although we strive to be. But we do try to look at things differently than what you may hear from other people-and we hope to be more right than wrong. Two things differentiate us. The first is that we are probably much more balance sheet-oriented than earnings-oriented. The other is that we make no secret about it: We are skeptics. We have something of a bearish bias in our approach to analysis. I tend to look at things, first to try to understand what the downside risk is. Then, if I determine that the downside risk is limited, I'll recommend a company without necessarily knowing all about the upside-just knowing that the risk/reward is favorable. Conversely, because we approach stocks by trying to understand the downside risk first, we uncover a lot of short opportunities. And, unlike most analysts, shorts are an area we've been willing to delve into. Another thing that differentiates us is that I'm willing to start with a macro bet which then feeds into a micro realization. By contrast, most of my Wall Street brethren who do banks are unwilling to make the macro call.

Why should they risk being doubly wrong?

Well, making the macro call is a way of being early. But it's also, I grant you, a way-in these volatile markets-of being wrong. You can be right, eventually, on your macro call, but suffer a tremendous amount of pain in the interim.

Which is particularly germane with "everybody" keeping score daily, if not hourly.