Bear case for Binck
Monday February 9th 2015 the online broker Binck will open the books. The first earnings report after a quarter full of misery. Quite a few figures to check. The consensus is their profit will drop a lot compared to last year’s fourth quarter. I’ve bought a few dozen puts this week. Count on them to deliver results which fall short of even the lowered expectations.
Alex Asset Management in downward spiral
First of all there’s Alex asset management. The idea to invest with lower risks with an automated system selling when markets drop is naive. Markets can behave like this for a year or two ; but trying to time the market with this simple idea will never work in the long run. Period. Missing a few of the best stock market days will ruin your result.
See the results over 2014 for the asset management division. Clients will start to realize they are investing in some kind of folly. If investors realize this, they will (and they should) withdraw their money. It’s not an underperforming stock they’ve invested in, but far worse : a system which will never work. Assets under management will drop below 2 bln, maybe even approaching 1.5 bln.
Some of those terrible v-shape movements in the market lately. Binck announced to fix the problem by adding US stocks. Adding more colors won’t help a thing if you’re betting on the wrong system. Guess what, stocks rise and fall on the other side of the atlantic as well. Binck blames it on the non-trending markets. Sure.
Impairment on Alex
In addition, the VEB has started an investigation in the terrible performance of Alex. Let’s assume the automated asset management will continue to underperform – as any experienced asset manager will expect. There’s a possibility of a significant impairment around the corner. It’s not a side activity, but was seen as a key driver of growth.
Active traders moving to DeGiro
Most money comes from active traders. Jumping in and out of single stocks, turbos and options. Especially the latter can ignite a series of trades (rolling the short calls). Well, this can be done against much lower fees at contender DeGiro. Old people investing a little bit now and then aren’t the cash cows for any brokerage. This being said, the Bols IPO is still bigger at Binck than competitors. A number of 2000 clients signed up for the shares, with DeGiro having 300 clients for Bols.
Number of accounts will remain the same. But if any retail investor is like me, then the boring passive investments remain where they are (Binck, Lynx, IB) but the active trading will be done from a brand new DeGiro account. This will hurt Binck – as they are dependent on a small group of very active traders. Their website is slick, but not ready to pay for it.
Binck client flow given to HFT sharks
Finally, there’s the conflict with DeGiro. Binck was accused to sell out retail orders to HFT sharks. Probably by accident due a dumb router. Still, DeGiro seems to be correct. Binck announced to sue them. Talk is cheap (supply excess of demand). They won’t do it. Binck is hoping everybody will forget about it. Don’t count on it.
Interest rates are zero
In a high interest rate world, there’s free money to be made. After all, they have a bank license. Get a nice interest spread on all the money clients have in their accounts. Unfortunately for Binck, the interest rates aren’t what they used to be.
Unable to sell Able, Pieter Aartsen fired
The firm had reached a deal to sell Able to French investors BlackFin. Suddenly the sale was aborted last November. Well, bad luck one could say. Blame it on the French. The fact is the whole unit has been dismantled afterwards. This Able / BPO unit does not exist anymore and the responsible director, ceo Pieter Aartsen has been fired.
Able / BPO will be slowly liquidated, according to sources. This in sharp contrast with the official statement the unit may eventually be for sale again. Curious what their statement will be this time. This is quite a big deal. And a disclaimer here, didn’t have this information when I bought the puts this week.
Not heading for guru status
Not really my niche to predict direction of stocks. Expect the results to be awful, but by the time you may read this I risk looking like a fool. Won’t update this post monday, head for iex.nl for the latest news on monday morning.
Do not forget the failings of Syntel/Able
Well guess what, everybody has already forgotten about Degiro’s accusations.
I wish I could buy puts on Degiro’s parent company. Their Market Neutral Fund has been showing such horrible results, they make investing in Alex’s strategy look like a great investment opportunity. Case in point: the Market Neutral Fund lost about 15% over the last three months. The fund is long more than 100% of their AUM in (mostly government) bonds (as the fund is required to provide ample collateral for their stock bets). On top of that they like to dabble in stocks (a.k.a. gambling) and they have some arbitrage/hft algorithms. For this they are charging above-average compensation (up to 3+30).
Bonds have gone through the roof giving them windfall profits. Their arbitrage strategies should be making money consistently (otherwise why call it arbitrage?). Many prop traders made a killing in January. Yet despite these plusses, MINUS 15% on a market *neutral* fund. Simply incredible.
The simple fact that their fund seemingly hasn’t encountered massive withdrawals tells you that many investors don’t make rational decisions. For the very same reason, most retails investors will stay put, regardless of the commissions that Degiro charges. Without a banking license, Degiro cannot hold their clients’ cash in plain cash accounts. Alone for that reason I don’t see many Dutch investors switching brokers any time soon.
Hi Jack, buying a few dozens of puts on Binck implies that you think you can beat the market as all arguments you gave are old news and are priced. I guess your rational aint much better than other private investors ones.
just because it’s old news doesn’t mean it’s all priced in, duh?
if the earnings comes in much below than the lowered expectations what do you think stock is going to do, rally?
the problem with Alex is that it’s just focussed on very narrow set of financial products, trend following is too erratic and only works if you go after trend in every possible financial asset, 2014 trend pnl was obviously from fx and oil, not from eq, 2008/13 was when eq produced trend pnl
nice to see jack use his platform to talk his book, good step forward
Does anyone know if the new bonus legislation published this Saturday in FD also applies to the trading industry? Bankers can recieve a bonus of max. 20% of their annual salary.
The new legislation applies to All Options, Degiro, Tibra, Source Capital etc. But since their bonuses were zero anyhow, it does not really affect them that much.
I heard Tibra paid bonuses last year.
any more details on how much bonuses were paid at tibra, amounts, distributions etc?
As long as TOM’s market share in the daily options is 100% I wouldn’t be too worried about DeGiro picking up retail traders…
How come Dutch bonus tax is more strict than European one?
Was there a higher degree of short term risk taking than elsewhere?
Or higher degree of short term vision in politics?
Good call. Binck down 7.5%
no this 7.5% move is going to reverse as all arguments Jack gave are old news and were already priced in
large dutch bonus tax as dutch treasury had to underwrite ing etc and now they are in position to arm twist them freddie/fannie style
why TOM’s 100% market share in the daily options removes any worry from DeGiro picking up retail traders?
“””then the boring passive investments remain where they are (Binck, Lynx, IB) “””
Lynx and IB are NOT for the passive investors. By IB you pay an inactivity fee when you don’t trade enough…
Degiro is trash. If you claim the opposite, it is clear you haven’t try Lynx.
IB and Lynx have only monthly fees for the small investors. Above a certain treshold the fee is waived.
Using DeGiro and IB. Not too many complaints on DeGiro. With small fees trading low priced options make sense again.
SourceCap paid good bonuses to their developers, as they do every year, please don’t spread half-truths and lies around. People who are smart do well at SourceCap.
how much average total comp for your developers vis a vis market rate?
I saw Joop and Randal having coffee yesterday in Amsterdam. Heard they were planning a new company with Joop the head of technology. I heard the word purge used several times
purge optiver?