Capital One

Frontrunning: October 17

  • Bonds Selloff Spreads on Inflation Concern; Stocks Fall With Oil (BBG)
  • Trump charges U.S. election results being rigged 'at many polling places'  (Reuters)
  • CNN’s Stelter Blames Firebombing of NC Republican Office on Trump's 'Over Heated' Rhetoric (Newsbusters)
  • Britain, France seek EU condemnation of Russia over Syria (Reuters)
  • Inside the Secret Society of Wall Street's Top In-House Lawyers (BBG)

Diversify At Your Own Risk

If one is to hedge with Treasury securities, they must also consider what happens if yields do not decline during a market correction. What if “safe-haven” securities traditionally used for hedging purposes were to lose 5% to 10% or even 20% or more?

"There Is A General Softening In The Consumer's Ability To Pay" - Why Credit Card Companies Are Crashing

On the day in which the government reported modestly stronger than expected retail sales for the month of May, signalling a return to strength for spending and the US consumer - the driving force behind 70% of US GDP - a far more ominous statistic was revealed by credit card company Synchrony Financial, which earlier today announced in a regulatory filing that it expects write-off rates to climb 20 to 30 basis points over the next 12 months, and will increase reserves for soured loans beginning this quarter.

Jamie Dimon Warns "Someone Will Get Hurt In Auto Lending" As Citi Sees No Rebound From Abysmal First Quarter

Jamie Dimon said the market for U.S. automobile lending is “a little stressed” and that he foresees higher losses ahead for some competitors. “Someone will get hurt in auto lending,” but not JPMorgan, Dimon said. Meanwhile, CEO Citigroup Mike Corbat indicated that the company's second-quarter net income will be roughly 25% lower than the same period a year earlier, roughly the same as the abysmal first quarter.

The 4 Key Themes From Q4 Conference Calls

  • Theme 1: US economy appears insulated from global weakness
  • Theme 2: Strong domestic consumer demand persists
  • Theme 3: Managements remain devoted to share repurchases
  • Theme 4: Outlook for China is positive despite recent turmoil

Howard Marks Warns "Investor Behavior Has Entered A Zone Of Imprudence"

"Security prices are not low. I wouldn’t say high, but full. So people are thinking cautiously but they’re acting bullish and they’re behaving in a pro-risk fashion. While investor behavior hasn’t sunk to the depths seen just before the crisis, in many ways I feel it has entered the zone of imprudence... The market is not an accommodating machine. It will not go where you want it to go just because you need it to go there."

Frontrunning: August 12

  • China central bank under pressure to weaken yuan further (Reuters)
  • Currency Rout Goes Global as Jen Sees Risk of 50% Loss on China (BBG)
  • Europe Stocks Fall Most in Two Weeks as China Sparks Growth Fear (BBG)
  • German Yields Drop to Record as China Boosts Bonds Around World (BBG)
  • FT to Japan, Economist to Italy: Agnelli Family Raises Stake in Economist as Pearson Exits (BBG)
  • Goldman Sachs to Give Out ‘Secret Sauce’ on Trading (WSJ)
  • Greece's Preliminary Bailout Deal Faces German Turbulence (BBG)

The 50 Most Illiquid Stocks

One of the strategies that has emerged in the post-squeeze normal is cornering the most illiquid stocks, and pushing them up, or down with relative ease due to the lack of liquidity and/or broad participation. But how does one go about quantifying what are the most illiquid stocks: is it the ones that trade the least on any given day (a double edge sword, because exiting a position would be that much more problematic after pushing the prices to any desired level), or is it simply those where individual trades have the highest price impact? One suggested answer is to look at the equities whose current float is a small fraction of their total outstanding stock.