Observations & Insight
Garry Jones, London Metal Exchange – Managing an Exchange in Uncertain Times
“It doesn’t matter where you start, it matters where you finish. Don’t just do the job for the money. Do your research, work hard…and it might work out.”
Garry Jones, CEO of the London Metal Exchange, says that our lives and the career path we go down shouldn’t be seen like a checklist – expecting to work at Company X by the time one is a certain age or saying that “By age Y, I will be married and have children” is unrealistic. Jones himself graduated with a degree in Geology and Geophysics; it would be later in his career that he became interested in banking and the financial industry. Jones stresses that it is important to take risks and not be afraid of failure. He also says that when speaking with other companies in hopes of employment, research is key.
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The VIX Keeps Acting Like the…VIX
The CBOE S&P 500 Volatility Index (VIX) is one heck of a volatile beast. Did I just use the word “volatile” to describe a “volatility” index? Shame on me for not being more creative with my words!
To bring you up to speed, here’s what’s happened: the recent behavior of the VIX and ETFs tracking it is giving the rollercoaster business a run for its money.
Soros Pulls $500 Million Investment With Bill Gross, WSJ Reports
John Gittelsohn – Bloomberg
George Soros’s investment firm has pulled a $500 million investment with Bill Gross that it made last year after the bond manager left Pacific Investment Management Co. to run a new fund at Janus Capital Group Inc., the Wall Street Journal reported, citing industry data and a person familiar with the matter.
Buffett’s Record Gain on Kraft Heinz Masks Stock Market Lapses
Bloomberg via Yahoo News – Noah Buhayar
Warren Buffett is about to show how getting one big investment right can overshadow several laggards.Berkshire Hathaway Inc., the sprawling conglomerate he’s overseen for five decades, is poised to report record quarterly profit on Friday because of a pretax gain of about $7 billion on a stake in Kraft Heinz Co. Buffett helped finance the merger that created the food company and Berkshire became its largest shareholder in July.
Why Big VIX Moves Are Unreliable Indicators
Does historical VIX data suggest we’re moving into a higher volatility regime?
Why El-Erian sees 30% US recession risk by 2017
Matthew J. Belvedere – CNBC
Economist Mohamed El-Erian said Monday he puts the risk of a recession in the United States at 25 percent to 30 percent.
“The road we’re on is going to end. We cannot rely on central banks, and central banks cannot be the only game in town when it comes to policy,” the former Pimco co-CEO said in a CNBC “Squawk Box” interview. “By 2017, we’re going to tip only way or the other.”
Weekly Market Outlook – Economy, Market, Sentiment, Sector
Price Headley – CBOE Options Hub
Though last week ended up being a merely mediocre one for the stock market, the entire month of October ended up being the best month for stocks in four years. All told, last week’s 0.2% advance for the S&P 500 (SPX) (SPY) meant an 8.2% advance for the calendar month.
And yet, despite the decidedly bullish momentum, the indices are not at multi-month new highs… a testament to how nasty August’s pullback was. On the flipside, the indices are above all the key moving average lines and we are at a time of year that’s generally bullish for stocks. A little bullish verification could go a long way.
Asset owners could pay price in ETP exchange wars
Rick Baert – Pensions & Investments
The battle among the three main U.S. stock exchanges for volume and issuance of exchange-traded products has meant lower costs for issuers and market makers, but asset owners using ETPs should take note that such competition could impact best execution and heighten volatility.
Hedge Funds End Run of Wrong-Way Gold Bets as Fed Sparks Decline
Luzi-Ann Javier – Bloomberg
After two months of a lackluster track record in gold, hedge funds finally backed away from bullish bullion bets just before the Federal Reserve drove the biggest weekly price drop in two months.
Volatility Uncovered: VIX ducks down as equities fly
Georgio Stoev – TradingFloor
August’s market selloff seems to be a thing of the past right now, leaving one to wonder about the short-term memory span of investors…
Just two months ago we were hearing about moving average “death crosses” and how bad the economy was. Even calls for recession were whispered here and there.
Why the S&P may already be in a bear market
Shawn Langlois – MarketWatch
Remember the third quarter? As a refresher: It was nasty. Nastier than a Matt Harvey slider (pre-9th inning). The worst quarter in four years. The market seemed to have finally surrendered itself to the bears. A rebound didn’t appear to be in the offing, either. Then October happened, and it was scary good.
The ominous chart pattern lurking in the S&P 500 index
Mark DeCambre – MarketWatch
Recent moves in the S&P 500 index have at least one chart expert seeing a bearish technical pattern. Northman Trader is seeing what most analysts describe as a head-and-shoulders formation in the S&P 500 that could bode ill for the broad stock-market benchmark.
The Option Queen Newsletter
Here we go off into Christmas help hiring season in anticipation of consumers rushing into brick and mortar store to purchase their holiday gifts….News Flash!!!! Many consumers will likely make purchases on-line, trying to find the best bargains without dealing with sales people, crowds or parking problems. That said, we expect to see lighter traffic in stores than anticipated. So what is an investor to do? Clearly buy the stocks of the best and most competitive on-line companies. While you are doing that, don’t forget to purchase shares in the companies that deliver these items. Remember the average US consumer is price sensitive.
The Week in Russell 2000 Trading – 10/26 – 10/30
Russell Rhoads – CBOE Options Hub
I’m still playing some catch up from school work and travel which caused me to take my eye off the ball with respect to the markets. It happens and when it does I’m always surprised by something that occurred while my mind and body were elsewhere. The big surprise for me this time around was the disconnection between small and large cap stocks that happened over the past couple of weeks.
Over the last two weeks of October the Russell 2000 (RUT) was basically unchanged (down 0.04%) while the large cap focused Russell 1000 (RUI) was up over 2%. That places RUI up 0.80% for the year while RUT is down 3.56% with 16% of the year to go. RUT has a lot of catching up to do.
How Mario Draghi will stop Janet Yellen from raising rates for years
Matthew Lynn – MarketWatch
Maybe right after Christmas. Perhaps in the spring. Certainly before the summer. In the City, highly paid analysts and economists are still sketching out scenarios for when the Bank of England will hike interest rates for the first time in seven years.
Here’s How Much QE Helped Wall Street Steamroll Main Street
Simon Kennedy – Bloomberg
Wall Street is counting its winnings from seven years of easy money.
In a report sent to clients on Sunday, Bank of America Corp. strategists totted up the results of 606 global interest-rate cuts since the collapse of Lehman Brothers Holdings Inc. and the $12.4 trillion of central bank asset purchases following the rescue of Bear Stearns Cos.
CBOE Holdings Q3 Earnings, Revenues Beat Estimates – November 2, 2015
CBOE Holdings Inc. reported third-quarter 2015 operating earnings of 76 cents per share, which surpassed the Zacks Consensus Estimate by 4.1% and also the year-ago quarter result by 33.3%.
This mark three straight quarters of positive earnings surprise with an average beat of 5.4%. The bottom-line growth was attributable to strategic initiatives taken by the company for product development, growing customer base and top line growth. CBOE Holdings also benefited from its proprietary products.
Revised OCC fact sheet reflects the addition of the EDGX Exchange
As the foundation for secure markets, OCC is a low-cost, customer-driven organization that delivers world-class risk management, clearing and settlement services to the listed options market. Our role as a Systemically Important Financial Market Utility (SIFMU) is critical to providing financial stability for market participants, investors, and the economy.
Eurex: Trading Statistics October 2015 – Eurex Exchange: ADV 5.3 Million Contracts
In October 2015, the international derivatives markets of Eurex, part of Deutsche Börse Group, recorded an average daily volume of 7.8 million contracts (October 2014: 9.9 million). Of those, 5.3 million were Eurex Exchange contracts (October 2014: 6.6 million), and 2.5 million contracts (October 2014: 3.3 million) were traded at the New York based International Securities Exchange (ISE). The volume traded on the spot and derivatives power markets of the European Energy Exchange (EEX) amounted to 270.1 terawatt hours (October 2014: 154.4 TWh). Eurex Repo recorded in all markets in October 2015 an average outstanding volume of 144.6 billion euros.
Derivatives, disliked by billionaire Warren Buffett, is gaining momentum in M’sia
The Star Online
Legendary billionaire investor Warren Buffett is no fan of it – and he makes no secret of his displeasure towards the complicated world of derivatives by calling them the weapons of mass destruction.
But risky as they may be, and regardless of how one perceives these instruments, it is undeniable that derivatives have enabled many investors to hedge their positions and protect their portfolios in an increasingly volatile and uncertain market environment.
And for Bursa Malaysia Bhd, derivatives have been the saving grace for its income growth amid the decline in trading activity in the domestic equity market.
Regulation & Enforcement
SEC moves to allow startup investing via crowdfunding
On Friday, the Securities and Exchange Commission voted 3-1 to allow small investors to buy stock in startup companies via online crowdfunding, reports Reuters and the Associated Press.
Before the new rules, private companies could seek money only from “accredited investors.” That’s defined as individuals who own more than $1 million in assets, excluding their primary residence, or have maintained an income of more than $200,000 for at least two years.
Under the new rules, those with more modest wealth will be able to invest in startups, with limits.
CME reopens online trading platform after technical glitch
CME Group Inc’s online trading platform CME Direct reopened four hours after it was shut on Monday due to a technical issue, the latest glitch to hit the world’s largest futures market operator and roil commodity trading.
FinTech Sandbox and CME Group Offer Historical Market Data to Spur Innovation among FinTech Startups
Press Release – CME Group
CME Group, the world’s leading and most diverse derivatives marketplace and FinTech Sandbox, a nonprofit whose mission is to promote entrepreneurship and innovation globally in the financial technology sector, today announced a new data agreement. CME Group will provide FinTech Sandbox startups with free access to historical futures and options data to promote technological innovation that will benefit the industry.
Intercontinental Exchange – New York Stock Exchange, Intercontinental Exchange Announce Increased Capacity, Enhanced Performance for SFTI Network
Press Release – ICE
Intercontinental Exchange (NYSE: ICE), the leading global network of exchanges and clearing houses, today announced several enhancements to its Secure Financial Transaction Infrastructure network (SFTI), which will offer customers additional capacity, performance and flexibility, while reducing the complexity associated with connecting to multiple market venues.
Fat Tail Risk: What It Means and Why You Should Be Aware Of It
Trevir Nath – NASDAQ
Following the 2008 Financial Crisis, conventional financial theories have been challenged for their inability to realistically explain risk. Traditional strategies of asset pricing often rely on a normal bell curve to make market assumptions, but in reality, the markets don’t behave this way. Under a normal distribution, a majority of asset variation fall within 3 standard deviations of its mean which subsequently understates risk and volatility.