Friday, July 30, 2010

Understanding the “equity market neutral” strategy

September 10, 2008

This is a convergence trading strategy that is designed to generate returns independent of what happens to the overall market.  It does this by attempting to neutralize all or most market directional risk (aka systematic risk or beta) as well as sector risk. With this strategy the focus is on

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What will the bailouts do for the stock market?

September 7, 2008

The Fannie & Freddie bailouts will help with sentiment in the short run, much like the Bear Stearns bailout, as we will likely see a general rally in equities on Monday and for a few days after that. This short term correction (rally) against the long term trend may take some of the indices such [...]

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Backwardation & Contango: Why The Confusion?

July 16, 2008

Those in the financial press often write about a futures market that is “backwardated” or in “contango.” Very often, they get confused when explaining a market in light of these concepts, and believe it or not, this even confused Fed Chairman Ben Bernanke. Last February Bernanke basically said that the then backwardated term structure of [...]

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Bear Trend For Equities Remains Dominant – Update

June 26, 2008

Back in April, I wrote the following: “Earnings are bad, inflation is bad, the credit crisis is bad…. But isn’t it always darkest before the dawn? Are stock market bottoms made when the news is the worst and things look bleakest? Yes and yes. But how does one know when a bottom is in place? [...]

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Has the EUR’s long term bull market ended?

June 1, 2008

The EUR has been in a bull market since 2002 but the economic and political fundamentals of Europe are not looking too good these days…and there are some dark clouds on the horizon for this currency when you consider the broader global socioeconomic framework. Of course, the EUR was a flawed currency from the start [...]

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Will another large securities firm fail?

May 30, 2008

A new report from Moody’s Investors Service explains that the biggest systemic risk to the $62 trillion credit-derivatives market is not its size and complexity but the potential failure of a large securities firm or investment bank which is acting as a counterparty. A bank collapse could damage the operational integrity and pricing in the [...]

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And Now: Introducing The Positive Side Of Globalization, Economics, & Finance…

May 7, 2008

It is always important to keep everything in context. At the present moment the majority of people are focused on the “negatives” in our world, and presently, things are indeed negative both politically and economically. It is also important to be objective and see the world as it truly is — understanding the broader trends [...]

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96% of Stockton, CA homeowners who purchased in 2006 are under water

May 7, 2008

My thoughts: The bottom in housing may not be here yet, and will probably take longer to achieve than most expect. But news like this means we are getting closer…. ————————————————————- You bought at the peak of the market. You put next to nothing down. (Maybe you even took out one of those 105% LTV [...]

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Returns are anything but normal

May 6, 2008

Much of modern finance and risk management is built on the concept of efficient markets and the “bell curve” or symmetrical normal distribution. However, out in the real world things are a bit different. Over the years many have treated the so called “black swan” events as something that is an anomaly. But when you [...]

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Foreclosure Rage: (former) homeowners take out their anger

May 4, 2008

Foreclosed homes are being damaged at a high rate as homeowners take out their anger on houses before they are forced to move out, increasing the costs for the banks that take back ownership (because they have to sell at a lower price as the new buyer has to pay for repairs. Is this just [...]

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