JLN Options: Fiscal Cliff Watch: Markets Ignore CBO’s Recession Warning

Aug 22, 2012

LEAD STORY

Fiscal Cliff Watch: Markets Ignore CBO’s Recession Warning
Steven Russolillo, The Wall Street Journal
Investor complacency surrounding the fiscal cliff is bubbling up. But analysts, economists and now a government agency are warning about the grave dangers should Congress fail to act.
The Congressional Budget Office on Wednesday said the U.S. economy will tumble into recession in 2013 if Congress fails to maintain current tax rates and avert deep cuts to federal spending.
http://jlne.ws/NIsqag
READ: Doug Ashburn’s commentary on the fiscal cliff: Geronimo! on JLNForex.com (July 2012)

Fiscal Cliff: Nothing to Fear But Fear Itself
Goldman note warns investors to dump stocks, but why?
Jim Woods, InvestorPlace
There’s a new panic phrase on Wall Street, as well as on the presidential campaign trail, and that phrase is the “fiscal cliff.”
By now, you’ve no doubt heard this term being bandied about by analysts, money managers, congressmen, senators and even the principles in the fight for the White House.
http://jlne.ws/PxFN02

Faith in Stock Market Waning, Tabb Says
Tom Steinert-Threlkeld, Traders Magazine
…In a survey of market participants between August 6 and 13, the industry consultant found that only 2 percent of broker-dealers, asset managers, hedge funds, execution venues and their arms suppliers rate their confidence in markets as very high.
http://jlne.ws/PxGd6S
** Which makes the following story all the more relevant. -JB

Exchanges hit again by trading error
Arash Massoudi, Financial Times
The Nasdaq Stock Market and other exchanges cancelled trades in a security on Wednesday after erroneous orders triggered a steep rise in its share price in a matter of seconds.
The cancellation highlights what is becoming a frequent feature of trading on stock exchanges as the rise of automated and high-frequency trading has increased the likelihood that mistaken orders take place.
http://jlne.ws/MNdJWz

Citadel Backs Nasdaq on Payback for Facebook IPO Losses
Jacob Bunge, Dow Jones Newswires
Citadel LLC urged U.S. regulators to approve a controversial plan by Nasdaq OMX Group Inc. (NDAQ) to make good on some losses sustained by trading firms in the stock market debut of Facebook Inc. (FB).
The $62 million proposal, which Nasdaq OMX retooled last month following outcry from brokers and rival exchanges, is “objective and fair,” according to a letter submitted Tuesday by Citadel to the Securities and Exchange Commission.
http://jlne.ws/O2vWNr

Cautious investors may tame hedge funds, at a cost
Anjuli Davies and Tommy Wilkes, Reuters
An academics’ pension fund, the Church of Sweden and a biomedical charity are among conservative investors breaking with tradition and piling into hedge funds who are willing to curb their highest-risk bets to attract their cash.
Five years into the financial crisis, volatile markets and rock-bottom interest rates have crushed the returns of charities and pension funds, making it harder to meet their liabilities in paying for their members’ retirements.
http://jlne.ws/SoFqak

Restoring Trust in the Futures Market
James E. Oliff and Neal L. Wolkoff, Dealbook
The recent failures of MF Global and Peregrine Financial, and the reported manipulation of the Libor benchmark for interest rates, could not have come at a worse time for the risk management industry. Severe weather problems in our major agricultural areas, uncertainty in the European and United States financial systems, a stubborn low-growth economic environment, instability in the Middle East that threatens energy supplies, and slower growth in China and Asia all spell the pressing need for a reliable and trustworthy risk management industry.
http://jlne.ws/NkssDU

Some banks hit after futures trading exclusion (India)
Reuters
NCC(NCCL.NS), Shipping Corporation of India(SCI.NS), South Indian Bank(SIBK.NS) and Central Bank of India (CBI.NS) fall 1 to 4 percent each after the National Stock Exchange excludes their shares from futures & options trading.
http://jlne.ws/O2xIhB

Panic in Hedge Fund Land
Lee Brodie, CNBC
According to a new study just 11 percent of hedge funds are beating the S&P 500 this year.
We can’t help but think that there must be panic in hedge fund land!
http://jlne.ws/Nksuvn

OptionMonster Cash Money Zone with Eric Wilkinson and Jeff Kilburg:

Exchanges

Direct Edge Chief Calls for Exchanges to Cooperate
Jacob Bunge, The Wall Street Journal
The U.S. stock market needs to improve industry coordination to help restore investor confidence in the wake of a string of high-profile technology problems, a senior exchange executive said Tuesday.
Priorities would include exchanges flagging planned changes to their systems as well as improved communications within the industry when problems arise, according to William O’Brien, chief executive of Direct Edge Holdings LLC, the nation’s fourth-largest stock market operator.
http://jlne.ws/SnCLMo

Regulation

Australia: ISDA Dodd-Frank Protocol opens for adherence
Louise McCoach, Mondaq
Last week the International Swaps and Derivatives Association, Inc. (ISDA) published a new protocol called the ” ISDA August 2012 Dodd-Frank Protocol” (DF Protocol). This is the first in a series of protocols planned to assist compliance with certain rules governing derivatives markets that will soon commence under Title VII of the United States Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).
http://jlne.ws/O2xrLC

Strategy

Protect—or Profit—From Market-Moving Events
Steven M. Sears, Barron’s
Confluence of potential actions on the economic and political fronts shows the value of options to protect portfolios.
Contrary to concerns voiced earlier in the year, 2012 is proving to be a very good time to own stocks. The total return of the Standard & Poor’s 500 index, which includes the reinvestment of dividends, stands at just over 14% through Monday.
http://jlne.ws/RDx7Iw

Events

The Chicago Board Options Exchange presents its highly acclaimedRisk Management Conference
Press Release
CBOE invites you to attend the debut of the Risk Management Conference in Europe.  Now in its 28th year in the US, the CBOE Risk Management Conference (RMC) is hosted by the Chicago Board Options Exchange (CBOE) and has proven to be a leading financial industry event in the US.
September 5 – 7, 2012
The Ritz-Carlton Powerscourt, County Wicklow, Ireland
http://jlne.ws/O2wTpc

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