Timing is money: the importance of timing orders
In 2005, the Japanese market experienced an exponential rise. Zombie stocks were alive again! In late January 2006, the police raided the party, literally. They arrested the poster child of this new-Japan paradigm. And suddenly, it felt like a nightclub closing. Crude neon lights were suddenly switched on. Haggard drunk people were staring at each other on the dance floor, confused and disoriented. Reality was back with a vengeance. The levitating zombies had rediscovered Newtonian physics. Unfortunately, the availability and cost of borrow on any single issue was dissuasive, so with my buddies on the Merrill Lynch stock lending desk, we came up with a Credit Rating Asset Price (CRAP) basket-swap idea. We dumped in all the zombies we could find. The cost of borrow was an affordable 2%. The price would be end of day closing price. Capacity was virtually unlimited. At a composite beta of 2.3, it had far more torque than index futures...
