Tag Archives: rareview macro

Fixed Income, Global Macro Strategy, People Profiles, Strike Price

Risk Takers Cry Out In Terror-A Rareview With Sight Beyond Sight

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Professional Investment Community Cries Out in Agony and They Don’t Yet Know Exactly Why

MarketsMuse Strike Price and Global Macro curators voted the Oct 5 edition of global macro advisory firm Rareview Macro’s Sight Beyond Sight the best read of the week. Yes, its only Monday, but those who follow this newsletter as we do (along with a discrete universe of savvy investment managers and hedge fund traders) have discovered that a certain degree of prescience can be contagious when trade ideas are presented with a pragmatic, transparent and easy to understand thesis.. Below are the lead-in topics and followed by selected excerpts…

  • A Great Disturbance in the Force – Oil, Materials, & Momentum Strategies
  • Portfolio Overlay – Two Inexpensive Ways to Add Downside Convexity
  • New Trade – Short 2-Year US Treasuries via Put Options

For those of you who still have to make up your mind on whether we can help you or not with your daily investment process, today’s edition of Sight Beyond Sight is a good example of what makes us different.  The majority of the morning notes you have received today all center on the “bad news is now good news” meme or how lower interest rates for longer will be supportive for risk assets. Of course, none of them have highlighted that financial conditions have been tightening all year long so despite the call for lower interest rates for longer the real world is not buying that unless credit spreads tighten. Instead, we will give you a rareview into how risk takers are faring across various strategies. Additionally, we provide three new trade ideas.

Neil Azous, Rareview Macro
Neil Azous, Rareview Macro

In the 1977 iconic movie Star Wars: Episode IV-A New Hope, following the scene where the Death Star destroys the planet Alderaan, the Jedi Knight, Obi-Wan Kenobi, said: “I felt a great disturbance in the Force, as if millions of voices suddenly cried out in terror and were suddenly silenced. I fear something terrible has happened.”

I have started with that quote because it seems the best way to describe the Start of the new week for the professional investment community. Take a look at the below observations and it will be easier to understand why risk takers are “crying out in terror” and for many of them “something terrible has happened”.

If you are a global macro fund, then liquidity is not going to be your friend today as you defend core strategies that are deeply entrenched. For those who have been living on a deserted island the remaining long US dollar positioning is mostly versus emerging market FX and G10 commodity currencies, rather than other reserve currencies such as the euro, Japanese yen, Pound sterling, and the Swiss franc.

If you are a long/short strategy, you already know what is happening because it started well over a week ago.

You just did not want to believe it. Not to worry, a further unwinding in the long Financial/healthcare versus short Material/Energy sector strategy will help you finally come to grips with reality. If you are a quantitative fund, up until really last Friday in both Europe and the US, you have had the benefit of being part of the number one factor input and best performing strategy this year –that is, MOMENTUM. Sadly for you, the reversal of that strategy is a lot more violent on the way out then chasing it on the way in. Perhaps you will take back your 15 minutes of old fame from the new guys-Risk Parity and Target Volatility funds?

The conclusion would be that the worst-of-the-worst–energy, materials and bottom 15% of single stock performers–is now in play from the long side for whatever reason –its “go time”, crude oil has bottomed, or gross exposure reduction is not near being completed.rareview macro sight beyond sight 0c5 5 2015

Ok, here we go…

Rareview Macro Portfolio Overlay –Two Inexpensive Ways to Add Downside Convexity

The current price in S&P 500 futures is ~1950. The low on August 24th was 1831. The difference between the two is ~6%.Protecting against a 6% downside move, or 120 S&P 500 points, is an expensive exercise right now, and not one we are interested in. Instead, we are more worried about the second 6%, or the move down to 1720-1700 from 1831, especially the air pocket that is likely to develop once/if the August 24th intra-day low of 1831 is breached.

The problem is that we do not know the short-term direction of the S&P 500 index, including if it will first go to 2000 in the next 30-days but we are highly sensitive to an even larger move on the downside in the fourth quarter than what occurred in the third quarter. So working on these premises, what are the best strategies to deploy right now? We think having a two-tiered approach between the S&P 500 index and equity volatility, as measured by the CBOE VIX Index, is an optimal strategy.

We’ll look to dynamically manage both of these strategies side-by-side in the event that we see another leg lower in US equities. The two strategies we like are and the ones we deployed in the model portfolio late last week and posted via Twitter are…. Continue reading →

Fixed Income, Global Macro Strategy

Why Glencore is Going to Cause Gas- A Global Macro View-Grab The Glenlivet

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MarketsMuse news curators have spotted dozens of commentaries from leading equities and debt market pundits opining about global mining giant Glencore. There is only one comment that offered a truly rare view that struck a chord, and it is courtesy of this morning’s edition of global macro newsletter “Sight Beyond Sight”, which is published by global macro think tank Rareview Macro LLC. The title of today’s edition:

Tentacles from Glencore Extend Well Beyond the Naked Eye…Quarter-End Flight to Quality

Neil Azous, Rareview Macro
Neil Azous, Rareview Macro

Today’s edition of Sight Beyond Sight is going to sound aggressively Bearish to some people. At the same time, the tone is insensitive to the countries, companies, and employees involved. If that bothers you, that is too bad. This is a financial services newsletter, not the United Nations or the Red Cross. We are not trying to disparage anyone or call someone out. Our goal is to try and help you make or save money.

When I traded credit derivatives at Goldman Sachs back in the late 1990’s, the way we separated our bond business between investment grade, high yield and distressed was very simple. If an issuer’s bond price was trading above 80 cents on the dollar you were investment grade. Conversely, if an issuer’s bond price was trading below 80 cents on the dollar you were high yield. Anything below 50 cents on the dollar, you were distressed. Below 20 cents…don’t ask.

Glencore EU1.25b notes due March 2021, one of the most recently issued and liquid tranches of their debt outstanding, dropped six cents to~76 cents on the euro today, effectively crossing over into high yield territory even though it still maintains its BBB credit rating. Headline writers argue that most of the weakness today in Glencore’s stock and bond price is the result of comments made by Investec Plc, where it warned that there would be little value for shareholders should low commodity prices persist. This echoes a key research note last week from Goldman Sachs that said: “If commodity prices were to fall 5% from current levels–which we do not consider to be a far-fetched assumption given the downside risk to commodity consumption in China–we believe that concerns about its IG credit rating would quickly resurface.

Under this scenario, we estimate that most of Glencore’s credit rating metrics would fall well outside the required ranges to maintain its IG rating, and that could happen as early as the next reporting period (FY15).”

From here, this is where those who throw bombs for a living believe is what is coming up next:

  1. Commodity prices drop another 5%;
  2. Rating agencies downgrade Glencore to high yield

(by Friday);

  1. Glencore’s trading desk receives margin/collateral call immediately as commodities are T+0 settlement for margin (i.e. remember Duke&Duke in Trading Places);
  2. Like AIG, the re-insurer of the credit markets, a significant amount of derivative contracts tied to commodities become an unknown.

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ETF News, Global Macro Strategy, Strike Price

The Volcano Trade, Vontae Mack and VXX

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MarketsMuse Global Macro merges with Strike Price seers with sage excerpt from 18 Sept edition of “Sight Beyond Sight”, the daily newsletter published by global macro think tank Rareview Macro and authored by Managing Member Neil Azous and rising star Michael Sedacca…For fans of the film Draft Day, this excerpt will resonate in a resounding way..For those who option traders who understand what VIX really is, and respect ideas that make sense, the following is a solid read.. The entire SBS edition can be found via link below..

Volcano Trade Cont. – No Matter What, Vontae Mack

Neil Azous, Rareview Macro
Neil Azous, Rareview Macro

Today, we are going to use a metaphor from a football movie to get our point across. Please note we expect to receive significant push back in this view, given we are going against the grain here. We are prepared for whatever you want to throw at us.

The movie, Draft Day, starring Kevin Costner, was an interesting (supposed) peek into the shrewd world of power plays among National Football League (NFL) general managers as they jockey to make the best deals on the yearly NFL Draft Day.

What grabbed the attention of viewers was the final, big reveal on a visual tease that ran through the whole movie involving a Post-It note. Kevin Costner’s character, Sonny Weaver, Jr, in only his second year as the General Manager for the Cleveland Browns, is feeling Herculean pressures from all sides – the arrogant owner, the difficult coach, and the even more difficult fans – to elevate the pitiful Browns into a team of national contenders. He has to make big, smart plays, which means we glimpse the political maneuverings at work, the salary cap issue, the various strengths and weaknesses of the key players his staff has been researching, as well as the poker game he must play with other GM’s in the NFL who are playing poker right back at him.

But all along, we see Sonny continually referring to the same little Post-It note he started with earlier that morning before he even left his house. He wrote the note himself, stuck it in his pocket, and then keeps referring to it as the day wears on and the stress level rises.

The draft begins. By making a painful trade that puts the entire future of his franchise on the line, Sonny secures the enviable #1 pick of the first round. Perfect, now he can get the obvious choice, the much-hyped #1 quarterback candidate. Instead, to the astonishment of all he unilaterally chooses the strong, but less regarded linebacker, Vontae Mack.

And this is what touched most viewers. At the end, after weathering the draft day storm, regardless that we all knew Costner would come out on top, it turns out what matters is that Post-It note. When he lays it on the table for the viewer, to finally read, it simply said:

vontae mack marketsmuse rareview macroNo. Matter. What. He carried it with him all day. He clutched it in his fist when the heat was hottest and the fog was thickest. He fumbled it, strayed from it, even doubted it, but in the end, that simple determination governed him, guided him, through the storm. When no one supported him or even thought he was sane, the fictional Sonny Weaver, Jr, had one thing, his No Matter What.

This is how I feel about the VXX put options we hold in the model portfolio.

You can insert CNBC in place of the Cleveland fans, my inner circle of trusted advisors in place of the coach, and our paid subscribers as the arrogant owner. But at the end of the day, we want to see how these moves lower in volatility plays out into next week. While we know we can book an additional 30-60 bps of PnL in the model portfolio in short order, we are looking to make a significantly larger amount if volatility continues to come in at the pace that has been witnessed over the last few days. The key point being, if VXX closes at 18 next Friday the below Volcano Trade would contribute an additional +4% to the NAV, on top of the 60 bps already realized. That is an opportunity we can’t ignore and we want to be a pig about it.

Yesterday before the Federal Reserve monetary policy statement we adjusted our short US equity volatility position for a second time.

Below is the sequence of trading events since the inception of this strategy but as a reminder the definition of the “Volcano Trade” is as follows: After an asset has had a large move in your favor and the option you own approaches a ~70 delta, you are able to roll the position to an out-of-the-money strike in two or three times the size, and capture an increasingly larger amount of profit if the move continues.

vxx puts no matter what rareview macro marketsmuseSeptember 1st:  Bought 10,000 VXX 9/18/15 $25 put options for $0.95 (VXX spot reference ~$30.50)

September 15th:  Volcano Trade

  1. Sold 10,000 VXX 9/18/15 $25 put options at $1.61 (vs. 0.95 cost basis)
  1. Bought 20,000 9/18/15 $23.50 put options for $0.78 (VXX spot reference ~$24.20)

Net Credit: $0.03 or $30,000

September 17th a.m.:  Super-Volcano Trade

  1. Sold 20,000 VXX 9/18/15 $23.5 put options at $1.76 (vs. $0.78 cost basis)
    1. 3,520,000 premium taken in
  1. Bought 30,000 VXX 9/25/15 $20.50 put options for $0.57 (VXX spot reference ~$22.00 at 9:57 a.m.)

Net Credit:  $1.81 or $1,810,000

*Locked in 60 bps of PnL to the model portfolio

**The roll and the remaining options are FREE.

September 17th p.m.:  Super-Volcano Trade Cont.

  1. Bought 10,000 VXX 9/25/15 $20.5 put options for $0.36 (VXX spot reference $22.80 at 4:10 p.m.)

Current position:  40,000 VXX 9/25/15 $20.5 put options for $0.5175.

*Playing with House Money:  Current premium $2,070,000 or 69 bps to the NAV.

Time Stamp: All updates were sent in real-time via Twitter.

Here are the following reasons for taking these actions:

  1. The FOMC rate decision and approaching expiration date (i.e. today) had caused this week’s options to carry an implied volatility about double that of next week’s expiration.
  1. The notional of the put options reached 150 bps of the model portfolio NAV, which considering they were less than 48 hours from expiration breached our rules-based discipline.

As a result we were able to accomplish three things.

  1. We were able lock in profit whilst keeping a comparable amount of short delta. At the time of the sale we were synthetically short 1.5mm shares of VXX. By rolling the options our new synthetic short position was the equivalent of 835,000 shares.
  1. We increased our gamma exposure to a further decline in US equity volatility by rolling down and out into larger size (i.e. 40,000 put options versus 20,000 put options).
  1. We significantly reduced our vega risk by shifting into options with half of the implied volatility.

So far, this is nothing more than us sticking to our rules-based discipline. In fact, this was “text-book” trading and a classic example of adjusting a position on numerous occasions at the most opportune time. Following the FOMC release yesterday, the VXX even broke below our new strike and traded at $20.04.

Our view remains the same as it did on Wednesday when we introduced the “volcano trade” to you – that is, we expect US equity volatility to continue to decline into the end of the quarter. Additionally, the VIX curve continued to shift towards contango, with it trading inverted for a portion of yesterday’s session.

While headline writers want to suggest that uncertainty around the path of Fed policy is negative for risk assets the fact remains that investors believe lower-for-longer interest rates trumps that view and, as a result, they are not long enough market beta if the bounce back in risk into the end of the quarter continues. After all, that would be the biggest Bronx cheer (i.e. middle finger) of all right now.

We are mindful that hanging around this long may be overstaying our welcome, but hopefully the “volcano” will continue to explode through this new lower-lower strike with four versus two times the leverage since inception and dispense burning lava all over the nearby villages filled with dogmatic perma-bears who are looking for high volatility once again because they did not get unshackled from the Fed handcuffs.

Feel free to turn the CNBC volume to full blast, call our office, or send us angry emails to change my mind. But remember where I am coming from today and what our Post-It note says. vxx puts no matter what rareview macro marketsmuse

Neil Azous is the founder and managing member of Rareview Macro LLC, a global macro advisory firm to some of the world’s most influential investors and the publisher of the daily newsletter Sight Beyond Sight.  

 

Fixed Income, Global Macro Strategy

Wanted: Fed-Watching Pundits: Requirement: Coin-Tossing Skills

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MarketsMuse editors were relieved yesterday after the Fed announcement for two reasons; the first being we were reminded that at least half of Wall Street’s Fed-watching pundits who get paid big bucks to predict events can be replaced by anyone who can flip a coin, as half of the pundits were wrong and arguably, at least half of those who were right, were probably right for the wrong reasons. One would need to have a transcript of the entire meeting to know what those Fed governors were thinking and saying.

The second relief comes from having watched a post-announcement color commentary on CNBC “Fed Winners and Losers”..which had sober and well-thought out thoughts from Rareview Macro’s Neil Azous and SocGen’s Larry McDonald

 

Global Macro Strategy

Global Macro-Contrarian Says: Laundry List for Long European Equities

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MarketsMuse Global Macro curators always look for substantive and objective observations from outlets that are truly substantial within the context of presenting thoughts and comments from experts followed by the most discerning investors. With that in mind, we salute the folks at UK-based Substantive Research for this morning’s note, which includes the following kudos to a global macro pundit who MarketsMuse takes credit for spotlighting early on….

Giving up on the European recovery theme?

Neil Azous from Rareview Macro published a great note that encapsulates a couple of big themes; Inflation targeting by central banks, and the impact of QE on equity markets, and in particular, European equities. There’s a big question about the relevancy of inflation targeting in today’s central bank user manual and Rearview has neatly put together a collection of quotes and academic work from central banks on this. with their own take on what this might mean for policy making in the future. How does this relate to European equities? If inflation targeting is no longer an effective policy tool it certainly limits policy options for the ECB. Azous also notes that European equities haven’t had the same tail winds that the US and Japan markets have had whether that is the direct result of QE policy, or corporate actions. This ”underperformance” shouldn’t signal less faith in the European recovery story, and he produces a laundry list of reasons to back the view for being long european equities here.

ETF News, Fixed Income, Global Macro Strategy, People Profiles, Strike Price

Market Mayhem: A Rare View From Global Macro Guru

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One needs to have ‘been there and seen that’ for at least twenty years in order to have been “loaded for bear” in advance of this morning’s equities market rout. At least one of the folks who MarketsMuse has profiled during the past many months meets that profile; and those who have a true global macro perspective such as Rareview Macro’s Neil Azous have pointed to the credit spread widening during the past number of months as a prime harbinger of things to come. And so they have…

Neil Azous, Rareview Macro
Neil Azous, Rareview Macro

Last night, Neil Azous published one of his finer commentaries in advance of this morning’s global equities market rout and incorporated a great phrase:

“Man looks in the abyss, there’s nothing staring back at him. At that moment, man finds his character. And that is what keeps him out of the abyss.” – Lou Mannheim, Wall Street, 1987

 

The highlights of last night’s edition of “Sight Beyond Sight” are below…

  • Big Picture View
  • S&P 500 View
  • Asset allocation Requires Swimming Against the Tide – Low-to-Negative Downside Capture
  • Long German versus Short US Equities (Currency Hedge)
  • US Fixed Income – Short 2016 Eurodollars
  • Long European & Japanese Equities (FX hedged), US Biotech and US 10-Yr Treasuries
  • Long US Energy Sector
  • Volatility – Sell Apple Inc.; Not the S&P 500 or VIX
  • Harvesting S&P 500 Index Option Skew
  • Long Agricultural Call Options
  • Long US Housing (Hedged)
  • Technical Mean Reversion – Short EUR/BRL
  • Long Euro Stoxx 50 Index Dividend Futures (symbol: DEDA Index)

To read the full edition of the Sight Beyond Sight special Sunday (Aug 23 2015) commentary, please click here*

*Subscription is required; a free, 10-day trial is available

Neil Azous is the founder and managing member of Rareview Macro, an advisory firm to some of the world’s most influential investors and the publisher of the daily newsletter Sight Beyond Sight.

Fixed Income, Global Macro Strategy

Global Macro Think Tank Rate Hike Hedge: A Rareview Special

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Within the context of continuous guessing as to the outlook for a rate hike, and how to hedge fixed income portfolios accordingly, getting a strong fix on fixed income strategies has proven to be a challenge for a vast majority of professional investors during the past 24-26 months, many of whom have replaced high-priced wall hangings with dart boards.  Many other managers prefer to simply hum “Lower for Longer” to themselves. For global macro-focused fund managers, MarketsMuse spotlights a refreshing update from Rareview Macro LLC, the global macro think tank and publisher of professional newsletter “Sight Beyond Sight.”  Below please find opening excerpt from today’s edition

Neil Azous, Rareview Macro
Neil Azous, Rareview Macro

We are pleased to present our new portfolio construction, including four new trade ideas and a tail risk hedge that make up our core fixed income strategy. As is customary, each one includes our standard trade matrix with a pre-defined game plan for managing gains and losses.

For those that regularly traffic in fixed income, we look forward to any feedback you may have and a spirited debate on our ideas. We are confident they are sufficiently robust to survive some criticism.  For those not in fixed income, please feel free to share this internally with your colleagues who are.

  • TRADE 1 – Gradual/Variable pace of rate hikes
  • TRADE 2 – Leverage on Gradual/Variable pace of rate hikes
  • TRADE 3 – Targeted field bet on no rate hikes in 2015, recession book overlay
  • TRADE 4 – “Uncertainty” Risk Premium
  • TRADE 5 – Choke Yourself Tail Hedge

Highlights:

  • Thematic view, not tied to day-to-day movements in the long bond
  • Multiple sources of return attribution
  • High return on capital: Low option premium outlay, high leverage
  • High risk/reward: Lose 1.5% (realistic) to 3% (absolute) of the NAV to make 6% to 8%
  • Both quantitative and qualitative risks clearly expressed

Above is the teaser, those interested in drilling down into the above, today’s edition of Sight Beyond Sight is available by clicking this link.

Fixed Income, Global Macro Strategy

GlobalMacro Rare View: Fixed Income Market Flashing Recession Alert?

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MarketsMuse Global Macro and Fixed Income desks converge to share extract from 23 July edition of Rareview Macro commentary via its newsletter “Sight Beyond Sight”. For those not following the corporate bond market, most experts will tell you the equities markets follow the bond market–which in turn is a historical indicator when it comes to economic expansion, contraction, and recession. Below is courtesy of Rareview’s founder/managing member Neil Azous .

In the past few days, US investment grade (IG) credit spreads have reached new three year wides. Historically, the absolute level of these spreads is consistent with periods of economic and financial market stress. Additionally, the daily volatility of these spreads has increased dramatically in recent weeks.

Below is a chart of the Moody’s Baa Corporate Bond yield spread over the US 30-year Treasury yield.

What is the significance of this observation?

Investment grade corporate bonds are one of the least risky investments within the capital structure, and less sensitive to changes in default risk due to economic weakness. Moreover, the credit market is arguably, next to the slope of the yield curve, the greatest predictor of future economic stress.

The most widely cited explanation for the recent widening in spreads is that it is due to the amount of new investment grade credit issuance. Indeed, that is one factor as new issuance (+SSA) set a record pace yesterday after having surpassed $1 trillion, a level not reached last year until mid-September.

However, the recent widening of the spreads is not just down to the recent surge in corporate issuance. Issuance is simply not a large enough driving force to cause this level of “stress”. The reasons for this widening are two-fold.

Firstly, the aggregate level of issuance, to a degree, is beginning to finally catch up with the market after years of sensational appetite. Corporations, in aggregate, are raising their leverage levels by issuing the new debt and not using the proceeds to grow their revenues or cash flows to compensate. Put another way, the market is beginning to segregate between issuance related to refinancing a company’s “credit stack” as part of its normal annualized funding requirements and pure capital redeployment for the benefit investors.

By the way, as we have pointed out in these pages for a while now, not only is the IG spread widening, signaling the distinction noted above, but the equity markets are now doing so as well. Again, see the below chart of the ratio of the S&P 500 to the S&P 500 BUYUP index overlaid with the US Treasury 5-30yr yield curve. Stock buy-backs are simply underperforming in 2015 after multiple years of outperformance as the yield curve steepens in anticipation that interest rate hikes will slow the capital redeployment process down. As a reminder, it is much easier to slow a buy-back than reduce a dividend as the former has a time-band and discretion to implement and the latter generally is a board-level decision.

Secondly, we are aware that discussions around the lack of liquidity in the credit markets are a near daily occurrence these days. The only observation of note is that there is now a new term associated with the market construct – that is, “liquidity cost basis”. In simple terms, due to the lack of market depth and the continued sensational appetite to issue bonds, there is now a higher premium being applied in the market to finding liquidity if you want to own a bond. All we are saying is that the investor concerns over liquidity are not only being priced into the market but those worries have been crystalized with a fancy Wall Street name.

 

The end result is that investors are demanding a higher premium for the new issues they are taking down, largely due to deteriorating fundamentals in the actual credit.

 

Now, the second most widely cited explanation for the spread widening is that it is due to the energy sector. If you decompose the spreads it is easier to argue that a notable portion of the weakness is due to the deterioration in the energy sector, whose credit spreads are highly correlated with the lower price of crude oil. However, energy makes up a much smaller portion of the investment grade market (~12%)  than it does for the high yield (i.e. ~18%+), which indicates that the breadth of weakness stretches across many other sectors of the investment grade market and is not due to one single risk factor, such as crude oil.

Lastly, we would note that the absolute levels of these spreads referenced on the chart above are also consistent with weakness after the US quantitative easing program was completed and in anticipation of an interest rate hike. We are not sure how much of the spread widening is a result of this less easy monetary policy but the fact is that both QE and the zero interest rate policy forced investors to perpetually search for yield and investment grade credit was a major source of that appetite. To what degree that happened is difficult to handicap but some of those inflows have to reverse given how asymmetric the outcome would be if the Federal Reserve actually embarked on a rate hiking cycle consistent with past cycles, as opposed to a gradual pace of hikes.

Taking a step back, if you look at both the US yield curve and the credit markets, what you find is that both are saying roughly the same thing – that is, there is currently a recession risk embedded in the market, and that there is the potential for the end of this credit and/or economic cycle to be on the horizon.

Take what we have just sketched out any way you want. We are not making a bearish call on risk assets or attempting to sell blood. All we are doing is saying that credit markets, the yield curve and corporate share repurchase trends are signaling some concern sometime over the next 6-9 months. Given that we have not had a recession in 6-7 years, and historically we have had one every four years on average in the modern era, it is not at all unreasonable to start to watch these signals a lot more closely from now on for something more acute.

Above segment from investment newsletter Sight Beyond Sight is re-published with permission from global macro think tank Rareview Macro LLC. Subscription to the daily commentary and trade strategy profiles is available via the firm’s website

 

 

Global Macro Strategy, People Profiles, Tech Talk

FinTech Helps Power Bull Market For Unbundled Research

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Disruptive Unbundlers, Securities Industry Untouchables, Fintech Aficionados and Innovative Altruists seek to level the investment research playing field, inspiring a bull market for independent research distribution channels, start-ups and disruptive schemes.

Investment research and expert ideas, whether within the context of equities analysis or global macro perspective, has long been the domain of sell-side investment banks, whose research insight is typically bundled as a ‘free product’ within the range of fee-based services provided, including trade execution. Those old enough to remember the ‘dot-com bubble’ days will recall that much of Wall Street’s so-called research was (and arguably still is) notorious for being heavily tilted towards “buy recommendations” in favor of the investment bank’s corporate issuer clients.

This clearly conflicted practice was perfected in the late ‘90s by the likes of poster-boy analyst Henry Blodget (since banned from the securities industry, and ironically, now Editor and CEO of financial media company Business Insider) and was lambasted by securities industry regulators when the “Internet bubble” burst. Those chasing-the-horse-after-the-barn-door-closed efforts since led to a regime of regulation and firewalls intended to distance in-house research analysts from their investment banker brethren so as to mitigate biased recommendations and conflicts of interest. Compliance officers across the industry found themselves facing a host of new rules, and that ‘compliance contagion’ served as the catalyst for a spurt in “independent research boutiques” offering “unbundled” and un-conflicted research sold as a stand-alone product with no ties to execution or trading commissions.

However compelling the notion, and despite the regulatory impetus to foster the growth of independent research boutiques, the business model for these firms has proven challenging during the past 10-15 years. Many boutique research firms floundered or failed for several crucial reasons, including but not limited to (i) the burdensome costs and means associated with creating a stand-alone brand, (ii) the challenge of delivering consistent and compelling content to institutional investment managers and sophisticated investors at a price point that could prove profitable and (iii) the non-trivial logistics required to deliver content in a compliant manner. In the interim, regulators stood by and observed, and digital delivery mechanisms for independent researchers only slowly evolved. Investment banks, never shy when it comes to creative workarounds, bolstered their research ranks and produced more content, even if mostly undifferentiated, but still promoted by the strength of the investment bank’s brand.

All of this is about to change again, causing some to conclude that regulatory market moves in cycles every decade or so, much like the stock market moves in cycles. The current bull market case for unbundled independent research is not a result of efforts by get-tough-on-Wall Street types such as New York Attorney General Eric Schneiderman or Massachusetts’ kindred spirits Elizabeth Warren and William Galvin, and the bull case is certainly not because of any efforts made by the SEC. To a certain extent, the positive outlook for those in the unbundling space is based on Moore’s Law and the advancement of Fintech-friendly applications, but it is more directly attributed to a new European Union law inspired by MiFID II, that if passed as expected, will require investment managers to pay specifically for any analyst research or related services they receive. With that new rule (which includes more than a few line items), many large money managers are starting to follow the proposed rules globally; investment banks in the U.S. (and obviously those in Europe) are devising new business models for one of their oldest and highest-profile functions: offering ideas to customers that banks can monetize through commission-based services.

More than some across the major continents believe that however much top investment bank brands are a decidedly powerful selling tool for research product, the power of the internet has enabled the distribution of independent research and enables a Chinese menu of pricing schemes via a continuously-growing universe of independent portals that invite content publishers to sell their products using an assortment of social media-powered distribution channels and revenue-sharing schemes.

Bloomberg LP has created its own independent research module accessible by 300,000+ subscribers in direct competition with Markit, the financial information services provider. Earlier this year, Interactive Brokers (NASDAQ:IBKR), the web-powered global online brokerage platform that provides direct market access to multiple exchanges and trading venues across the entire asset class spectrum quietly began enhancing its offering of third-party professional and institutional-grade research. IB’s 300,000+ accounts comprising professional traders and institutional clients may subscribe to research made available in the trading platform, Trader Workstation (TWS). At the same time, IB began promoting these third-party research providers via IB Traders’ Insight, a blog embedded within the firm’s Education module that covers the full range of investment styles from more than two dozen content providers.

While bolstering objective research content is a natural business extension for those having captive brokerage clients and for terminal-farm behemoths, perhaps even more interesting is that start-ups in the unbundling space are starting to percolate.

On the European side of the pond, UK-based SubstantiveResearch, created earlier this year by former EuroMoney Magazine publisher Mike Carrodus, is positioned to be an institutional research thought- leader that curates and filters both independent and sell side global macro research, with a sleeve that hosts regulatory events for investment manager content consumers and sell-side content providers.  Start-ups in the US include among others, Airex Inc. , which dubs itself “the Amazon.com for financial digital content” and recently secured funding from fintech-focused merchant bank SenaHill Partners. TalkMarkets.com is another notable entrant to the space, and was created in late 2014 by Boaz Berkowitz, a former “Bloombergite” who was also the original brain behind Seeking Alpha. From the traditional financial media publishing world, industry stalwart Futures Magazine, recently re-branded as “Modern Trader” and the parent to hedge fund news outlet FinAlternatives is also embracing the research content unbundling movement as a means towards capturing more Alpha and better monetizing relationships with content providers. Each have their own business models, including the use of cloud-based technology and coupled with the muscle of creative online marketing, social media tactics and search-engine ranking techniques.

While the start-up space is often littered with short shelf-life stories, these new unbundled research distribution vehicles are being enabled by the fintech revolution and embraced by distributors of content, high-profile independent research providers, as well as by at least one major bank seeking to hedge its internal bets; earlier this year, Deutsche Bank inked a deal with upstart Airex, such that DB’s proprietary equity research is available on a delayed basis and can be purchased by any AIREX Market shopper. In the case of now 6-month old TalkMarkets, they are embracing an advertising-based business model, which is predicated on building an outsized audience of sophisticated retail investors for prospective advertisers. To date, they have enlisted more than 350 content providers and 10,000+ registered users. While there is no cost to access the platform, content providers are able to upsell subscription-based services and at the same time, earn ‘points’ that can be converted into the private company’s equity shares.

Neil Azous, Rareview Macro
Neil Azous, Rareview Macro

According to former sell-side global macro strategist Neil Azous, the Founder/Managing Member of think tank Rareview Macro LLC, and the publisher of subscription-based “Sight Beyond Sight” which is now being distributed across several channels apart from the firm’s website (including via Interactive Brokers), “Truly superior, high-quality content, including actionable ideas remains relatively scarce, but the fact remains, content has become commoditized. The good news is that banks are not the sole source of carefully-conceived research and the better news is that conflict-free content publishers can now more easily distribute via a broad universe of narrow-casting, web-based channels.”

Added Azous, “For independent research providers and trade idea generators, it’s arguably a watershed moment. As new rules take shape, content publishers, including those who previously worked under investment bank banners, can now reach an exponentially larger universe of content buyers through these new distribution channels. It’s a numbers game; instead of working inside an investment bank and trying to ‘sell’ a traditionally high-priced product to a relatively narrow list of captive clients, the more progressive idea generators can re-tool their pricing and make their product available to exponentially more buyers, and in a way that conforms to and stays within goal posts of compliance-sensitive folks.”

However much it makes sense to foster the easy distribution of independent and un-conflicted research, Wall Street et. al. is not going to easily abrogate their role for providing ideas or forgo the trade execution commissions derived from those proprietary ideas. Banks are reported to be devising new pricing models for investment research in view of EU proposals that could prevent research from being paid for using dealing commissions. In an unbundled world, where payments are separated, competition for equity and credit research may increase as asset managers look beyond traditional sources, which may trigger fragmentation. They may also move research in-house. The U.K.’s FCA, which is driving the debate, has endorsed the EU proposals.

As noted within the most recent edition of Pensions & Investments Magazine, Barclays PLC, Citigroup Inc., Credit Suisse Group AG and Deutsche Bank AG are working with clients to come up with pricing for the analyst research customers receive, according to bank executives. Prices are expected to range from roughly $50,000 a year to receive standard research notes, up to millions of dollars for bespoke research and open-door access to analysts.

“We are working to change the mind-set so that fund managers understand that research should be treated as a scarce resource. There is a great opportunity to tap into experts in their fields at brokers, but we need to really think about the value of research and determine the right amount to pay for it,” said Nick Anderson, head of equities research at Henderson Global Investors.

The following [excerpted] analysis is by Bloomberg Intelligence analysts Sarah Jane Mahmud and Alison Williams and helps summarize the current outlook. It originally appeared on the Bloomberg Professional service. 
Continue reading →

ETF News, Global Macro Strategy, People Profiles

Global Macro: Long/Short Hedge Funds Have Done Something Stupid

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Now that InteractiveBrokers is turning up the heat and joining the “unbundling movement” by offering independent research via its world-class trading platform, MarketsMuse editors spotlighted the following comments courtesy of global macro sage Neil Azous, Founder/Managing Member of Rareview Macro LLC from today’s IB feed..If you’re a hedge fund-type, you will either smile, smirk or throw a rock at your computer..

Neil Azous, Rareview Macro
Neil Azous, Rareview Macro

A few of our hedge fund buddies have asked us to bring back “the old-school Neil” and tell you what I think will happen in the next 48-hours. We aim to please, at least sometimes, so therefore today’s note has a lot of “hedge fund speak” and is very short-term in nature. Here we go.

If you ban selling, threaten to arrest short sellers and suspend over half the market, then at some point Chinese equities will inevitably close positive. Add in some good old fashioned government buying of what actually remains open and it is no great surprise that equity markets closed positive in China.

Of the 2,754 shares traded in Shanghai, 1,700 were suspended but the ones that were opened had virtually a 100% up-day. All 194 of the 484 shares that are still open for trade on the ChiNext Board – the poster child for speculation – rose limit up 10%. The three main index futures – CSI 300 and CES China 120 – closed limit up 10% and FTSE China A50 futures closed up +17%. The 5.8% gain in the Shanghai Composite was the largest since 2009.

While the invisible hand of China’s government has set a positive bid-tone for the rest of global risk assets today, it also increased the probability of further PnL duress for long/short hedge funds here in the old US of A.

Sadly, the desire by the long/short hedge fund strategy to reduce overall gross exposure over the last week has been very low.

The fact is that the majority believe that the earnings bar going into this reporting season is so low that you can crawl over it on your knees, and that the dispersion of opportunities remains high due to M&A activity or event-driven catalysts. The last thing this investor base wants to do is lose core positions on account of Greece or China. In Greece, the opportunity cost has been high over the years, and in China’s case, since none of them have really any meaningful direct exposure, the mindset is that the spillover effect to US equities is marginal at best.

As a result, long/short hedge funds remain long on single stocks, and to at least show some appearance to their investors that they are being prudent given the top-down concerns globally they have OVER-purchased a lot of market-related protection, or have used blunt instruments to get really short of the market outright. Put another way, their gross exposure is roughly the same as where it was last month, before the very recent global margin call kicked in, but there is large contingency now running TOO NET SHORT.

To continue to dazzle you with words like “code-red”, it does not take a genius in this business to look at all the usual short-term hedge fund indicators and recognize that many of them are at extremes – that is, put/call option ratios are at 18-month highs, prime brokerage position reports show the net short position at multiple standard deviations above the average over the past year, etc.

So what does the fact that long/short hedge funds are extremely long single stocks and over-hedged actually mean? Continue reading →

ETF News, Fixed Income, Global Macro Strategy

Its All Greek..A RareView View…

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As the events in Greece escalate to a frenzy, global macro strategists are lining up to opine on what might happen as the EU and the world calculate the impact of a Grexit. MarketsMuse tapped into one of the industry’s most thoughtful strategists and one who is notorious for having both ‘sight beyond sight’ and inevitably, a view that is rare when compared to those who position themselves as “opinionators.”  Without further ado, below is the extracted version of the 29 June edition of “Sight Beyond Sight“

Neil Azous, Rareview Macro
Neil Azous, Rareview Macro
  • Key Talking Points…What People Are Watching…Major Asset Prices
  • US Fixed Income – Choke Yourself If  You Believe in 2 Rate Hikes in 2015
  • China – Correction Accelerates Government Learning Curve & Possibly IPO Reform

 

We started working early yesterday morning, spending time on the phone with as many risk takers as possible around the world and listening in on numerous bank conference calls on the unfolding events. Additionally, we felt compelled to watch our screens all night. At the time of writing, we have not actioned one item in our model portfolio and are nowhere near able to aggregate the thoughts of the risk takers we respect or the market commentary we received from anyone who writes research for a living. The fact is there is no coherent sentence to write. The dust has yet to settle, and until it does, no one can claim to know what will happen.

Despite all of this market plumbing being very visible, and even after the Greece referendum news on Friday, the probability of a disorderly financial reaction due to its consequences has only risen to ~40% from 20% or less based on what we can gather. Leaving last week many held the view there was a 50-50 probability for a resolution with a bias for a positive outcome.

Now let’s go through the asset classes and products, and ask how they will perform. For ETF players, our lens is on GREK, FXI, HEDJ and necessarily, SPY. For those looking for an immediate take-away trade with regard to the overwhelming Greek-infused chitter chatter and jibber jabber, think $GLD. In this case, our view, which we have espoused for more than 15 minutes, might or might not be  ‘rare’, but its one we can hang our hat on…

Prudent risk management says that the overriding exercise now is to take risk down regardless of your bias on the outcome. Resolution strategies are a distant second place and with US employment Thursday followed by a three day weekend that includes this Greek referendum, that makes this scenario that much more likely.

In terms of Greece, many are watching/waiting for the ECB reaction function to the Emergency Liquidity Assistance (ELA), which is scheduled to be revisited on Wednesday. As a reminder, the events in 2012, in which there was a large spike in the ELA program assistance as a result of Greece, was the catalyst for the now famous “do whatever it takes” speech by ECB President Mario Draghi. Ironically, the three-year anniversary of that speech is coming up shortly and there is no question professionals want to see Draghi re-ignite the European recovery trade. Our point is that faith in him being a steward of the market remains unwavering and he is still the only person perceived as the class act in this goat rodeo.

If we had to pick one asset that we all were led to believe mattered in the context of a “Grexit” over the last five years, and that was supposed to react to that event, it would be Gold. It should be up $50 at a minimum and yet it can barely hold a bid. If you feel bad for the citizens of Greece, then please save a little sympathy for the Gold terrorists at the failure of the yellow metal to respond today. Next week, if things get worse, and gold still fails to respond, that could be the final nail in their coffin. At least there will be one good outcome to the whole sorry saga. Continue reading →

ETF News, Fixed Income, Global Macro Strategy

Global Macro: Decomposing the Move in Yields-The Pendulum Swing

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Decomposing the Move in Yields…Global Fixed Income Coming Closer to Decoupling from German Bunds

MarketsMuse Global Macro and Fixed Income departments merge to provide insight courtesy of “Sight Beyond Sight”, the must read published by global macro think tank Rareview Macro LLC. Below is the opening extract from 10 June edition.

Neil Azous, Rareview Macro
Neil Azous, Rareview Macro

Firstly, please note this morning’s Model Portfolio Update: Crude Oil, XLU/SPY, IYR/SPY, FXI: As per yesterday’s edition of Sight Beyond Sight, we added to existing long positions in Crude Oil, XLU/SPY and IYR/SPY. The update was broadcast in real time via @RareviewMacro.

Now, on to the day’s primary talking points..

The confidence level in the professional community remains low. The attack on the Dollar-Yen (USD/JPY), which had its largest one-day drop since August 2013, was just another casualty of the search and destroy mission underway in overall asset markets. The fact is that there is no model–valuation, technical, or otherwise–that can handicap the speed and the degree of the backup in global yields. The overriding question remains: “When will global yields stop going up, and when can the rest of fixed income decouple from German Bund leadership?”

Risk-Adjusted Return Monitor Summary & Views Continue reading →

ETF News, Global Macro Strategy

ETF Trade for Experts Only: Revert to the Mean: IYR, XLU, SPY

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“What Goes Up, Must Come Down”

MarketsMuse ETF update is courtesy of a special trade post sent this afternoon to subscribers of “Sight Beyond Sight”, the global macro trade newsletter published by Rareview Macro LLC and authored by Neil Azous.  The trade alert was also posted to Twitter via @RareviewMacro. For those not familiar with the concept of mean reversion, the simplest metaphor that drives the following thesis is “what goes up must come down.”

Neil Azous, Rareview Macro
Neil Azous, Rareview Macro

As highlighted in this morning’s edition of Sight Beyond Sight, the ratio of the iShares U.S. Real Estate ETF (IYR) and Utilities Select Sector SPDR Fund to the SPDR S&P 500 ETF Trust (SPY) is now trading at approximately two standard deviations away from its regression line since US interest rates peaked in September 2013.

rvr jun4

A short while ago in the model portfolio, we initiated a new mean reversion strategy in both of these ratios.

Specifically, we are buying $10 million notional each of IYR and XLU, and selling $20 million notional of SPY over the rest of today at VWAP.

Tomorrow, depending upon the results of the US Labor Report, we will add an additional $10 million notional each of IYR and XLU, and sell an additional $20 million notional of SPY in the morning.

Below is a thesis and trade matrix with a pre-defined game plan for gains and losses. Continue reading →

ETF News, Global Macro Strategy

Crude Oil-This Global Macro Trading Expert Says This About That

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MarketsMuse Global Macro Trading dept. merges with our ETF dept. to provide the following excerpt profiling a compelling and conservative Crude Oil-centric strategy courtesy of global macro think tank Rareview Macro LLC. The following was posted to subscribers of “Sight Beyond Sight” on Wednesday, May 27. Irrespective of subsequent three day’s pricing and trade activity across crude oil marketplace, MarketsMuse editors have determined the strategy proposed by Rareview Macro’s Neil Azous remains ‘evergreen’ (for the time being).

Neil Azous, Rareview Macro
Neil Azous, Rareview Macro

Today we got long on WTI crude oil in the model portfolio. Take it for what it’s worth, but this is the first time we have traded Crude Oil during this entire corrective phase stemming back to last summer. As per the March 18th edition of Sight Beyond Sight, when we put a long crude oil strategy on our watch list for a reduction of the severe contango in the futures curve, we are finally comfortable with the risk profile, especially considering volatility has been reduced by more than half since then. Sadly we did not deploy a position on March 18th as it coincidentally was the day the “barrel” bottomed.

The reason we chose to utilize a risk reversal approach today to get long on crude oil is because of the pronounced put skew in the term structure. For example, the structure we entered captures seven volatility points of skew on the ask side.

We like the risk-reward in this position. For example, if the November 2015 crude oil future (symbol: CLX5) were to fall $6 in the next one to two months, the strategy stands to lose ~$1.4mm. Conversely, if it were to rise by $6 in the same time frame the expected profit is ~$3.2mm, which returns a profit ratio of 2.28:1.

Sidebar: A similar strategy can be employed in the US Oil Fund (symbol: USO) by buying the 10/16/15 $21.5 calls and selling the $16 puts, but the ETF position is vulnerable to the shape of the futures curve moving further into contango. Continue reading →

Fixed Income, Global Macro Strategy

Global Macro: Historical Backdrop re Yield Moves: Pre-Mature to Call Bear Market

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MarketsMuse Global Macro update is courtesy of extract from a.m. edition of “Sight Beyond Sight”, the newsletter published by global macro think tank Rareview Macro LLC and authored by Neil Azous.

Neil Azous, Rareview Macro
Neil Azous, Rareview Macro

In last Thursday’s edition of Sight Beyond Sight we argued that we couldn’t work out how anyone was able to make an argument about the short-term direction of fixed income, and especially calling the end of the sell-off, with a straight face. Put another way, there were a lot of pikers out there with no accountability or transparency voicing their opinions that day. Given that any attempt at analyzing fundamentals relative to positioning at historically climactic moments is generally a very poor exercise, we refused to go on the record that day and said we would regroup over the weekend. Given the resumption of the sell-off, that patience has served us well.

At this point, just repeating that CTA/Managed futures, a strategy that makes up ~10% of hedge fund AUM but deploys the most leverage, have lost on average ~5% over the last few weeks is a waste of time. Since CTA’s apply priced-based trend-following algorithms to the trading of futures contracts what matters is that many thresholds used to trigger a stop-loss have been breached and then some.

The takeaway at this point is that CTA’s/Managed futures strategies are way passed working through large offsides positions and many of them have now flipped their strategies to go the other way. Along those lines the positions that have flipped are more acute so far in Europe than the US.

That is very important to recognize because that position building is still in the early stages and as/if the new trends extend those positions will grow and grow given this is the most levered strategy within hedge fund products.

The big out-trade at this point is that asset managers still hold structural long US dollar and Treasury curve flattening positions and have yet to adjust them in the same way as the CTA’s. Why? Because their threshold for pain is a lot greater and they are not reactive to priced-based trend-following algorithms.

What does this mean? It means that the risk from here is that as CTA/Managed futures strategies ramp up new positions that will begin to force the hand of asset managers who have yet to be really reactive.

The new leverage being applied to the counter-trend on the hedge fund side plus the liquidation of structural position on the asset manager side is the point we think we are at now in terms of overall market positioning.

So what is most at risk now? Continue reading →

Fixed Income, Global Macro Strategy

Global Macro: Selloff and Noise Level Around European Fixed Income Reach Historic Levels

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MarketsMuse Global Macro update is courtesy of opening extract from today’s a.m. edition of “Sight Beyond Sight“, the global macro newsletter published by global-macro think tank Rareview Macro LLC and authored by Neil Azous, Rareview Macro’s Founder and Managing Member.

Neil Azous, Rareview Macro
Neil Azous, Rareview Macro

Forgive our saucy tone today, but this has been a long week. That is not because we were long European bonds, but because we provided a lot of free therapy to people who were. In the last two hours we have received way too many communications around today’s events.  At one end of the spectrum there are those arguing that Fixed Income has crashed, the bond bull market is over, and this is reminiscent of US Treasuries in 1994 or the Japanese JGB move in 2003. And at the other end, today’s reversal off the extreme yield levels seen just a short while ago is leading many to call the move finally over, arguing that supply/demand and the search for income are once again set to take over and force global yields much lower.

We don’t know how either side is able to make either argument with a straight face. Put another way, there are a lot of pikers out there with no accountability or transparency in their views voicing their opinions today. The attempt to analyze fundamentals relative to positioning at climactic moments historically is a poor exercise, especially considering the UK election is today and the US employment number is not released until tomorrow.

Instead, you might be able to make a better argument that the European Central Bank (ECB) was able to meet its bond buying quota very early in the month, and at choice prices and it is best for everyone else to wait until next Monday to go on the offensive. That just seems more rational. Just because we write a newsletter doesn’t mean we have to go on the record today. So we will not and instead regroup over the weekend and come back Monday refreshed.

To be clear, we are not “off-side’s.” We are just more interested in where Global fixed income will be over the next two to three months rather than getting caught up in the next two to three hours. In that spirit, for those who want to fall back on something more fundamental or process oriented instead, the below observations may be of interest.

US Fixed Income Observation

Below is a snapshot of our internal model for US interest rate hike probabilities over the next 18 months. The top graph looks at the total probability of a hike BY a certain meeting, whereas the bottom graph determines the probability of a hike AT a certain meeting. Beyond that, the very affordable cost of Sight Beyond Sight ® newsletter prohibits us from sharing any additional methodology with you. So please don’t ask us. Let’s just say we utilize this tool frequently in our internal process and we place a lot of weight on it. Continue reading →

ETF News, Global Macro Strategy

Global Macro: Is The Darling of EM Faltering?; How To Trade It..

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MarketsMuse ETF and Global Macro update takes a look at India for those following the two leading ETFs in the space, the $2.3 billion WisdomTree India Earnings Fund (EPI. C-73) and the $1.9 billion iShares MSCI India ETF (INDA. C-92), and introduces a global macro perspective that adds a different dimension via a brief excerpt from today’s a.m.  edition of Sight Beyond Sight and courtesy of Rareview Macro LLC a.m. notes

India: The Darling of EM Faltering

In a very rare occurrence in India, where investors are two-times overweight the equity market benchmark, 49 of the 50 names in the National Stock Exchange CNX Nifty Index (NIFTY Index -2.81%) closed negative. Not only has the ratio of India to Brazil (NIFTY/IBOV) now retraced almost 50% since its mid-2012 ascent higher, but it remains one of the best representations globally of the unwind of the commodity importer vs. exporter strategy that dominated the deflation headlines from July 2014 to February 2015.

Here is an updated version of our favorite representation. This is the Indian SENSEX versus Brazilian Bovespa overlaid with the inverse of WTI crude oil. As you can see, without Brazil even being opened today yet, the Indian leg has taken that ratio down below the 200-day moving average.

For the avoidance of doubt, which is very high in the professional community when it comes to India, after last night’s price action the equity markets are now formally in a technical correction (i.e. -10%) as the NIFTY is -11.36% off its March high. Additionally, the major benchmarks are now negative on the year in both US dollar and local currency (INR) terms. Optically, next to Turkey, India is the only other major emerging market that is negative year-to-date.

 

Sight Beyond Sight® is a global macro trading newsletter written daily by Neil Azous. With close to two decades of institutional experience across asset classes, Neil interprets the day-to-day economic, policy and strategy developments and provides actionable trading ideas for investors.

Global Macro Strategy, People Profiles

Global Macro Trading: Why It’s Time to Stop Hating Apple Inc

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MarketsMuse.com Global Macro update necessarily touches on the hyperbole and couch quarterbacking connected to yesterday’s earnings announcement from Apple Inc ($AAPL), which included a big bump in planned corporate share buyback and increased dividend.

Our editors were particularly entertained by below extract from today’s edition of global macro trading commentary produced by Neil Azous, the Founder and Managing Member of Rareview Macro LLC and publisher of “Sight Beyond Sight”. During the past year, and notwithstanding a focus on thematic, macro-style strategies, Azous has published a selection of comments re $AAPL which have proven remarkably prescient. Below snippet is merely a teaser to a more detailed defense of Apple, and the same edition includes a Rareview look at “Gold Terrorists.”

(LATE POST:CNBC staffers were apparently so tickled by the Apple comments from Azous (and specific recommendation below), they demanded that Azous share his tongue-in-cheek comments on air…the video clip is below)

Neil Azous, Rareview Macro
Neil Azous, Rareview Macro

“…On a personal note, we would encourage those professionals who love to hate AAPL to book themselves a series of therapy appointments. It is ok to spend $10,000 and tell a stranger that you are “angry”.

We recommend one session each for the following 10 “issues” for you to work through. In fact, see if you can haggle yourself a discount for a pre-paid 10-pack of therapy sessions.

1. You are “angry” about the fact that their China revenues went to $17 bln from $10 bln and sales in China surpassed the US.

2.You are “angry” about the 70% year over-year growth rate in a country that is supposed to be in a hard landing.

3.You are “angry” about the China stock market impact, i.e. the $4 trillion in new market cap that could be put towards a new iPhone or Watch, and that AAPL is now geared to China.

To read the entire a.m. edition of “Sight Beyond Sight”, including commentary focused on “Gold Terrorists” and the outlook for yellow metal within the context of a sensible investment portfolio, please click here. (Subscription is required; Free Trial is available)….