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Post by xray on Nov 24, 2022 17:26:12 GMT
Goldman’s forecast for stocks over the next 3 months isn’t pretty—and investors should expect ‘less pain but also no gain’ next yearMichael Nagle/Bloomberg via Getty Images Will Daniel Wed, November 23, 2022, 3:46 PM In this article: ^GSPC +0.59% Despite a parade of recession predictions from Wall Street this year, Goldman Sachs’ strategists still believe a “soft landing” is likely. But that doesn’t mean stock market investors should celebrate. The 153-year-old investment bank’s equity research team, led by chief U.S. equity strategist David Kostin, said this week that they believe the S&P 500 will drop roughly 10% to 3600 over the next three months as interest rates rise. After that, Kostin and his team made the case that the blue-chip index will finish 2023 at 4000—roughly the same level it closed at today. Their argument is based on the idea that the Federal Reserve’s inflation battle will end by May of next year, which will help boost equity prices from their lows even as global economic growth stalls. The Fed has raised rates six times this year to fight inflation not seen since the early 1980s. In October, the results of its work started to show when year-over-year inflation, as measured by the consumer price index (CPI), fell to 7.7%, a significant drop from its 9.1% June peak. “Our economists expect by early 2023 it will become clear that inflation is decelerating and the Fed will reduce the magnitude of hikes and eventually cease tightening,” Kostin wrote in a Monday research note. But at the same time, with a lack of corporate earnings growth on the horizon and company profit margins facing pressure, Kostin and his team said they “expect less pain but also no gain” for stocks in 2023. And they warned there is one key risk to their flat-year for stocks thesis—a recession. “ flat return under our base case and large downside in a recession means investors should remain cautious,” they wrote.
A ‘distinct risk’
Here are the facts. Some 98% of CEOs expect a recession within 18 months and 72% of economists polled by the National Association for Business Economics expect a recession within the next year. Meanwhile, 75% of voters believe we’re already in a recession—and billionaires like Elon Musk agree. Despite this, Goldman Sachs believes the U.S. economy is strong enough to weather the storm, even if its analysts admit a serious economic downturn “remains a distinct risk.” If a recession does hit, Kostin and his team argue that corporate earnings would fall 11% next year. For the S&P 500, that would mean a drop to 3150 (-22%) at the low point of the recession. When is that low point? Kostin and his team didn’t make that forecast but argued that when economic growth data is at its worst, markets typically hit bottom. They noted, for instance, that in the 12 recessions since World War II, the S&P 500 has “often” bottomed within a few months of the cycle-low of the ISM Manufacturing Index, which is a gauge of economic activity in the manufacturing sector. Finally, Kostin and his team noted that there will be less appetite for stocks next year due to a reduced number of corporate buybacks, as well as less stock buying among retail investors, which could hurt share prices.
“Buybacks have been the largest and most consistent source of demand for shares for more than 10 years but demand will soften in 2023,” they wrote, predicting a 10% year-over-year decline in corporate buybacks. Goldman also expects households to be net sellers of stocks for the first time since 2018 next year, with estimated outflows of $100 billion.
This story was originally featured on Fortune.com ----------
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Post by xray on Nov 26, 2022 17:15:21 GMT
Home Markets Need to Know Need to Know Bear markets come in three stages; and we’ve only just started the second, says veteran analyst. Last Updated: Nov. 25, 2022 at 6:48 a.m. ET First Published: Nov. 25, 2022 at 6:47 a.m. ET By Jamie ChisholmFollow
Stocks will start the Black Friday half-session near 10-week highs, having rebounded partly on hopes the Federal Reserve will be slowing the pace of interest rate rises as it waits to see how much previous tightening has impacted the economy. Investors are thus looking ahead to when the Fed eventually pivots and borrowing costs can start coming down again. For now, they are displaying few concerns about how much damage any economic slowdown may do to corporate earnings. It’s all too rosy, reckons Peter Boockvar, chief investment officer of Bleakley Financial Group. In an interview with Magnifi+, an AI investing and trading platform, the veteran analyst warns that stocks will grind lower next year, and we have not seen the bottom of a bear market still in its middle phase.
“Bear markets usually come in three stages. The first one is we take a lot of the frothy excesses and euphoria out of the market in terms of the sexy names that we saw in 2021 and we take a PE ratio down. We’ve done that, we went from 22 times earnings, call it 16 to 17,” says Boockvar. -In the second phase, he adds, investors start calculating the economic and company earnings consequences of the ongoing rises in interest rates…”and then the third phase is everyone throws in the towel. No one wants to own a stock again, and that’s your bottom and that’s when you need to be buying stocks hand over fist.” “I feel like we’re really just only beginning to start that second phase,” he said.
Still, there will be opportunities. It all depends on your time scale, according to Boockvar. “If you have a big purchase that you have to make within the next year or two, whether it’s a kid going college or it’s a wedding, a bar mitzvah or some other expense like a home that you have put aside money for, it should not be in the stock market. It should be in the bank it should be in short-term T-bills. It should be in cash equivalents because the next couple of years are going to be challenging for those with shorter-term time horizons,” he said.
So, what assets is he interested in? Bonds are attractive, but it’s important to stick to quality. “You have investment-grade bonds that are yielding 6% and you can do that without taking much duration risk by buying shorter-term durations….And you can buy a short-term, two-year treasury and get a yield of four and a half percent and get some attractive Munis too. So fixed-income land, with shorter durations, I believe, is more attractive. Longer-term trade durations, I’m still more suspect on,” says Boockvar.
Black Friday Sale
And in equities? “Value stocks are much more attractive than growth, the tech stocks. I think commodity stocks are much more attractive than they’ve been over the past five years. Certainly energy, precious metals, even industrial metals like copper stocks.” If the dollar has peaked and pulls back as the Fed gets closer to the end of its hiking cycle, then Boockvar likes the look of foreign markets, particularly in Asia, and gold and silver once the central bank begins cutting rates.
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Post by xray on Dec 1, 2022 23:23:34 GMT
Bloomberg BofA Stocks Indicator Hovers Near ‘Buy’ Signal as Bears Retreat
Norah Mulinda Thu, December 1, 2022, 1:19 PM In this article:
^GSPC -0.09%
(Bloomberg) -- Wall Street is growing less bearish, Bank of America Corp. strategists led by Savita Subramanian said. The bank’s so-called sellside indicator, which tracks the average recommended allocation to stocks by US sellside strategists, remains within two percentage points of a buy signal, its closest since 2017. The indicator rose 56 basis points to 53.3% in November, just as the S&P 500 notched its second consecutive month of gains. That may not actually be a good thing for stocks as “Wall Street’s consensus equity allocation has been a reliable contrarian indicator over time,” the strategists wrote in a note Thursday. “In other words, it has been a bullish signal when Wall Street strategists were extremely bearish, and vice versa.” Wall Street had recommended under-weighting equities through the entire bull markets of the 1980s and 1990s, as well 2009 to 2020, the strategists point out.
Currently, the indicator remains in neutral territory, a less predictive range than the buy or sell thresholds, the strategists said. The gauge doesn’t catch every stock market rally or slump, but it has some historical predictive capability for subsequent 12-month S&P 500 total returns, they wrote. Indeed, a recent buy-side survey conducted by the bank showed that most are expecting a sell-off in the first half of 2023. Respondents said fading inflation and less hawkish central banks could turn things around though with a rebound is expected in the second half. And its not just institutional investors that are flashing near-term warning signals, JPMorgan Chase & Co. strategists also said recently more pain lies ahead for stocks in the new year.
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Post by xray on Dec 6, 2022 21:22:40 GMT
Business Insider Jamie Dimon sees the Fed hiking rates to the highest in 15 years, but warns that may still not be enough to tame inflation Phil Rosen Tue, December 6, 2022, 10:05 AM· JPMorgan CEO Jamie Dimon.Reuters, Mike Theiler
JPMorgan CEO Jamie Dimon warned that inflation is eroding everything even as consumer spending remains robust. He added that the Fed will have to raise rates to 5% and holding them there for three to six months, but that may not be sufficient. - Geopolitical risks, too, threaten the US economy and could push rates higher, he said. - JPMorgan CEO Jamie Dimon expects the Federal Reserve to hike rates to 5% and hold them there for several months, but warned even that may not be enough to bring inflation back under control.
His forecasts come as residual pandemic savings that have been propping up consumer spending start to run out next year, with Fed rate hikes weighing further. "Inflation is eroding everything I just said, and that $1.5 trillion will run out sometime mid-year next year," Dimon told CNBC on Tuesday. "So when you're looking out forward, those things may very well derail the economy, and cause this mild-to-hard recession that people are worried about." Comments from Fed Chair Jerome Powell and other central bank officials have left Dimon expecting a peak rate of 5%, which would be the highest since 2007. He then sees the Fed holding rates at that level for about three to six months, but added, "That may not be sufficient."
Other risks to the US economy include the central bank's quantitative tightening campaign, persistent and stubborn inflation, and geopolitical tensions that could worsen oil, food, and humanitarian crises, according to the JPMorgan chief.
"We've not had a war in Europe like this since 1945, and back then we said never again," he said. "Add to that by the way, a lot of emerging market countries that a lot of people don't focus on are going to pay a heavy price to the strong dollar, higher rates, and higher oil prices. And so that stuff is really significant. I don't think we've seen that kind of turmoil in the global world in a long time."
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Post by xray on Dec 9, 2022 23:06:50 GMT
STOCK MARKET TODAY Market Rally Awaits CPI Inflation Report, Federal Reserve After Ugly Week; Here's What To Do FacebookTwitterLinkedInShare Licensing ED CARSON05:27 PM ET 12/09/2022
Dow Jones futures will open Sunday evening, along with S&P 500 futures and Nasdaq futures, with attention squarely on the CPI inflation report and the Federal Reserve. The stock market rally retreated last week with the major indexes continuing their trend of popping to new highs but then fading back. It's a challenging environment for buying stocks. This coming week investors get a one-two shot of big economic news. On Tuesday, the Labor Department will release its November CPI inflation report. On Wednesday afternoon, the Federal Reserve will hike rates yet again with Fed chief Jerome Powell offering signals about further tightening in early 2023. That could be a catalyst for big market gains or losses, or choppy sideways actions could continue. Investors should likely wait for the inflation report and Fed news before adding exposure. Breakout failures or fizzles are widespread, with DXCM stock tumbling back Friday after briefly clearing a buy point Thursday on FDA approval. Fed May Ditch Its 2% Inflation Target — Or Economy, S&P 500 Face Hard Landing
CPI Inflation And Fed Meeting
Early Tuesday, the Labor Department will release the November consumer price index. Overall and core CPI inflation rates should cool over the next several months, if only because comparisons are getting tougher. But services prices have been stubbornly strong. The Federal Reserve wants to see more-substantial declines on services inflation, as well as wage gains, before halting rate hikes. At 2 p.m. ET, the Fed is expected to raise its fed funds rate by 50 basis points, to 4.25%-4.5%, ending a string of four 75-basis-point hikes. Investors will want some clues about the February meeting, and how high the fed funds rate may ultimate reach. Markets are currently pricing in another half-point Fed rate hike in February, though there's a decent chance of a quarter-point move. Fed chief Powell's comments at 2:30 p.m. ET, along with the CPI inflation report, may set the tone on Fed policy heading into 2023. Powell and several policymakers have signaled that a recession may be necessary to bring inflation under control.
Stock Market Rally
The stock market rally saw significant retreats for key indexes in the latest week. The Dow Jones Industrial Average sank 2.8% in last week's stock market trading. The S&P 500 index lost 3.4%. The Nasdaq composite tumbled 4%. The small-cap Russell 2000 plunged 5%. The 10-year Treasury yield rose 6 basis points to 3.57%, rebounding from 3.4% midweek. U.S. crude oil futures plunged 11% to $71.02 a barrel last week, with gasoline futures tumbling 9.8%. Both hit 2022 lows. Natural gas prices dipped 0.6%.
ETFs
Among key growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) slumped 4.6%, with Microsoft stock a major holding. The VanEck Vectors Semiconductor ETF (SMH) retreated 1.7%. Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) tumbled 9.2% last week and ARK Genomics ETF (ARKG) 8.1%. TSLA stock is a massive holding across Ark Invest's ETFs. SPDR S&P Metals & Mining ETF (XME) gave up 6.4% last week. The Global X U.S. Infrastructure Development ETF (PAVE) fell back 2.85%. U.S. Global Jets ETF (JETS) descended 3.3%. SPDR S&P Homebuilders ETF (XHB) fell 2%. The Energy Select SPDR ETF (XLE) dived 8.45%, decisively breaking its 50-day line. The Financial Select SPDR ETF (XLF) retreated 3.9%. The Health Care Select Sector SPDR Fund (XLV) dropped 1.3% after climbing in eight of the prior nine weeks.
Megacap Stocks
Apple stock fell 3.8% in the past week, tumbling below that key level Tuesday and hitting resistance there on Friday. Bad news on iPhone production might be priced in, and AAPL stock is rebounding. Fellow Dow tech titan Microsoft stock also sank 3.8%, but held support at the 21-day line, modestly above a just-rising 50-day. But it's well below the 200-day line. MSFT stock is essentially flat vs. a month ago, much like the S&P 500 and Nasdaq. Tesla stock tumbled 8.1% in the latest week, even with Friday's 3.2% pop. TSLA stock is jumping above recent bear market lows. Tesla announced new China incentives this past week with widespread media reports that the Shanghai plant will cut production significantly over the next few weeks, even halting Model Y output.
Stocks To Watch
Caterpillar stock fell 3.7% to 227.29 last week, undercutting the 21-day line. The retreat could end up being a constructive shakeout. CAT stock has a buy point at 238 or 239.95 from a long cup base. In another week, the Dow heavy equipment giant could have a flat base with that 239.95 buy point. A slightly longer pause would let the fast-rising 50-day line narrow the gap with CAT stock. Goldman stock slumped 5.6% in the latest week to 359.14, round-tripping a breakout from a cup base with a 358.72 buy point, before rising slightly above it. A solid bounce from here could offer a new entry, especially if the 50-day or 10-week line catch up. On a weekly chart GS stock has a 13-month cup-with-handle base, with a 389.68 buy point, according to MarketSmith analysis. The past week has now created more depth on that handle, which also could become a flat base in a week. Sanmina stock slumped 7.3% to 62.48 this past week. SANM stock had been consolidating tightly in the profit-taking zone after an October breakout from a cup base. Shares could be starting a pullback to the 50-day/10-week line, offering a buying opportunity, though the weekly drop was abrupt. SANM stock also is working on a possible flat base. McKesson stock fell 4% to 371.37 last week, dropping Friday to just below the 50-day and 10-week lines. MCK stock is working on a new consolidation after a sharp sell-off on Nov. 10-11 that slammed many defensive medical stocks. A move above the Dec. 2 high of 389.45 could offer an early entry, still close to moving averages. MELI stock sank 5.1% to 896.48, its fourth straight weekly decline. The Latin American e-commerce and payments giant has a 1,095.44 buy point, with a trendline entry around 1,025. An aggressive entry could be a decisive retaking of MELI stock's moving averages, with the Dec. 2 high of 957 as that trigger. While MercadoLibre stock has been trending lower, the weekly losses come on lighter volume with some relatively strong positive closes.
Market Rally Analysis
A week ago, the stock market rally was hitting new highs, with the S&P 500 above its 200-day line for the first time in months. But as investors re-evaluated the jobs report and Fed chief Powell's comments, the major indexes retreated. The S&P 500 fell below its 200-day line, while the Nasdaq tested its 50-day. Both hit resistance at the 21-day line late in the week. The Russell 2000 tumbled below its 200-day and 21-day lines and came right down to its 50-day, just undercutting its 10-week line. The rally-leading Dow is holding support around its 21-day. The S&P 500 is basically where it was after Nov. 10, when a tame October CPI inflation report buoyed stocks. The Nasdaq and Russell 2000 are back to those early November levels, but also late October peaks. If you had to design a scenario to lure investors in to get roughed up repeatedly, this current uptrend might be the blueprint: A market rally of a few big one-day gains followed by pullbacks over several sessions. It's still a confirmed market rally. However, further losses, such as the Nasdaq or especially the S&P 500 clearly breaking their 50-day lines, would be worrisome.
Tuesday's November CPI inflation report and Wednesday's Fed meeting announcement and Powell's comments could provide a catalyst for a sustained market rally, or a decisive sell-off. But they also could spur yet another big market pop that seems decisive, only to be followed by yet another pullback or bounce.
What To Do Now
Investors should be wary of adding exposure until the CPI inflation report and Fed meeting are in the rearview mirror. Even if markets jump on the inflation data and Fed chief Powell's comments, investors should be selective about new buys, in case the major indexes simply fall back over the next several sessions. At some point a sustained, steady market rally will take hold. When that happens, buying opportunities will be plentiful.
So get your stock market holiday shopping list ready. A large number of stocks from a variety of sectors are setting up or close to doing so.
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Post by xray on Dec 16, 2022 18:31:41 GMT
Bloomberg Stocks Bulls Losing Support as $4 Trillion of Options Set to Expire Lu Wang Thu, December 15, 2022, 7:00 PM EST
(Bloomberg) -- Bulls reeling from the Federal Reserve’s still-hawkish tilt are about to lose a major force that helped tamp down turbulence in US stocks during this week’s macroeconomic drama. An estimated $4 trillion of options is expected to expire Friday in a monthly event that in tends to add turbulence to the trading day. This time, with the S&P 500 stuck for weeks within 100 points of 4,000, the sheer volume provides a positioning reset that could turbocharge market moves. Given the brutal backdrop that emerged in recent days, from a raft of rate hikes by global central banks to signs the American economy is starting to flag, worries are mounting the expiration will act as an air pocket. That’s how David Reidy, founder of First Growth Capital LLC, sees it playing out. In his view, the market has been mired in a “long gamma” state where options dealers need to go against the prevailing trend, buying stocks when they fall and vice versa. Friday’s event “could break the tightness of the gamma exposure and lead to some dispersion, that is, room for the index to break out,” Reidy said. “That would be a downside move given yearend position adjustments and the macro recession view.”
Options tied to the 4,000 level on the S&P 500 account for the biggest chunk of open interest set to mature and acted as something of a tether for the index’s price in the weeks leading up to Friday, according to Brent Kochuba, founder of Spot Gamma. Stocks were already under pressure Thursday as the European Central Bank joined the Fed in raising interest rates and warning of more pain to come. The S&P 500 sank 2.5%, closing below 3,900 for the first time in five weeks. That sets up a pivotal day, when holders of options tied to indexes and individual stocks — whose notional value according to Goldman Sachs Group Inc. strategist Rocky Fishman is worth $4 trillion — will have to either roll over existing positions or start new ones. The event this time coincides with the quarterly expiration of index futures in a process ominously known as triple witching. Added to that comes a rebalancing of benchmark indexes including the S&P 500. The combination tends to spark single-day volumes that rank among the highest of the year. “Between expiration and rebalances, Friday will likely be the last ‘liquidity day’ of 2022,” said Chris Murphy, co-head of derivatives strategy at Susquehanna International Group.
Options traders were gearing up for turmoil going into this week’s report on consumer prices and the last Federal Open Market Committee meeting of the year. In a sign of heightened anxiety, the derivatives market did something unusual Monday with the Cboe Volatility index, a gauge of options cost known as VIX, jumping more than 2 points while the S&P 500 climbed 1.4%. That’s the biggest concerted gains since 1997. “Essentially all of the options prices tied to Friday were extremely high, and very sensitive to implied volatility (and time decay) because they are expiring in just a few days,” SpotGamma’s Kochuba said. “Once the events passed, the implied volatility (i.e. value of these options) tanked, leading to hedging flows that brought mean reversion to markets.”
The dynamic was on display Wednesday, as a drop in the S&P 500 coincided with a slide in the VIX, again bucking the historic pattern of their moving in opposite directions. That unwinding of hedging removed one market support and opened the door for more volatility, according to Danny Kirsch, head of options at Piper Sandler & Co. “Now that the event has passed, the market is free to move more,” he said. “And the realization of higher-for-longer Fed is setting in, plus the high possibility of recession next year.”
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Post by xray on Dec 16, 2022 18:45:19 GMT
Bloomberg Stock Market Traders Discover That Bad News Is Bad After All Vildana Hajric and Lu Wang Thu, December 15, 2022, 4:20 PM EST
(Bloomberg) -- Order is being restored in financial markets, a frightening development for equity bulls.
For the first time in a long time, news that was bad for the economy was bad for the stock market as well, more proof that recession fear has replaced inflation angst as that market’s biggest bugaboo. That bonds took the news in stride is nice for investors with a toe in each market, but adds to evidence that concern about the economy has become the bigger input to both. Rather than rise on speculation that weak data would curb Federal Reserve tightening, the S&P 500 dropped 2.5% on Thursday, while the Nasdaq 100 lost 3.4%. Small-cap stocks lost more than 2.5% and the VIX volatility gauge shot back above 22. The yield on 10-year Treasuries hovered around 3.45%, down from a peak of 3.63% earlier this week. “The concern is growth and what’s going to happen to the economy, and is the Fed pushing us into recession,” Mona Mahajan, senior investment strategist at Edward Jones, said on Bloomberg’s “What Goes Up” podcast on Thursday. “Markets won’t ignore the fact that we’re entering a downturn — and so could we head back toward those lows, give up some of the gains that we’ve seen recently? We think that is certainly a scenario that is a credible one.” In months prior, bad economic news was often taken as good by investors because it suggested the Federal Reserve’s interest-rate increases were working as intended to cool the economy and tamp down inflation. But now a shift may be at hand: Many investors are worrying more about a recession in 2023, with the risk increasing that the Fed could overtighten.
Data Thursday suggested US economic growth is slowing, with retail sales and manufacturing dropping last month, though the labor market has remained strong. Retail sales fell in November by the most in nearly a year, calling into question the health of the consumer, while several factory measures also showed contraction, burdened by weaker demand, among other things. Meanwhile, regional Federal Reserve banks data showed that manufacturing weakened in both the New York and Philadelphia regions by more than expected — the latter’s new orders gauge fell to the lowest since the onset of the pandemic. “Investors took their eye off the ball and were hoping for a glide path into the holidays,” said Mike Bailey, director of research at FBB Capital Partners. “Markets are realizing that we are in for a staring contest between Jay Powell and investors that could go on for three, six, or nine months.” He added that yields on short-term Treasuries rose Thursday, while those on longer-term ones declined, “which would support a theme of a hawkish Fed move near-term, pushing rates up, but also leading to perhaps a worse recession, which might suggest slower long-term growth and lower long rates.”
The iShares 20+ Year Treasury Bond ETF, known by its ticker TLT, is on pace to beat the SPDR S&P 500 ETF Trust (SPY) for five straight weeks, the longest winning streak since March of 2020. The Treasury fund is outperforming the latter by nearly 10 percentage points in December, poised for its best month since that period as well.
On Wednesday, the Fed raised its benchmark rate by 50 basis points to a 4.25%-to-4.5% target range and policymakers predicted rates would end next year at 5.1%, a higher level than previously indicated. Chair Jerome Powell reiterated that the central bank would keep rates higher for longer, and played down hopes for a rate cut next year.
The Fed also, among other projections, updated its forecast for the unemployment rate, saying it could rise to 4.6% next year — and such a hike from July’s trough of 3.5% “has never not caused a recession,” wrote Julian Emanuel, chief equity, derivatives and quantitative strategist at Evercore ISI, who added that no bear market has ever bottomed before a recession has started. Emanuel recommends a defensive position as the first half of 2023 could remain volatile still. “The pullback in the market today — we aren’t surprised by it,” Nadia Lovell, UBS Global Wealth Management senior US equity strategist, told Bloomberg Television on Thursday. “This is a market that has traded on the hope that the Fed will not do what they say they will do. Yesterday they sent a clearly different message.” “The risk is to the upside. That is what the market is grappling with today,” Lovell added. “We don’t yet think the bottom is into this market. You’ll probably see it in the first half of the year.”
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Post by xray on Dec 18, 2022 23:44:07 GMT
Bloomberg Real-Money Funds Dump $100 Billion of Stocks on Rebalancing Denitsa Tsekova Sat, December 17, 2022, 1:00 PM EST
(Bloomberg) -- The world’s biggest money managers are set to unload up to $100 billion of stocks in the final few weeks of the year, adding to a selloff that’s snowballed since Jerome Powell’s unequivocal message that policymakers will press on with aggressive tightening at the risk of job cuts and a recession. Notwithstanding their losses this week, equities gained over the quarter, driving up their value relative to other asset classes and forcing managers with strict allocation mandates to sell them to meet targets. Bonds are the likely beneficiaries of sales by sovereign wealth, pension and balanced mutual funds looking to replenish their fixed-income holdings, according to JPMorgan Chase & Co. and StoneX Financial Inc. When December wraps up, sovereign wealth funds could be done selling roughly $29 billion in equities while US defined benefit pension plans would need to shift up to $70 billion from equities to bonds to meet their long-term targets and bring them back to September levels, JPMorgan estimates.
The pension and sovereign wealth funds that form the backbone of the investing community typically rebalance their market exposures every quarter to achieve a mix of 60% stocks and 40% bonds. “The recent equity market correction and bond rally is consistent with the rebalancing hypothesis,” said Vincent Deluard, a macro strategist at StoneX, who projects that some of the rebalancing has already happened this week. “Investors had to sell stocks and buy bonds to get back to target. It makes sense for this to continue until the end of the year.” The adjustments away from equities will compound some $30 billion of forced sales expected by trend-chasing quants following a slide that’s taken the S&P 500 down about 6% from its November high.
The latest blow came Wednesday when Chair Powell warned interest rates would remain elevated to tame inflation at the end of the Federal Reserve’s final 2022 meeting, dashing hopes the central bank was preparing to ratchet down its aggressive tightening campaign. Instead policymakers indicated they will keep hiking to a peak beyond what the market had anticipated. According to JPMorgan calculations, Japan’s $1.6 trillion GPIF, the world’s largest pension fund, would have to sell $17 billion of equities to get back to its target asset allocation. The $1.3 trillion Norwegian Oil Fund could move $12 billion from stocks to bonds. A spokesperson for Norges Bank Investment Management, which manages the Norwegian Oil Fund, declined to comment. A spokesperson for GPIF didn’t immediately respond to an email outside of business hours seeking comment.
The forecasted sales mark a reversal from the first and second quarter trend where big funds were forced to buy stocks and fanned strong, but short-lived rallies. The last time such funds had to unload stocks to rebalance was in the fourth quarter of 2021, according to JPMorgan strategist Nikolaos Panigirtzoglou. Even so, this month’s sales are likely to pale in comparison to last December’s. “The estimated rebalancing flow was almost double of the one estimated for the current quarter,” Panigirtzoglou said.
--With assistance from Sid Verma.
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Post by xray on Dec 19, 2022 22:57:43 GMT
ALERT.... GPP
GPP insider selling (12,000sh at 12.20 on 12/7) ....
Live Long and Prosper....
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Post by xray on Dec 24, 2022 19:53:00 GMT
Bloomberg Traders Are Losing Hope in Stock Market After Year of Rolling Losses, Fakeouts Lu Wang Fri, December 23, 2022, 4:01 PM EST
^GSPC +0.59%
(Bloomberg) -- For all the ink spilled over its horrors, the 2022 stock market will go into the books as an undistinguished one in the history of bad years. For traders who lived through it, though, certain things have made it feel worse than top-line alone numbers justify, a potential impediment to a quick recovery.
While the 25% peak-to-trough drop in the S&P 500 ranks in the lower range of bear-market wipeouts, it took a particularly jagged route to get there. At 2.3 days, the average duration of declines is the worst since 1977. Throw in three separate bounces of 10% or more and it was a market where hopefulness was squeezed as in few years before it. This may explain why despite a smaller drawdown, pessimism by some measures rivals that seen in the financial crisis and the dot-com crash. Safety crumbled in government bonds, which failed to provide a buffer for beat-up equities. Buying put options as a way to hedge losses didn’t work either, adding to trader angst. “There’s less and less people willing to go out there and stick their necks out to try and buy on those pullbacks,” said Shawn Cruz, head trading strategist at TD Ameritrade. “When they start seeing the pullbacks and the drawdowns be longer and be more pronounced and the rallies being maybe more muted, that’s just going to serve to further drive more risk-averse behavior in the market.”
While stocks headed to the Christmas break with a modest weekly decline, anyone hoping for the rebound from October lows to continue in December bounce has been burned. The S&P 500 slipped 0.2% in the five days, bringing its loss for the month to almost 6%. That would be just the fourth-worst month of the year in a market that at times has seemed almost consciously bent on wringing optimism out of investors. Downtrends have been drawn out and big up days unreliable buy indicators. Consider a strategy that buys stocks one day after the S&P 500 posts a single-session decline of 1%. That trade has delivered a loss of 0.3% in 2022, the worst performance in more than three decades. Big rallies have also been traps. Purchasing stocks after 1% up days has led to losses, with the S&P 500 falling an average 0.2%. “There’s an old saying on Wall Street to ‘buy the dip, and sell the rip,’ but for 2022, the saying should be ‘sell the dip, and sell the rip,’” Justin Walters, co-founder at Bespoke Investment Group, wrote in a note Monday. It’s a stark reversal from the prior two years, when dip buying generated the best returns in decades. For people still conditioned to the success of the strategy — and until recently, many were — 2022 has been a wakeup call. Retail investors, who repeatedly dived in earlier in the year when stocks pulled back, got burned, with all their profits made in the meme-stock rally wiped out. Now, they’re exiting in droves.
Day traders have net sold $20 billion of single stocks in December, pushing their total disposals in recent months to almost $100 billion — an amount that has unwound 15% of what they accumulated in the prior three years, according to an estimate by Morgan Stanley’s sales and trading team that’s based on public exchange data. The retail army is likely not done selling even with January historically marking a strong month for that crowd, according to the Morgan Stanley team including Christopher Metli. Using the 2018 episode as a guide, they see the potential for small-fry investors to dump another $75 billion to $100 billion of stocks as next year cranks up. “Retail demand may not follow seasonal patterns as strongly in 2023 given a deteriorating macro backdrop, with low savings rates and a higher cost of living,” Metli and his colleagues wrote in a note last Friday.
The mood among pros is as bleak if not gloomier. In Bank of America Corp.’s survey of money managers, cash holdings rose to 6.1% during the fall, the highest level since the immediate aftermath of the 2001 terrorist attack, while allocation to stocks fell to an all-time low. In other words, even though this retrenchment is nowhere near as bad as the 2008 crash that eventually erased more than half of the S&P 500’s value, it’s stoked similar paranoia, particularly when nothing but cash was safe during this year’s drubbing. In part because of the market’s slow grind, once-popular crash hedges have misfired. The Cboe S&P 500 5% Put Protection Index (PPUT), which tracks a strategy that holds a long position on the equity gauge while buying monthly 5% out-of-the-money puts as a hedge, is nursing a loss that is almost identical to the market’s, down roughly 20%.
Government bonds, which delivered positive returns during every bear market since the 1970s, failed to provide buffer. With a Bloomberg index tracking Treasuries down 12% in 2022, it’s the first year in at least five decades where both bonds and stocks suffered synchronized losses of at least 10%. “There was nowhere to hide for a whole year — that’s a big issue,” Mohamed El-Erian, chief economic adviser at Allianz SE and Bloomberg Opinion columnist, said on Bloomberg TV. “It’s not just returns, it’s returns correlation and volatility that have hit you in a big way. Is it done? No, it’s not.”
--With assistance from Vildana Hajric and Jonathan Ferro.
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Comment: No one can predict the market, not now or going forward. We all have (many times quite different) opinions. With that said.... My current take is (looking at my current analysis data being shown to be 44% negative) indicates current 50% cash position. However, always however's, there are some very good "undervalued" (by Income oriented traders) securities out there paying substantial dividends (currently in our portfolio's or watchlists) that we need to continue to watch and possibly buy (at the right timing by analysis and the market time in our individual opinions)....
Live Long and Prosper....
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Post by xray on Dec 24, 2022 20:05:35 GMT
Market Extra How a Santa Claus rally, or lack thereof, sets the stage for the stock market in first quarter Published: Dec. 24, 2022 at 8:00 a.m. ET By Vivien Lou ChenFollow
It’s the time of the year when the traditional seasonal lift for U.S. stocks known as the “Santa Claus rally” usually takes place. But unlike past holiday seasons, this one may get bogged down by the risks of a recession and continued rise in interest rates during the new year. The Santa Claus rally refers to the stock market’s tendency to rally in the last five trading sessions of a calendar year and the first two sessions of the next year. Friday marked the start of the period, which will run through Jan. 4 this time around. Analysts said investors shouldn’t count on stock-market gains this holiday season, though some market participants are still holding out hope. History underscores just how bullish this final stretch of the year typically tends to be, and how relatively uncommon it is to see stock-market declines before and after Christmas. Seventy-two years of data on the S&P 500 SPX and its predecessor index, the S&P 90, shows that only 15 to 16 holiday seasons have failed to produce a rally. Of those seasons, seven were followed by first-quarter losses in the index, according to Dow Jones Market Data.
Any Santa Claus rally to close out the 2022-2023 season “will be very short-lived in nature, and we will quickly give back those gains because there just is not going to be any sustainable rally with the Federal Reserve maintaining high interest rates,” said Eric Sterner, chief investment officer at Apollon Wealth Management, which manages $3.1 billion from Mount Pleasant, S.C. “It will likely be all of 2023 before inflation comes down and, on top of that, we have major earnings revisions that need to happen,” Sterner said via phone. He said earnings per share could drop by 15% to 20% on average, versus current estimated gains of 4% to 5% for next year, and that the S&P 500 could retest its October low of around 3,500 in the first half of 2023 before ending the year flat.
Stocks have suffered in 2022, with the S&P 500, Nasdaq and Russell 2000 all posting double-digit percentage declines, as the Federal Reserve continued to hike interest rates to arrest inflation running at four-decade highs. Dow industrials have fared better, but were still down 8.6% year to date through Friday. When stock-market gains failed to materialize during the Santa stretch, the S&P 500 eked out just a 0.53% average gain in the first quarter that followed, according to Dow Jones Market Data. That’s in contrast to the majority of times when there were holiday-season gains, with the index producing an average 2.49% first-quarter advance thereafter. This year “is certainly a good candidate for a Santa Claus rally, given how bad the selloff was this year, but that doesn’t mean you’ll have a good year ahead, on average,” said Eric Diton, the Boca Raton, Fla.-based president and managing director at The Wealth Alliance, which oversees $1.5 billion in managed and brokerage assets. “The bigger correlation is the January indicator, in which if you a positive January, you have a higher probability of having a positive year.” “If corporate earnings can hold up after this massive tightening by the Fed and pretty big reduction in the money supply, the stock market should have a pretty good year,” he said via phone. “If earnings fold, we’ll have another leg down. My gut is saying that we could have a mild recession, but I’m pretty optimistic about the second half of 2023: The Fed should be done raising rates by then, taking pressure off of the market.”
The Dow Jones Industrial Average DJIA, +0.53% and S&P 500 Index have each traded higher almost 80% of the time during the seven-day holiday period since 1950, gaining an average of 1.38% and 1.32% respectively, according to Dow Jones Market Data. The Nasdaq Composite COMP, +0.21% has traded higher 78% of the time since 1971, for a 1.81% average gain, while the Russell 2000 RUT, +0.39% has been up 71% of the time since 1987 and gained 1.5% on average. If Dow industrials and the S&P 500 finish higher for the 2022-2023 season, that would be their seventh straight successful Santa Claus rally and their longest winning stretch since the string of eight that occurred between 1969-1970 and 1976-1977.
Data from FactSet shows that analysts remain relatively optimistic about the direction of U.S. stocks in 2023: As of Wednesday, their median estimate for where the S&P 500 would be 6 to 12 months from now was 4,517.29 — up from Friday’s close just shy of 3,845. For the Nasdaq Composite, their median estimate was 13,577.30 versus a close at 10,497.86 on Friday. Given a dearth of major market-moving news between now and year-end, “conditions are definitely ripe for a rally right now that could coincide with what we typically experience at this time of the year,” said Keith Buchanan, senior portfolio manager at GLOBALT Investments in Atlanta, which oversees $2.5 billion. “With recession risks looming, sentiment has been pretty beaten down and there’s pessimism in the markets. When that’s the case, it can typically set up a bounce of sorts.” GLOBALT remains somewhat conservative in its positions, while waiting for opportunities to pivot to a more aggressive stance, Buchanan said via phone. Meanwhile, market participants are waiting for what he calls a “blue-skies” scenario, in which inflation eases further in 2023 and the Fed engineers a soft landing by slowing the economy without throwing millions of people out of work. “A lack of a Santa Claus rally would set the tone early in 2023 of a market needing some or any optimism in order to rally in the face of what a lot of economists see coming: a recession,” he said. Alternatively, a Santa Claus rally that materializes “wouldn’t necessarily mean 2023 will be a bounceback year, but might help the rest of January.”
The economic calendar is light in the holiday-shortened week ahead. The stock market is closed on Monday in observance of Christmas Day, which falls on Sunday, and is shut again on Jan. 2 in observance of the New Year’s Day holiday. On Tuesday, November data on trade in goods is due, along with October’s S&P Case-Shiller U.S. home price index and FHFA U.S. home price index. Wednesday brings the pending home sales index for November. On Thursday, weekly initial jobless claims are released, followed the next day by the Chicago purchasing managers index for December.
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Live Long and Prosper....
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Post by xray on Dec 31, 2022 19:46:02 GMT
Home Markets Market Snapshot Market Snapshot U.S. stocks fall on last trading day of 2022, booking monthly losses and worst year since 2008 Last Updated: Dec. 31, 2022 at 8:47 a.m. ET First Published: Dec. 30, 2022 at 5:52 a.m. ET By Christine IdzelisFollow and Joseph AdinolfiFollow
Treasury yields jumped in 2022, booking their biggest annual increases since at least the 1970s. U.S. stocks ended lower Friday, booking their worst annual losses since 2008, as tax-loss harvesting along with anxieties about the outlook for corporate profits and the U.S. consumer took their toll.
How stock indexes traded
The Dow Jones Industrial Average DJIA, -0.22% slipped 73.55 points, or 0.2%, to 33,147.25. The S&P 500 SPX, -0.25% shed 9.78 points, or 0.3%, to 3,839.50. The Nasdaq Composite COMP, -0.11% dipped 11.61 points, or 0.1%, to 10,466.48. For the week, the Dow fell 0.2%, the S&P 500 slipped 0.1% and the Nasdaq slid 0.3%. The S&P 500 dropped for a fourth straight week, its longest losing streak since May, according to Dow Jones Market Data.
All three major benchmarks suffered their worst year since 2008 based on percentage declines. The Dow dropped 8.8% in 2022, while the S&P 500 tumbled 19.4% and the technology-heavy Nasdaq plunged 33.1%.
What drove markets
U.S. stocks fell Friday, closing out the last trading session of 2022 with weekly and monthly losses. Markets will be closed Monday in observance of the New Year’s Day holiday, which falls on Sunday. Stocks and bonds have been crushed this year as the Federal Reserve raised its benchmark interest rate more aggressively than many had expected as it sought to crush the worst inflation in four decades. The S&P 500 ended 2022 with a loss of 19.4%, its worst annual performance since 2008 as the index snapped a three-year win streak, according to Dow Jones Market Data. “Investors have been on edge,” said Mark Heppenstall, chief investment officer at Penn Mutual Asset Management, in a phone interview Friday. “It seems as though the ability to drive down prices is probably a bit easier given just how crummy the year’s been.” Stock indexes have slumped in recent weeks as hopes for a Fed policy pivot faded after the central bank in December signaled that it would likely wait until 2024 to cut interest rates.
On the final day of the trading year, markets were also being hit by selling to lock in losses that can be written off of tax bills, a practice known as tax-loss harvesting, according to Kim Forrest, chief investment officer at Bokeh Capital Partners. An uncertain outlook for 2023 was also taking its toll, as investors fretted about the strength of corporate profits, the economy and the U.S. consumer with fourth-quarter earnings season looming early next year, Forrest said. “I think the Fed, and then earnings in the middle of January — those are going to set the tone for the next six months. Until then, it’s anybody’s guess,” she added.
Flash Sale
MarketWatch on Multiple devices The U.S. central bank has raised its benchmark rate by more than four percentage points since the beginning of the year, driving borrowing costs to their highest levels since 2007. The timing of the Fed’s first interest rate cut will likely have a major impact on markets, according to Forrest, but the outlook remains uncertain, even as the Fed has tried to signal that it plans to keep rates higher for longer.
On the economic data front, the Chicago PMI for December, the last major data release of the year, came in stronger than expected, climbing to 44.9 from 37.2 a month prior. Readings below 50 indicate contraction territory. Next year, “we’re more likely to shift towards fears around economic growth as opposed to inflation,” said Heppenstall. “I think the decline in growth will eventually lead to a more meaningful decline in inflation.” Eric Sterner, CIO of Apollon Wealth Management, said in a phone interview Friday that he’s expecting the U.S. could fall into a recession next year and that the stock market could see a new bottom as companies potentially revise their earnings lower. “I think earnings expectations for 2023 are still too high,” he said.
The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite booked modest weekly declines, adding to their December losses. For the month, the Dow fell 4.2%, while the S&P 500 dropped 5.9% and the Nasdaq sank 8.7%, FactSet data show.
As for bonds, the U.S. Treasury market was set to record its worst year since at least the 1970s. The yield on the 10-year Treasury note TMUBMUSD10Y, 3.879% has jumped 2.330 percentage points this year to 3.826%, its largest annual gain on record based on data going back to 1977, according to Dow Jones Market Data. Two-year Treasury yields TMUBMUSD02Y, 4.423% soared 3.669 percentage points in 2022 to 4.399%, while the 30-year yield TMUBMUSD30Y, 3.971% jumped 2.046 percentage points to end the year at 3.934%. That marked the largest calendar-year increases ever for each based on data going back to 1973, according to Dow Jones Market Data.
Outside the U.S., European stocks capped off their biggest percentage drop for a calendar year since 2018, with the Stoxx Europe 600 SXXP, -1.27%, an index of euro-denominated shares, falling 12.9%, according to Dow Jones Market Data.
Companies in focus
Tesla Inc. TSLA, +1.12% shares rose 1.1% after their worst run of losses in more than four years Southwest Airlines LUV, +0.87% shares gained 0.9% as the company said it expected its holiday travel fiasco to impact fourth-quarter profits Las Vegas Sands Corp. LVS, +2.10% was among the best performers in the S&P 500 index on Friday, with its shares ending 2.1% higher, as it confirmed renewed gaming concessions in Macau.
—Steve Goldstein contributed to this article.
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Live Long and Prosper....
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Post by xray on Jan 16, 2023 18:54:11 GMT
Markets "UP" but some securities/CEF's are currently not performing to usual patterns:
Examples:
ECC EFC FSK USDP
If securities or CEF's are not performing to this point in time (early 2023), extra effort to re-analyze is required IMHO. Appropriate action like removal from portfolio or reducing any major shares might be required....
Live Long and Prosper....
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Post by xray on Feb 24, 2023 17:47:35 GMT
Selling becoming a "fad" currently as inflation continues big time and Fed will be increasing interest rates (probably until the end of the year) with the market responding on their downward trend. With that said....
Observations (based on my sole data): 1... Portfolio's should currently be 35-65% continually invested 2... Any continual "GROWING" MktPrc declines in portfolio's should be followed by selling some shares or getting out of current position 3... Take advantage of CEF's that are "RISING" in this market (Best Managers will be taking advantage of the current declining market for "KEY" buying opportunities driving MktPrc's higher with the NAV increases with others selling previous positions and raising cash driving the NAV down) 4... Keep a good CASH position for later buying opportunities if/when the market turns around 5... Watch carefully the the CEF USA (follows NasDaq and S&P) as it appears smart investors are buying to the NAV (examples: NAV vs MktPrc: 2/19 - 6.23, 6.23 - currently 6.14, 6.14) 6 ... Examples (for study and further analysis) of some currently rising (or basically stable) NAV's (in value - tending to buck the downward trend) CEF's (6-19 to 6/23): AVK, EDF, EDI, FCT, GLO, GLQ, HGLB (if it goes to open ending fund it will have to pay the NAV price) HQH, HQL, KYN, OPP, VGI, RSF, RVT (considered bargain price if/when MktPrc in the 13's)
Sole opinion for what it is worth....
Live Long and Prosper
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Post by retiredat48 on Feb 24, 2023 17:50:18 GMT
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Post by marpro on Feb 24, 2023 18:22:40 GMT
xrayYou should drop by often. Anyway, glad to see your post.
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Post by xray on Mar 11, 2023 20:02:34 GMT
uncleharley, richardsok, yogibearbull, steelpony10, rhythmmethod, Fearchar, retiredat48, steadyeddy, My Previous Post: Selling becoming a "fad" currently as inflation continues big time and Fed will be increasing interest rates (probably until the end of the year) with the market responding on their downward trend. With that said.... Observations (based on my sole data): 1... Portfolio's should currently be 35-65% continually invested 2... Any continual "GROWING" MktPrc declines in portfolio's should be followed by selling some shares or getting out of current position 3... Take advantage of CEF's that are "RISING" in this market (Best Managers will be taking advantage of the current declining market for "KEY" buying opportunities driving MktPrc's higher with the NAV increases with others selling previous positions and raising cash driving the NAV down) 4... Keep a good CASH position for later buying opportunities if/when the market turns around 5... Watch carefully the the CEF USA (follows NasDaq and S&P) as it appears smart investors are buying to the NAV (examples: NAV vs MktPrc: 2/19 - 6.23, 6.23 - currently 6.14, 6.14) 6 ... Examples (for study and further analysis) of some currently rising (or basically stable) NAV's (in value - tending to buck the downward trend) CEF's (6-19 to 6/23): AVK, EDF, EDI, FCT, GLO, GLQ, HGLB (if it goes to open ending fund it will have to pay the NAV price) HQH, HQL, KYN, OPP, VGI, RSF, RVT (considered bargain price if/when MktPrc in the 13's) Sole opinion for what it is worth.... ---------- Buying into a "SELLERS Market" (2008 repeating with the banks that appear in trouble (insured deposits only covered to $250,000), 31 trillion dollar debt and will be increasing, with investors panicking (because of the "UNKNOWNS" is not a smart thing to do currently as everything will be going down in the short term.... "OBSERVE" your holdings "EACH DAY" against "INSIDER BUYING/SELLING activity. Sell any selling, consider buying if/when insiders are currently buying and current analysis warrants it....Observations (based on my current data): 1... Portfolio's should currently be 15-25% continually invested 2... Any continual "GROWING" MktPrc "declines" in portfolio's should be followed by selling some shares or getting out of current position3... Take advantage of CEF's that will be " RISING" (eventually) in " FUTURE TURNAROUND" markets (Best Managers will be taking advantage of the current declining market for " KEY" buying opportunities driving MktPrc's higher with the NAV increases with others selling previous positions and raising cash driving the NAV down) 4... Keep a good CASH position for later buying opportunities if/when the market turns around 5... Watch carefully the the CEF USA (follows NasDaq and S&P) as it appears smart investors are buying to the NAV (examples: NAV vs MktPrc: 2/19 - 6.23, 6.23 - currently 6.14, 6.14). Use 12/31/2022 for charts to observe what is happening in 2023.... 6 ... Examples (for study and further "continual" analysis) of some basically stable) NAV's (in value - tending to buck the downward trend) CEF's (6-19 to 6/23): AVK, EDF, EDI, FCT, GLO, GLQ, HGLB (if it goes to open ending fund it will have to pay the NAV price) HQH, HQL, KYN, OPP, VGI, RSF, RVT (considered a bargain price if/when MktPrc in the 13's) Sole opinion for what it is worth.... --------------- Reuters Yellen warns U.S. House members of 'economic collapse' from defaultU.S. House Ways and Means Committee hearing on President Joe Biden's fiscal year 2024 Budget Request in Washington David Lawder Fri, March 10, 2023, 9:09 AM EST By David Lawder WASHINGTON (Reuters) -U.S. Treasury Secretary Janet Yellen urged members of the U.S. House of Representatives on Friday to raise the federal debt ceiling without conditions, warning that a default on U.S. debt would cause "economic and financial collapse."Yellen, in budget testimony before the Republican-controlled House Ways and Means Committee, said that failure to increase the $31.4 trillion borrowing cap would threaten the economic progress that the U.S. has made since the COVID-19 pandemic. "In my assessment - and that of economists across the board - a default on our debt would trigger an economic and financial catastrophe," Yellen said. "I urge all members of Congress to come together to address the debt limit – without conditions and without waiting until the last minute." Asked about the possibility of prioritizing payments to cover U.S. debt payments first from available cash resources, as some Republicans have suggested, Yellen said that was "not a solution to the debt ceiling issue." "Prioritization is simply not paying all of the government's bills when they come due. That is something we have never done since 1789. And that really is just default by another name."The only option to avoid a crushing spike in interest rates following a default is for the U.S. to commit to pay its bills on time, she said. " If we don't do that and think that there's some shortcut around it that will avoid economic chaos, we're kidding ourselves because not paying the government's bills will produce economic and financial collapse," she said. Some Republicans have demanded spending concessions from U.S. President Joe Biden in exchange for raising the debt ceiling. Yellen has refused to negotiate over raising the debt ceiling, arguing that it is about making good on Congress' past spending decisions.----------------------------- Comment: Many investors have moved to the sidelines and will probably observe the next 7-10 day period. CEF and Mutual Fund managers will probably sell a "PERCENTAGE" of their portfolio's to raise " CASH" for future buying driving the market down further.... One single opinion of the many I am sure Live Long and Prosper
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Post by xray on Apr 12, 2023 15:22:57 GMT
retiredat48, marpro, ---------- Bloomberg (Bloomberg) -- Bank of America Corp. clients sold US equities of all sizes last week, pulling roughly $2.3 billion despite the relative quiet in the stock market. That was the second consecutive week of outflows, BofA strategists led by Jill Carey Hall wrote in a note Tuesday. The analysts didn’t specify the reasons for the withdrawal, which was evident across all client groups. Selling was pronounced among institutional, retail and hedge-fund clients. The outflows come as uncertainty brews about the staying power of this year’s rally in the S&P 500. Conviction among traders has been missing lately, with the gauge posting its sixth straight day of moves less than 0.6% in either direction on Tuesday — the longest stretch of stasis since 2021. Following the always eagerly awaited Friday’s jobs report, investors have been bracing for Wednesday’s inflation print and the start of the first-quarter earnings season, which is expected to post the biggest contraction since the onset of the pandemic, according to data compiled by Bloomberg. BofA’s clients yanked $451 million from real-estate stocks last week — the largest withdrawal since July 2021. On the flip side, communication services and staples were the only two sectors to see inflows. ---------- (Bloomberg) -- The largest US banks are about to reveal how they fared as customer deposits came under siege in the first quarter. Deposits at JPMorgan Chase & Co., Wells Fargo & Co. and Bank of America Corp. are expected to have tumbled $521 billion from a year earlier, the biggest drop in a decade, according to analysts’ estimates. The decline — which includes a $61 billion slide in just the first quarter — comes as a late influx of cash following a crisis at regional lenders failed to offset the steady drain of customers to products offering higher rates. “By far the biggest issue for the banks is around deposits, both for the quarter and for March,” Wells Fargo & Co. analyst Mike Mayo said in an interview. “Non-answers are a failing grade for this take home exam.” Western Alliance Bancorp learned that lesson the hard way last week, when it released updated financial information that left out data on deposit levels. Shareholders sent the Phoenix-based firm’s stock tumbling, until it released deposit data later in the day that was better than some analysts had feared. For smaller competitors like Western Alliance, the problem is twofold: Their customers also want more for their money, and the recent collapse of three regional lenders has left consumers jittery, prompting them to yank their cash and store it in larger banks instead. The turmoil has also weighed on bank stocks. The KBW Bank Index is down 19% this year, and lost 25% in March alone. Regional banks were the biggest losers for the period, with First Republic Bank down 89%. The coming first-quarter disclosures from the big banks could intensify concerns about deposit-mix and, should lenders miss expectations, set off more inquiries about the health and future of the industry.Fight for Funds Lenders began seeing deposits dwindling as early as the start of last year, as historic levels of inflation ate away at consumers’ savings. Still, they were largely able to keep a lid on deposit costs, with many banks still paying just a few basis points in interest on basic checking accounts. That’s changed. Amid the cacophony of headlines about the Federal Reserve’s aggressive push to raise interest rates, consumers and companies have flocked to money market funds, sending the total amount in these funds to a record $5.2 trillion from $4.59 trillion a year ago. That means deposit betas, the percentage of change in market rates that banks pass on to their customers, will be in focus in the coming days as they have lagged behind in recent quarters. “It had already been a fiercely competitive environment for deposit gathering, and the recent bank failures may turn the deposit knife fight into a metaphorical gun fight,” Wedbush Securities analysts David Chiaverini and Brian Violino wrote in a note. While raising rates could force banks to cough up a few more basis points to savers, they are also handing them record amounts of net interest income. For the biggest banks, that’s boosting net interest margins, a key gauge of profitability that measures the difference between what a bank pays depositors and what it collects on loans. Still, analysts worry that as banks are forced to spend more on depositors, they’ll see those margins shrink. “ April earnings will be about the outlook, not the results,” Betsy Graseck, an analyst at Morgan Stanley, said in a note to clients in which she lowered the outlook for banks’ profits in 2023 and 2024 “to reflect accelerating deposit betas driving down NIMs.”Liability Management The effects of rising interest rates will be felt elsewhere in earnings as well. Back when banks were sitting on record levels of deposits, many lenders chose to invest that excess cash in safe assets — such as Treasuries and mortgage-backed securities — to get a little bit of yield while they waited for loan demand to materialize. As the Fed’s push to raise rates got underway, it caused the value of those assets to fall. Now, lenders will be scrutinized for those earlier decisions on how and where they invested their excess cash. “This is a nightmare on ALM-street — asset liability management,” Wells Fargo’s Mayo said. To be sure, most US banks will hold these assets to maturity, so the losses don’t materialize unless they have to sell. Plus, the collapse of three regional lenders has sparked a rally in Treasuries, which should curb some of the paper losses. That’s left analysts and investors looking for some kind of update on how these securities portfolios are performing and whether the recent upheaval has changed banks’ approach to investing. “Investors and stakeholders are going to look at the makeup of a bank’s balance sheet and held-to-maturity assets, which many didn’t pay much attention to until the last few weeks,” John Walsh, leader of EY Americas’ banking and capital markets operation, said in an interview. Trading Troubles Despite the recent volatility, banks have still warned that trading revenue is likely to show a drop for the first three months of the year compared to a year earlier, when Russia’s invasion of Ukraine roiled markets and spurred client activity. For the five biggest Wall Street banks - a group that includes JPMorgan, Bank of America, Citigroup Inc., Goldman Sachs Group Inc. and Morgan Stanley — total trading revenue is expected to slump $3.2 billion, or 10%, to $29.9 billion. Those firms have also said the recent market upheaval has contributed to extending the slowdown in dealmaking and capital-markets businesses. Across the five biggest companies, such fees are expected to drop a whopping 25% from last year’s already low levels.“A lot of this depends on how the geopolitical and macro environment kind of plays out,” Citigroup Chief Financial Officer Mark Mason warned last month. “The trajectory of the rebound is really going to depend on that to some extent.” ---------- Comments: 1... April 15th is normally when investors/traders withdraw from the market (take their profits) and don't return until after Labor Day. They may be leaving early looking at my current data.... 2... Current data shows a "basic" stagnate market for investors while day traders have been doing rather well.... 3... Next normal dividend cycle is "June" so may income investors will have a lot of their money on the sidelines.... 4... My (sole opinion of course) analysis data indicates that a general withdrawal from the market is taking place. I took notice that Warren Buffet has taken a 7% position in Japan. Some money may be following him currently.... 5... Looking at the insiders, nothing is happening (no buys/sells) and the market appears quiet (maybe waiting for another shoe to drop, or not).... Live Long and Prosper....
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Post by richardsok on Apr 12, 2023 17:12:06 GMT
Thanks for the post, x.
I agree, there seems a dearth of insider buys. The only two recent purchases of any size I see are FTCI and NOGN, of which I know nothing. Overall market seems directionless, not overall bearish: SPY is almost at the precise point it was two years ago. Gold has been rewarding its holders, though. If it behaves true to past form it will turn and punish the faithful, so I am watching my PMs daily.
FWIW, Merrill likes healthcare and energy. A lot of preferred ETFs seem to have found support; possibly buy oppty here with bank fears still rife.. Am holding FFC, FLC and PFFA in addition to couple of individuals for the yields.
As I am too late to grab hold of CANE, I own some BCI (non K-1 commodities). Waiting to see if Pimco CEF coverage numbers improve. Numbers should be out next week.
Good luck out there.
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Post by retiredat48 on Apr 13, 2023 4:22:13 GMT
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Post by xray on Apr 15, 2023 18:05:32 GMT
retiredat48, marpro, richardsok, Business Insider JPMorgan boss Jamie Dimon says storm clouds are gathering for the US economy as financial conditions tighten Morgan Chittum Fri, April 14, 2023, 6:57 PM EDT Jamie Dimon, JPMorgan Jamie DimonChip Somodevilla/Getty Images JPMorgan's CEO said he sees trouble ahead for the US economy. Banking sector woes, a hawkish Fed, and Russia's invasion of Ukraine make for an uncertain macro forecast. The investment bank posted record revenue for its first fiscal quarter on the back of higher interest rates. JPMorgan CEO Jamie Dimon warned investors of looming "storm clouds" ahead for the US economy in the firm's earnings report on Friday. The bank posted strong results, with record revenue of $38.3 billion handily beating expectations on the back of higher interest income thanks to the US central bank's aggressive monetary tightening campaign. "The U.S. economy continues to be on generally healthy footings —consumers are still spending and have strong balance sheets, and businesses are in good shape," Dimon said. "However, the storm clouds that we have been monitoring for the past year remain on the horizon, and the banking industry turmoil adds to these risks."Dimon's warning on the economy doesn't necessarily mean tough times ahead for the firm, as trading desks often thrive on heightened volatility, but the head of the largest US bank is still feeling nervous about a few big headwinds. Banking sector woes, a hawkish Fed, uncertain relations with China, and Russia's invasion of Ukraine all contribute to an uncertain macro forecast, the JPMorgan chairman said."The banking situation is distinct from 2008 as it has involved far fewer financial players and fewer issues that need to be resolved, but financial conditions will likely tighten as lenders become more conservative, and we do not know if this will slow consumer spending," Dimon said. He added: "We also continue to monitor for potentially higher inflation for longer (and thus higher interest rates), the inflationary impact of continued fiscal stimulus, the unprecedented quantitative tightening, and geopolitical tensions including relations with China and the unpredictable war in Ukraine." ---------- Bloomberg JPMorgan, Citigroup and Wells Fargo Reap Gains From Rates Roiling Small Banks Charting the Global Economy: IMF Trims 2023 Growth ProjectionsKatherine Doherty Fri, April 14, 2023, 12:54 PM EDT (Bloomberg) -- JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. are reeling in windfalls from higher interest rates that upended smaller lenders last month. The three giant US banks, which kicked off the industry’s quarterly earnings reports Friday, are each finding ways to benefit from rate hikes that contributed to the collapse of Silicon Valley Bank in March and left customers at regional lenders racing to move uninsured deposits to safe havens.JPMorgan posted a surprise 2% increase in deposits despite what analysts predicted will be a broader migration of savers to higher-yielding investments. Citigroup boasted one of its best fixed-income trading hauls in a decade as clients reacted to changing rates. And all three firms said income from lending jumped from a year earlier after Federal Reserve hikes.The benefits reported by the nation’s largest banks contrast with the experience at regional lenders that saw a flood of withdrawals and precipitous stock drops last month, as shareholders worried that rising rates are eroding the value of the banks’ assets. Still, Friday’s reports offered smaller firms a few silver linings, showing that even as big banks start to pay depositors more, they aren’t upping the competition yet. “We saw significant new account-opening activity and meaningful deposit and money-market fund inflows,” JPMorgan Chief Financial Officer Jeremy Barnum said on a conference call to discuss results. JPMorgan — the nation’s largest lender — rose 7% as of 12:50 p.m. in New York trading, as Citigroup gained 4.2%. Wells Fargo was little changed. ‘Sticky’ DebateFed rate hikes aimed at taming inflation spelled pain for some smaller, regional banks. Many lenders plowed the extra cash they got from depositors in the pandemic into safe assets — such as Treasuries and mortgage-backed securities — to get a little bit of yield.But the Fed’s moves caused the value of those assets to fall. And when customers at firms such as SVB tapped into their savings, the banks were forced to sell assets at losses to keep up with demands for cash. Big banks, which were largely immune to those pressures and weren’t forced to sell assets at a discount, said Friday that the higher rates are fueling revenue from lending operations. First-quarter net interest income surged 49% at JPMorgan, prompting the bank to boost its forecast for such revenue to $81 billion this year. That compares with a January prediction of $73 billion. At Wells Fargo, that revenue line jumped 45%, and at Citigroup 23%, compared with a year earlier. And Citigroup’s fixed-income traders unexpectedly boosted revenue 4% — raking in $4.5 billion to help the bank defy analyst predictions that company wide profit would drop.One mystery is how long the influx of deposits may last. Citigroup believes inflows from corporations and midsize companies amid the financial industry’s recent turmoil “are quite sticky,” CFO Mark Mason said on a conference call Monday. Others weren’t so sure. “We’re being realistic about the stickiness,” JPMorgan’s Barnum said. “By definition, these are somewhat flighty deposits because they just came into us. So it’s prudent and appropriate for us to assume that they won’t be particularly stable.” Meanwhile, BlackRock Inc. Chief Executive Officer Larry Fink said Friday that deposits will keep bleeding out of banks amid concerns about regional lenders. “ More and more deposits are leaving and they’re going into ETFs and into any form of cash and money market funds,” he said. “This type of dislocation is just going to create more and more opportunity for us.” Big banks are having to pay a bit more interest to keep their deposits from leaving for alternatives, such as money market funds. As that pressure rises, it can cut into their profits. FDIC AssessmentFor now, the earnings jolt may embolden regulators to force big banks to bear the brunt of costs stemming from weaker lenders’ failures linked to rising rates. The Federal Deposit Insurance Corp. has estimated its main fund will spend $23 billion following the collapses of Silicon Valley Bank and Signature Bank. The agency is considering steering a larger-than-usual portion of that burden to big banks as it crafts a special assessment for the industry, people with knowledge of the matter said late last month. Big banks already pay more than smaller lenders, Mason said of assessments. “I don’t really want to speculate on how this will play out for this current sector turmoil,” he said. The resiliency of the industry’s largest firms may also lift some of the pressure on the Fed to temper its battle against inflation. The results are “good for banks, bad for the broader market,” said Opimas CEO Octavio Marenzi. Hopes the Fed will reverse interest rate hikes later this year amid banking issues have now “evaporated,” he said. --With assistance from Jenny Surane, Hannah Levitt, Max Reyes and Felice Maranz. ---------- Business Insider Markets are growing nervous over the prospect of a US default as debt ceiling deadline looms Jennifer Sor Fri, April 14, 2023, 10:56 PM EDT Investors are getting nervous that the US could default on its debt. Demand for debt insurance has skyrocketed, while demand for US Treasury bills has fallen off, the FT reported. The US could fail to meet its obligations as soon as July this year, the Congressional Budget Office warned. Investors appear to be growing more anxious about the standoff on raising the US debt ceiling as a deadline looms before the US possibly defaults this summer. Five-year credit default swaps on US government debt – one of the most traded forms of debt insurance– have notched their highest price since 2012, the Financial Times reported, reflecting investors' desire to protect themselves against a potential default of debt. Meanwhile, the demand for US Treasury bills has fallen off, a sign investors are leaning away from government-issued debt as the impasse over raising the debt ceiling drags on. Prices for Treasury bills that expire in late summer – around the time a debt default could potentially happen – have fallen below those of other, riskier short-term debt instruments, the FT said. Though experts say it is unlikely, a debt default would be potentially catastrophic for markets, with US Treasury Secretary Janet Yellen calling such an event an "unthinkable." Markets could easily be upended by liquidity problems as bond holders, businesses, and foreign governments sell their holdings, which could spark a financial crisis, she warned. But time is running out for policymakers, who are holding out as they spar over possible spending cuts as a condition for raising the debt ceiling. The X-date – when the US will fail to meet its debt obligations – could fall between July and September of 2023, according to a projection from the Congressional Budget Office.In the meantime, the US Treasury has stepped in with "extraordinary measures" to make sure the government can continue to meet its obligations, stalling an immediate crisis from hitting the economy. House Republicans are reportedly starting to create a debt ceiling package and could be close striking a deal with Democrats, but the proposal includes hefty spending cuts, Punchbowl News reported, including banning items on Democrats' agenda like student loan forgiveness. Comment: April 15 has arrived and many investors and traders are now out of the current market. It is reasonable to assume (single opinion) that many income oriented investors have cut back their portfolio's substantially while we observe (and wait patiently) what is currently going on (going forward) and how to respond rationally to the events unfolding in front of us.... Live Long and Prosper....
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Post by xray on Apr 21, 2023 15:05:40 GMT
retiredat48, marpro, richardsok, Business Insider The credit crunch is here and it could cripple the economy. Here's what Larry Summers, Nouriel Roubini and 7 other experts have said on the emerging threat.Zinya Salfiti Thu, April 20, 2023, 1:45 PM EDT Money under lock The banking turmoil has spawned a new worry for investors: a credit slump that's threatening the economy. Latest bank lending data suggests the credit crunch "has already started," according to Morgan Stanley strategists. Here's a selection of recent warnings on the emerging threat from experts including Larry Summers, David Solomon, Mike Wilson, Nouriel Roubini and Bill Gross.The worst banking turmoil since the 2008 financial crisis appears to have calmed somewhat but it's spawned a new worry for investors: a credit slump that's threatening to cripple the economy. Banks are turning increasingly risk-averse and less willing to lend as they face massive deposit outflows and the prospect of increased regulatory scrutiny amid the sectoral jitters - and that's crimping the flow of credit into the economy. Recent data showed the steepest lending drop on record over the last two weeks, which suggests a credit crunch has already started, according to Morgan Stanley.Many big Wall Street names and other experts are now concerned about the impact of the credit squeeze on the US economy. Former Treasury Secretary Larry Summers, Morgan Stanley's Mike Wilson, "Dr. Doom" economist Nouriel Roubini and billionaire investor Bill Gross are among those who have warned about the emerging threat. To be sure, not everyone sees it that way. Apollo Asset Management's Jim Zelter told Bloomberg "it's not a credit crunch" but rather a "transition period" as markets face higher debt costs. Still, much of the latest economic commentary from top voices is ringing a distinct note of caution. Below are some of the most recent warnings on the credit slump and related economic risks from high-profile investors, analysts and other experts. Mike Wilson, Morgan Stanley's top stock strategist "The data suggest a credit crunch has started," Wilson said in a note published over the weekend, referring to recent figures that showed an unprecedented decline in bank lending. He added that $1 trillion in deposits had been withdrawn from US banks since the Federal Reserve began raising rates a year ago.While equity markets have been relatively stable after the initial impact of last month's bank failures, that should not be taken as a sign that everything is fine, but rather as an indicator that stocks are at risk of a sudden drop, according to Wilson. Larry Summers, former Treasury Secretary
"The chance that a recession will have begun this year in the US over the next 12 months is probably about 70 percent," Summers said. "As I put together the lags associated with monetary policy, the credit crunch risks, the need for continuing action around inflation, the risk of geo-political or other shocks affecting commodities, 70% would be the range that I would be in." "I think that puts me at the pessimistic end of the spectrum of opinion," the economist added. 'Dr. Doom' economist Nouriel Roubini
US regional lenders are bearing the brunt of the recent banking turmoil, and that potentially spells further trouble for the economy, according to Roubini. "I think the problems are with the regionals. But the regional banks are significant lenders to households for mortgages, for small businesses, for SMEs, for commercial real estate. And therefore we're going to have a credit crunch," the veteran economist said in a recent Fox Business interview. "That credit crunch is going to make the likelihood of a recession — a hard landing — much greater than before. So we're facing a serious credit crunch for a good chunk of the US banking system," he said. 'Bond King' Bill Gross, Pimco cofounder "Fed's Williams dismisses link between rate hikes and bank stress !!!!" Gross tweeted last week, after New York Fed President John Williams said he didn't believe rising rates were responsible for the lender collapses. "Rather unbelievable," Gross continued. "450 basis points and more rate hikes in 12 months time are bound to affect balance sheets that use proper accounting — duration and credit as well." Jeffrey Gundlach, DoubleLine Capital CEO"The NFIB Small Business Credit Conditions Index is plummeting (not surprisingly given recent bank failures) and it is now in the same place it was in late 2007/early 2008," the DoubleLine Capital CEO tweeted. David Solomon, Goldman Sachs CEO"The recent events in the banking sector are lowering growth expectations, and there is a higher risk of a credit contraction given the environment is limiting banks' appetite to extend credit. We continue to be cautious about the economic outlook," the Goldman Sachs chief said on the bank's first-quarter earnings call on Tuesday. Daniele Antonucci, chief economist at Quintet"The legacy of the bout of financial instability and banking-sector stresses is likely to be tighter credit conditions. We expect more stringent lending standards going forward," Antonucci told Insider. "Whether this qualifies as a full-blown 'credit crunch' remains to be seen. Even though we'd describe it more as a 'credit squeeze' at this juncture, there's a risk that, if left unchecked, it could morph into something broader." Preston Caldwell, chief US economist at Morningstar Research"The credit crunch complicates the Fed's job because it creates uncertainty about the sensitivity of the economy to changes in monetary policy," Caldwell told Insider. Salman Ahmed, Fidelity's global head of macro and strategic asset allocation"As long as money market yields remain substantially higher than banking system deposit rates, deposit flight from smaller banks to larger banks or out of the banking system entirely might continue fuelling further tightening or stress in the credit channel," the Fidelity strategists said. ---------- Live Long and Prosper....
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Post by retiredat48 on Apr 21, 2023 18:39:48 GMT
thanks, xray
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Post by xray on Apr 23, 2023 0:24:51 GMT
uncleharley, richardsok, yogibearbull, steelpony10, rhythmmethod, Fearchar, retiredat48, steadyeddy,Bloomberg Day Traders Lose $358,000 Per Day Gambling on Zero-Day OptionsLu Wang Fri, April 21, 2023, 9:45 AM EDT (Bloomberg) -- Day traders are paying a price for their newfound love affair with one of the hottest trades in the equity market. Rushing to join the trading frenzy in options with ultra-short lifespans, known as 0DTE for zero-days to expiration, small-time investors find themselves struggling to make it work. A fresh study from researchers at the University of Muenster in Germany shows the crowd may have lost $358,000 a day since May 2022, when it became possible to trade expiring contracts every day. The record is alarming, but probably not a huge surprise. By one estimate, amateur investors took a billion-dollar bath dabbling in stock options during the pandemic boom. The new game of 0DTE is more challenging in many ways, among them the tight timeframe in which wagers need to work out. The paper, titled Retail Traders Love 0DTE Options... But Should They?, is a reminder to investors and regulators alike that the latest investment innovations may not always be suitable for everyone. “We are seeing the study as a cautionary tale,” Heiner Beckmeyer, who co-authored the study along with Nicole Branger and Leander Gayda, said in an interview. “These 0DTE options have huge leverage. They’re a one-or-zero bet, so you have the opportunity to make a lot of money, but you also have the opportunity to lose a lot. And that’s what we find in the paper that on average, it seems to be to the detriment of these retail investors.” Zero-day options first garnered mainstream attention when retail investors embraced them as a cheap way of gambling during the meme-stock era in 2021. While the current craze involves indexes like the S&P 500 and has been driven by professional traders, 0DTE’s high-risk, high-reward potential — and potentially quick payoff — appeals profoundly to amateurs too. By the researchers’ estimate, the retail crowd’s market share in 0DTE trading volume has expanded, topping 6% in 2022 versus 4% in the prior year. Among all of the cohort’s trades in S&P 500 options, such flashy contracts make up more than 75% of the total. For all the engagement, however, the wagers largely failed to pay off. While they did fairly well writing options, decisions to buy them suffered badly. All told, day traders lost $20 million as a result of poor positioning in about two years through February 2023. The bill climbed to more than $70 million when the cost of doing business with market makers was factored in. To be sure, it’s not easy to make money in a new instrument that even Wall Street pros don’t seem to fully understand. To have an edge, one has to be extremely vigilant and nimble — and probably lucky. A JPMorgan Chase & Co. analysis showed that while buying or selling 0DTE options tended to be profitable in the first 10 minutes of trading, two-thirds of the gains came in the first minute. In the study by the University of Muenster researchers, they tracked all 0DTE transactions that were identified as being initiated by retail, netted them out as orders came in, and tallied a return at the end of each day. They found the day-trader army has lost money on a net basis every month since Cboe Global Markets Inc. added Tuesday and Thursday expiration options for the S&P 500, expanding existing products to cover each weekday. “Their hunger for lottery-like assets leads to large aggregate losses,” the researchers wrote in the paper. “Should daily expirations be rolled out for single equity options, the potential losses retail investors face are amplified manifold.” Cboe didn’t respond to a request for comment. --With assistance from Justina Lee. ---------- Live Long and Prosper....
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Post by xray on Apr 23, 2023 0:42:34 GMT
retiredat48, marpro, richardsok, Bloomberg Investors Are Anxious About the Debt Ceiling. Alexandra Harris Fri, April 21, 2023, 9:00 AM EDT (Bloomberg) -- Investors are little closer to knowing just when the US might default on its debts than a week ago and there are signs that they’re getting more worried about the risks posed by the $31.4 trillion statutory borrowing limit.The yield premiums demanded by investors for securities that are more at-risk for non-payment have increased relative to other maturities. Meanwhile, rates on those that are most assured of avoiding the potential storm — the very shortest securities — have been pushed lower by overflowing demand from buyers. All this after a week that saw the Treasury give some insights into how big its 2022 tax take is likely to be and the introduction of a first-gambit proposal by Republican lawmakers in Congress to get the Washington debt-ceiling conversation going again. Neither of these events did anything to really reduce uncertainty and estimates for when the so-called drop-dead debt will arrive are highly contingent on what happens in the coming days and weeks. Astute observers say that July or August remain most likely, but some also acknowledge that the risk of not making it through June has increased if tax receipts are as lackluster as they are at risk of being. Following are some key metrics to watch to figure out just how jittery investors should be. Bill Curve DislocationsInvestors right now are demanding higher yields on securities that are due to be repaid shortly after the US runs out of borrowing capacity. That’s because the government won’t be able to sell fresh securities and get cash to repay holders. In past episodes, that’s created unusual kinks in the yield curve around the most vulnerable point and there’s evidence of dislocations appearing at present. Without a specific deadline to coalesce around, investors who are able to are shunning to some degree securities in the June to August period, driving yields there higher. The picture is muddied somewhat by uncertainty over the path of Federal Reserve policy rates, but the amping up of angst is unmistakable. Insight From AuctionsAuctions in the past week have provided one of the clearest insights of that dislocation. Demand for Monday’s sale of three-month bills — securities that mature right in the danger zone of July — was so lackluster that the yield they had to offer was the highest since Bill Clinton was president in 2001. A one-month auction on Thursday, by contrast, was snapped up at the lowest yield in half a year, well below much of the existing bill curve. Insuring Against DefaultBeyond T-bills, one key market to watch is what happens in credit default swaps for the US government, which have continued to lurch to new highs in the past week. The Cash PileUltimately, it all comes down to whether the Treasury can stretch out the cash it has on hand right now — and the additional revenue that it will receive over the coming weeks — until some kind of political deal is done. Investors, therefore, are going to be keeping a close eye on how much cash is coming in and going out of the Treasury’s bank account at the Fed. Receipts from the day of the Internal Revenue Service’s main filing deadline, April 18, were somewhat underwhelming and boosted the cash balance by just $108 billion on the day. All eyes, therefore, are going to be on the ongoing trickle from later payers over the coming weeks to see if that’s enough. The key hump to get over is June 15, when a batch of corporate tax payments come due. If the Treasury can make it to that point, it can probably also hold on until June 30 when the the Treasury can implement another batch of extraordinary measures — the accounting gimmicks its been using to avoid breaching the statutory cap. After that, it’s then a question of whether the money lasts until July or August — or even later. But the risk remains — and Wrightson ICAP economist Lou Crandall currently puts it at around 15% — that officials will be on the precipice of running out of cash in June.---------- Live Long and Prosper....
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Post by Fearchar on Apr 23, 2023 12:47:16 GMT
retiredat48 , marpro , richardsok , Bloomberg Investors Are Anxious About the Debt Ceiling. Alexandra Harris Fri, April 21, 2023, 9:00 AM EDT (Bloomberg) -- Insight From AuctionsAuctions in the past week have provided one of the clearest insights of that dislocation. Demand for Monday’s sale of three-month bills — securities that mature right in the danger zone of July — was so lackluster that the yield they had to offer was the highest since Bill Clinton was president in 2001. A one-month auction on Thursday, by contrast, was snapped up at the lowest yield in half a year, well below much of the existing bill curve. Insuring Against DefaultBeyond T-bills, one key market to watch is what happens in credit default swaps for the US government, which have continued to lurch to new highs in the past week. The Cash PileUltimately, it all comes down to whether the Treasury can stretch out the cash it has on hand right now — and the additional revenue that it will receive over the coming weeks — until some kind of political deal is done. Investors, therefore, are going to be keeping a close eye on how much cash is coming in and going out of the Treasury’s bank account at the Fed. Receipts from the day of the Internal Revenue Service’s main filing deadline, April 18, were somewhat underwhelming and boosted the cash balance by just $108 billion on the day. All eyes, therefore, are going to be on the ongoing trickle from later payers over the coming weeks to see if that’s enough. The key hump to get over is June 15, when a batch of corporate tax payments come due. If the Treasury can make it to that point, it can probably also hold on until June 30 when the the Treasury can implement another batch of extraordinary measures — the accounting gimmicks its been using to avoid breaching the statutory cap. After that, it’s then a question of whether the money lasts until July or August — or even later. But the risk remains — and Wrightson ICAP economist Lou Crandall currently puts it at around 15% — that officials will be on the precipice of running out of cash in June.---------- Live Long and Prosper.... Yikes! I was thinking of entering Mondays' auction for 3 month T-Bills. Just need to decide how much to put in. Also planning on comparing the price I get via different brokers as I have reason to suspect that some may be taking a cut. E*Trade Fidelity TD Ameritrade Schwab maybe Vanguard
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Post by yogibearbull on Apr 23, 2023 13:17:27 GMT
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Post by johnsmith on Apr 23, 2023 15:07:08 GMT
I would think for the small investors, it would be perfect to buy in that spot and get some extra money. It’s not like the US will default forever. You will get the money eventually. I wonder what happens to the extra days the govt keeps hold of that money, does interest get accrued until the pay date? Default rates?
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Post by Fearchar on Apr 23, 2023 15:20:59 GMT
Thank-you Yogi; I've gone ahead and placed multiple auction orders for Monday. Went okay with E*Trade, Vanguard, Schwab and Fidelity. Not so good with TDAmeritrade. TDA will eventually merge with Schwab. However, currently they are separate. Maybe it's me or maybe it's them, but the problem at TDA is that there is currently only $7.13 available to trade. However, on April 13th a previous 3Month T-bill matured. The next day April 14th after hours, an order appears that show the majority of proceeds going into SWVXX. I honestly don't recall placing that order and thought that SWVXX was their sweep fund. It's Schwab Value Advantage MM. Current SEC yield 4.76%, which isn't too shabby. So, it appears that Fidelity and Vanguard have respectable MM funds for sweeping cash. Schwab, E*Trade and TDA do not. Another nuance Vanguard reported an indicated yield of 5.133% for the auction while Fidelity reported 4.916%. Schwab did not indicate a yield, but did have some market depth information that I didn't notice with the other brokers. Finally, while this is an auction, the CUSIP is 3 months old. That is this CUSIP was originally a 6 month T-Bill that is being placed into auction again. I guess that's standard practice for 3 month T-Bills.
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Post by yogibearbull on Apr 23, 2023 15:52:30 GMT
Fearchar, some are new Auctions, others reopened ones. It shouldn't matter to retail investors. Bid-ask are meaningless as the Auction as the Treasury will use the highest clearing yield to have its full fill - everybody will get that yield and we will know that around Monday Noon or 1pm.
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