Exchange Traded Fund
The last six months have not run according to anyone’s plan. Who would have thought that equity market structure would yield a best-selling book, after all? As ConvergEx's Nick Colas notes, on the fundamental side of things, interest rates across the developed world are lower, not higher – counter to the consensus view just 180 days ago. Mutual fund investors first bought U.S. equities earlier in the year, then in the last 6 weeks have begun to liquidate in earnest. Exchange Traded Fund investors are buying more fixed income products than those dedicated to U.S. stocks. Large cap stocks are trouncing small caps in terms of performance. And as for volatility – well, Elvis has clearly left the building on that one. So which of these surprises has staying power into the back half of 2014?
For many months we have discussed the massive outperformance that buying the "most shorted" stocks has created. The 'alpha' generated fro buying the weakest balance sheet companies in preference of the stronger has enabled the dash-for-trash strategy (just as we saw yesterday when Tepper unleashed hell) to be the new meme. And so it is, like anything that is popular, ETFTrends reports that ETFis - a turnkey ETF provider - has filed with the SEC to launch an actively managed short squeeze fund...
"Artificial, credit-stained activity will never be more than a fleeting substitute for fundamental demand. And when the artificiality inevitably subsides, what is left is far worse than not having entertained it at the start. That too is a testament against the illicit concept of neutrality. We may all be dead in the long run, but it used to be nice to enjoy the fruits of free economic expansion whilst awaiting the unavoidable."
Remember the legend of the great rotation? Neither do we. But we do know that a Treasury fund inflow of $3.06 billion, the largest since at least 2010 according to Bank of America, coupled with an equity fund outflow of $7.1 billion, means just one thing: the great unrotation is raging. It does beg one question, however, with equity funds dumping in the past week, just who is actually left BTFATH? (Don't worry, that's rhetorical - we all have Kevin Henry and the HFT crew to thank for the ongoing endless manipulation of the rigged market).
Another important caveat to the figures is the ‘elephant in the room’ that is demand from the People’s Bank of China (PBOC). The PBOC does not declare their monetary gold purchases to the IMF or release the data. However, most market participants accept that they have and are quietly buying significant amounts of gold as part of their foreign exchange diversification programme and as part of their strategic goal to position the yuan as a rival global reserve currency ...
RUSSIA TEST FIRES INTERCONTINENTAL BALLISTIC MISSILE: INTERFAX
INTERFAX CITES RUSSIAN DEFENSE OFFICIAL EGOROV ON MISSILE TEST
That should wake things up for the 2nd time in two months. Time to BTFWWIII.
When is marginable collateral not marginable collateral? When it is an ETN, or Exchange Trade Note: the cousin of the Exchange Traded Fund (ETF). The very mutated, and unabashedly evil cousin of the ETF that is. At least such is the view of US brokerage Interactive Brokers " Pursuant to a recent decision by FINRA whereby Exchange Traded Notes (ETNs) will no longer be eligible for Portfolio Margining, these securities, including options having an ETN as an underlying, will be phased out of the program by OCC during the week of May 19, 2014."
With two of Tepper's top six positions being new, and quite massive, calls in either the SPY or QQQ, we would be nervous too...
In this brave new centrally-planned world, where bad is good, very bad is very good, and everything is weather adjusted, Japan's blistering GDP report last night, printing at 5.9% on expectations of 4.3% was "bad" because it means less possibility for a boost in QE pushing futures lower, while the liquidity addicts were giddy with the GDP miss in Europe where everyone except Germany missed (as for the German beat, Goldman's crack theam of economic climatologists, said it was due to the weather), and the Eurozone as a whole came at 0.2%, half the forecast 0.4%, which in turn allowed futures to regain some of the lost ground.
UPDATE: *NYSE REVIEWING TRADES FOR 'AOL,' 'NBR,' 'MPC,' 'LO,' 'CNQ' FROM 3:49:00PM-3:51:00PM ET
By now it is clear to everyone that the market is rigged, manipulated and broken. But this rigged, manipulated and broken? Honestly, we don't know, hence our question: is this now "normal" or are these just the death throes of a "market" busted beyond all repair?
With the very largest and most experienced of hedge fund managers vociferously commenting on the "Truman Show" mirage of the markets, the danger of currently policies (there is no way to tell exactly how it all will end. Badly, we guess), and the need for stock-picking prowess, we thought the following chart might highlight the dawning of the death of an entire substrata of so-called hedge-fund managers (and not just the $0 AUM newsletter publishers) who appear unable to "stockpick" their way out of a Fed-provided paper bag. Since Q4 2010, Long/Short funds are down 6% while the immutable low-cost levered wealth creation policy vehicle of choice for the Fed (the S&P 500) is up almost 50% (dividends aside).
While Jeff Gundlach's against-mainstream-consensus bearish call on the homebuilders (and over-rated housing recovery) will come as little surprise to regular readers of Zero Hedge, we thought the following chart might provide one more simplifying perspective on his call for lower prices in homebuilder stocks...
Are the S&P 500 and VIX right while the Russell and Treasury Rates are Dumb?