Archives: May , 2014

BlackRock CEO Roils ETF Audience: “Leveraged ETFs Can Blow-Up The Industry”

May 28, 2014 MarketsMuse Staff Reporter Leave a comment

Courtesy of Reuters News

May 28 (Reuters) – BlackRock Inc Chief Executive Larry Fink said on Wednesday that leveraged exchange-traded funds contain structural problems that could “blow up” the whole industry one day.

Fink runs a company that oversees more than $4 trillion in client assets, including nearly $1 trillion in ETF assets.

“We’d never do one (a leveraged ETF),” Fink said at Deutsche Bank investment conference in New York. “They have a structural problem that could blow up the whole industry one day.” (Reporting By Tim McLaughlin; Editing by David Gregorio)

Tech Talk

Dark Pool IEX Seeks To Transform to Major Exchange; Solicits Investors With $200 Million Valuation

May 24, 2014 MarketsMuse Staff Reporter Leave a comment

Extract below courtesy of WSJ Weekend Edition (May24-25) and reporters Bradley Hope, Telis Demos and Scott Patterson

IEX Group Inc., an upstart trading venue that aspires to be a haven from high-frequency trading, wants to become the only stock exchange that isn’t dominated by speedy dealers.

The firm is in talks with potential investors to raise millions of dollars to expand its operations and pay for the increased regulatory costs of becoming a full-fledged exchange, according to people familiar with the talks. At present, IEX is a “dark pool,” a lightly regulated, private trading venue.

IEX has previously gained the backing of a number of big investment firms, such as Los Angeles-based Capital Group Cos., which manages American Funds, and has shunned investments from Wall Street banks.

The latest fundraising talks, held at IEX’s New York headquarters, have involved hedge funds, private-equity groups and asset managers, according to people familiar with the talks.

An exchange owned solely by investment firms would be a “game changer,” said Albert Kyle, a professor of finance at the University of Maryland who has advised the government on market issues. “The motives of the exchange would be different than what we have now, and that could have benefits for investors,” he said. For the full WSJ story, please click here

Global Macro Strategy

Soothsayers Soliloquy “Sell In May…” Is Just Plain Silly in ZIRP Environment

May 13, 2014 MarketsMuse Staff Reporter Leave a comment

Excerpt below courtesy of this a.m.’s Sight Beyond Sight notes to newsletter subscribers. Today’s edition from Rareview Macro LLC also includes the following talking point: “The True Pain Trade is Not SPX 1920-1950 but Beyond 1950”

Sell in May and Go Away?

Historically, we despise the advice to “sell in May and go away”. The main reason is that very few of the people who make that argument do not actually factor the following considerations into their analysis:

What index are they selling? There is a big difference between the Dow Jones and S&P 500, especially when you take into consideration the index rebalances over time.

When does the period actually begin and end? By that we mean there is a big difference between selling on May 1st and May 15th.

What happens if you just remove September from the equation? September is usually the weakest month of the year and the month that has the biggest impact on a risk-adjusted return basis, so if you take that out it makes a big difference.

What are the external factors? By that we mean was the market up or down going into May 1st. Or was the budget in deficit or surplus or are investor cash balances high or low? These factors all matter as well.

What are the real world implications? The analysis never takes into consideration taxes, transaction costs, where an investor would re-deploy the capital or what would happen if an investors circumstances change and they cannot buy back into the market in November.

All that said, we felt compelled this year to chime in with a couple of thoughts that we have not seen made in the market this time around, perhaps because most of the analysis has just focused on the period following the global financial crisis. Continue reading →

Global Macro Strategy, People Profiles

Batter Up: New Hedge Fund For Bitcoins

May 12, 2014 MarketsMuse Staff Reporter Leave a comment

Below excerpt is hot of the press and courtesy of one of MarketsMuse’s favorite outlets: FINalternatives..

Coin Capital Management is this week launching a Bitcoin-focused hedge fund, which will buy and hold the leading crypto-currency in an institutional grade environment.

“We are pretty excited about Bitcoin…it is an exciting payment technology,” said Samuel Cahn, managing partner at the New York-based firm. “We are fully dedicated to holding Bitcoin, and we are the first ones to do so in an institutional grade hedge fund using the same types of checks and balances that investors have come to expect.”

For the rest of the reporting, please visit FINalternatives

ETF News, Global Macro Strategy

Macro Muse: Expert Says: Short USTs, Yields Poised to Rise

May 8, 2014 MarketsMuse Staff Reporter Leave a comment

Courtesy of one of our reader’s sighting this a.m.’s comments from Rareview Macro LLC’s “Sight Beyond Sight”, we’re compelled to cite the original source:

“…For the first time in months the setup is compelling enough for us to short US Fixed Income.

Earlier this morning the model portfolio sold short enough 30-year bond futures (symbol: USM4) at 135-28 to risk $50,000 USD per basis point. The reference point or last yield on the 30-year cash bond is ~3.40%. The first target in cash yield terms is 3.48% and the second is 3.52%. A stop at 3.36% (closing basis) has been placed. This is a short-term tactical trade with a risk-reward profile of three to one (3:1)…”

For those who embrace the above outlook, our insightful reader who pointed out the above sighting caveats: You can increase your chances by using a non-leveraged short ETF like TBF or simply shorting the long ETF. Beware: shorting bonds ETFs will result in you having the pay the dividends, which can be substantial.

Below includes a snapshot of (3) inverse-bond ETFs that could be considered by those seeking to hedge against or exploit a pending spike in UST yields. *

Note: MarketsMuse DOES NOT OFFER OR RECOMMEND TRADE IDEAS, NOR DO WE ENDORSE ANY SPECIFIC ETF PRODUCT Continue reading →

ETF News, Global Macro Strategy, Tech Talk

Let’s Get Technical: Wasatch Funds’ Fundamentalist Embraces Chartism

May 6, 2014 MarketsMuse Staff Reporter Leave a comment

A Fund-Company Chief Embraces Technical Analysis

MarketsMuse Editor Note: In the course of rifling through the onslaught of today’s mid-day trading desk talking points sent to us courtesy of top gun traders at major Wall Street firms, the theme has been ripe with “support levels” i.e. the most followed stocks and ETFs that are approaching, or “violating” short-term “technical support levels.” While our editorial staff has spent more time [in prior lives] analyzing point and figure charts than most of our readers would care to count, this week’s WSJ profile of Wasatch Funds’ Sam Stewart (courtesy of reporter Simon Constable) indicates that more than a few smart folk embrace the notion that charts merely tell traders what happened in the past..

Wasatch Fund's Sam Stewart. photo courtesy of WSJ — Wasatch Fund’s Sam Stewart. photo courtesy of WSJ

“….If it wasn’t for the global financial crisis that began in 2007, Sam Stewart, president of the Wasatch Funds, might never have considered using so-called technical analysis to help pick stocks. But these days he wouldn’t consider doing otherwise.

In the fall of 2007, he saw value in stocks. The major indexes were starting to drift lower then, and some sectors, including financials, were already tanking. Some stocks looked cheap to him, based on fundamental analysis, so he bought them—and lost money as markets plunged in 2008 and into 2009.

In retrospect, Mr. Stewart says, “I lost sight of the forest for the trees.” If he had looked at the charts at the time, he’d have said to himself, “You are crazy” to consider buying, he now says.

For those who are bullish on stocks, Mr. Stewart has some good news. The same indicators he ignored at his peril back in 2007 “are giving me reasons for optimism today,” he wrote to shareholders. The full story at WSJ

ETF News, Global Macro Strategy

Time to Worry About Stock Market Bubbles (?): Nobel Laureate Robert Shiller

May 6, 2014 MarketsMuse Staff Reporter Leave a comment

Extract below courtesy of NY Times and reporter David Leonhardt

Relative to corporate earnings over the previous 10 years, the Standard & Poor’s 500-stock index is still less expensive than over much of the last 15 years. But it’s more expensive than at any other time over the last century, save the 1920s.

While the rest of economy has been growing frustratingly slowly for almost five years, stocks have been rising at a boomlike clip. An investment in the Standard & Poor 500-stock index would have doubled from early 2009 through early 2013 and then gained an additional 18 percent over the last year.

Relative to long-term corporate earnings – and more in a minute on why that measure is important – stocks have been more expensive only three times over the past century than they are today, according to data from Robert Shiller, a Nobel laureate in economics. Those other three periods are not exactly reassuring, either: the 1920s, the late 1990s and in the prelude to the 2007 financial crisis.

“..It’s possible that a world of rising inequality and low interest rates is here to stay – and that stocks have reached a permanently high plateau. In that case, whatever our other economic worries, the stock market’s valuation doesn’t need to be high among them…”

For the full NYT story, please click here

Global Macro Strategy

“Sell in May and Go Away” ? Macro-Strategist Says “Maybe Not This Year..”

May 5, 2014 MarketsMuse Staff Reporter Leave a comment

On April 24, Rareview Macro’s Neil Azous had this to say about the notion of “Sell in May and Go Away..” Since that appearance Rareview’s newsletter, “Sight Beyond Sight” has provided further insight to aforementioned “long held wisdom.”
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