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Securities Lending

Sears Still a Going Concern for Lending Desks


We wrote previously on February 3rd about Sears Holdings (NASDAQ: SHLD) and it has been a point of focus on street lending desks.  On Tuesday the stock dropped pre-open from a $9-handle to the $7’s on the company’s disclosure regarding it remaining a “going concern.”  Shorts are having trouble finding shares as the bear trade becomes more popular.  Utilization is high, with shares-on-loan increasing 10% this week.  We believe that had there not been a dearth of supply, the amount of shares-on-loan might be higher.  Commensurate with demand, the borrow fee moved up from 60% to 85% today, with some shorts paying up to 105%.  The share price has recovered a bit to the mid-8’s but Open Interest in ATM Puts has been consistently increasing.
 

The analysis in this article is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


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Options

Volatility 411


CBOETV - Dan Deming, KKM Financial, discusses the VIX skew.

Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options. Copies are available from your broker, or at www.theocc.com. The information in this program is provided solely for general education and information purposes. No statement within the program should be construed as a recommendation to buy or sell a security or to provide investment advice. The opinions expressed in this program are solely the opinions of the participants, and do not necessarily reflect the opinions of CBOE or any of its subsidiaries or affiliates. You agree that under no circumstances will CBOE or its affiliates, or their respective directors, officers, trading permit holders, employees, and agents, be liable for any loss or damage caused by your reliance on information obtained from the program.

Copyright © 2016 Chicago Board Options Exchange, Incorporated.   All rights reserved.

This video is from CBOE and is being posted with CBOE’s permission. The views expressed in this article are solely those of the author and/or CBOE and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


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Macro

Why Things Aren't What They Used to Be in Emerging Markets


The prospect of stabilizing commodity prices and improving corporate earnings has helped rebuild investor interest in emerging markets over the past year. But returning investors may find the constituents of today’s emerging markets are very different from those of the past. I’ve invited my colleague Carlos Hardenberg to share some of his experiences of how emerging markets are not just emerging but evolving, too.

 

When we look at the emerging-market companies in which we invest today, they are worlds away from the companies we were analysing a decade or two ago.

The landscape of emerging-market corporations in general has undergone a significant transformation from the often plain-vanilla business models of the past that tended to focus on infrastructure, telecommunications, classic banking models or commodity-related businesses, to a new generation of very innovative companies that are moving into technology and much higher value-added production processes.

Furthermore, we’re starting to see the establishment of some very strong globally represented brands which originate from emerging-market countries.

Back in the late 1990s, when I was starting out in the emerging-market investing world, technology-oriented companies made up only around 3% of the universe, as represented by the MCSI Emerging Markets (EM) Index.1 Even six years ago, information technology (IT) represented less than 10% of investable companies in the index.2 Much has changed since then.

Today, around a quarter of the MSCI EM Index is in the IT sector, which includes hardware, software, components and suppliers.

01317_CarlosRising4

And while much of this activity is originating in Asia, including Taiwan, South Korea and increasingly China, we are also seeing similar developments in Latin America, Central and Eastern Europe and even Africa.

The IT sector can be a difficult space to understand and value. Business models are rapidly changing as they adapt to the shifting demands of consumers, and respond to new environmental requirements. Thus, one needs to spend more time understanding and evaluating individual companies before investing in the right stocks, also based on desired risk tolerance.

Currently, we have identified opportunities among some larger-sized companies, but tend to generally favour mid-sized companies we think have the potential to outgrow the market as a whole. We look for companies we believe have the ability to adapt more efficiently and are more flexible in adjusting to a fast-changing environment, run by flexible and well-incentivised management teams.

The Value of Active Management in Emerging-Market Investing

While there has been a considerable evolution in the emerging-market investing universe over the last decade, we remain adamant in our belief that emerging markets remain an investment asset class in which active management should play a vital role for a number of reasons.

Emerging markets tend to have their own business rules and regulations which affect companies, corporations differ largely in their attitude towards minority investors, governance standards vary significantly and local intricacies determine consumer trends and habits. We often need to develop fairly close relationships to gain a better understanding of business prospects and find successful management teams that respect the rules.

We think these factors could be an important consideration as attention returns to emerging markets on the back of the generally improving performances we have seen in these markets recently.

After more than three years of languishing at depressed levels, earnings in emerging-market companies are showing signs of recovery, and that is reflected in the attitudes of companies and their management as well as in their financial data.

0317_Carlos_Turn2

Recently, on a trip to Dubai, my team and I met a range of companies from Africa, the Middle East and other emerging markets, which were far more confident and open in sharing their outlook for the next 12-to-24 months.

Even in regions that are still going through a phase of adjustment and rebalancing, we see improving visibility and increasingly evident robust underlying economic conditions such as low debt, stabilizing commodity markets, reduced currency volatility and improving consumer confidence.

After a relatively bleak period for emerging markets, it seems that many of the factors that have attracted investors to the asset class, including stronger earnings growth, higher gross domestic product growth levels and far more attractive consumer trends, may be coming back into play.

Carlos Hardenberg’s comments, opinions and analyses are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. Because market and economic conditions are subject to rapid change, comments, opinions and analyses are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment or strategy.

Important Legal Information

All investments involve risks, including the possible loss of principal. Investments in foreign securities involve special risks including currency fluctuations, economic instability and political developments. Investments in emerging markets, of which frontier markets are a subset, involve heightened risks related to the same factors, in addition to those associated with these markets’ smaller size, lesser liquidity and lack of established legal, political, business and social frameworks to support securities markets. Because these frameworks are typically even less developed in frontier markets, as well as various factors including the increased potential for extreme price volatility, illiquidity, trade barriers and exchange controls, the risks associated with emerging markets are magnified in frontier markets. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions.

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1. Source: MSCI. The MSCI Emerging Markets Index captures large- and mid-cap representation across 23 emerging -market countries. Indexes are unmanaged, and one cannot directly invest in an index. They do not include fees, expenses or sales charges. See www.franklintempletondataservices.com for additional data provider information.

2. Ibid.

This article is from Franklin Templeton and is being posted with Franklin Templeton’s permission. The views expressed in this article are solely those of the author and/or Franklin Templeton and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


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Technical Analysis

Still The Most Hated Bull Market Of All Time


Despite the fact that the S&P 500 bottomed a little more than 8 years ago on March 9, 2009 at a little more than one-fourth of its current value, the fourth estate has gone from calling the rise in stocks a “rally” to the “Trump Bump.”  In some sign that the chattering classes view it as somewhat illegitimate, you’ll never hear anyone calling this move a “bull market,” which it most assuredly is.  Two fifty percent declines in stocks in the current century have left most people either superstitious or skeptical.  The market isn’t cheap on an absolute basis but it is quite reasonably valued, in our view, when stacked up against other asset classes.  As it stands now, it is the second longest bull market and the fourth biggest since 1928.  It is thus understandable and prudent to start thinking about how this may end.  The problem for the bears is that there are few of the signs of speculative excess than normally accompany the start of a bear market.  Only one of the nine items on our Strategas’ bull market top checklist – flagging upward earnings revisions – can currently be checked-off.  Credit spreads are tight, IPO and M&A activity are modest, net inflows into domestic equity mutual funds and ETFs have only started to pick up, and defensive shares have underperformed.  What’s more, the popular press, as highlighted by the headlines on page three, has fought the latest phase of the bull market every step of the way since the election in November.  While the shot clock on a real business cycle and thus a bear market may have started, it appears to be counting down far more slowly than the chattering classes have expected – or perhaps hoped.  

Strategas Research Partners' Institutional Investor-ranked Research Team works to identify the major themes with broad implications for global financial markets. Strategas covers the broad investment landscape, with published reports discussing Investment Strategy, Economics, Washington Policy, Quantitative and Fixed Income research. The team's thematic and macro-driven approach relies on empirical data as well as fundamental and technical research to provide readers with an integrated investment strategy for a variety of time horizons.

 

This article is from Strategas Research Partners and is being posted with Strategas Research Partners’ permission. The views expressed in this article are solely those of the author and/or Strategas Research Partners and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


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Stocks

Nasdaq Market Intelligence Desk - Equity Market Insight March 24, 2017


NASDAQ Composite +0.6% Dow +0.2% S&P 500 +0.4% Russell 2000 +0.7%
NASDAQ Advancers: 1472 / Decliners: 602
Today’s Volume (100day avg): -23%

Stocks are marginally higher this morning on soft volume and all eyes on the results from the proposed healthcare bill. Sector performance is mixed; strong results in the semi space has Info Tech (+0.5%) the top gainer. If we don’t see stocks make significant strides higher the S&P 500 will suffer its largest weekly decline in 2017, signaling the Trump Trade might be unfolding.

  • We’re expecting to see a healthcare reform vote, but we assumed the same situation yesterday. Apparently the republicans didn’t have the Frank Underwood whip influence and the original vote time/date was pushed to today. Several market strategists have released reports on the likelihood to bill will pass, but none of them have eclipsed the 60% probability.
  • February’s Durable Goods was better than expected, with US factories seeing a steady demand over the past 6 months. The strong figure had little effect on the markets.
  • Micron Tech is surging today, up ~9% and touching its highest level since mid 2015. Investors are applauding the company’s strong outlook on memory-chip demand. Western Digital (+5%) is seeing bullish sympathy from MU today. Last year. WDC acquired SanDisk to increase their memory chip business.

Technical Take:

Below is a weekly period relative-strength chart of the Russell 1000 Value Index (RLV) vs. the Russell 1000 Growth Index (RLG) with Value in the numerator (RLV/RLG).  Since peaking in 2006, the ratio has been in a long term downtrend reflecting value underperforming growth.  In January 2016 the Value Index bounced off its lower multi-year support line and rallied the entire year to its peak in December.  At this time its RSI reached an extreme 75 level, its highest reading in ten years.  Importantly, during the 2016 advance the ratio broke above its clearly-defined, declining resistance line originating from 2008.  Throughout Q1’17 the ratio has been correcting backwards its price as it works off overbought technical, and then some, as the weekly RSI has been declined sharply to a now bearish 34 level.  The ratio itself is now at a key juncture.  It is testing from above the prior 8-year resistance line which it broke out from in 2016.  If “resistance turns support” then Value may be ready to start outperforming growth again.  Given the long term time frame of the pattern, this reversal could be significant.  The December high, 1.0472, is the key price level for the ratio to get above before declaring Value has reversed the long term trend of underperformance. 

 

Nasdaq's Market Intelligence Desk (MID) Team includes: 

Michael Sokoll, CFA is a Senior Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over 25 years of equity market experience. In this role, he manages a team of professionals responsible for providing NASDAQ-listed companies with real-time trading analysis and objective market information.

Jeffrey LaRocque is a Director on the Market Intelligence Desk (MID) at Nasdaq, covering U.S. equities with over 10 years of experience having learned market structure while working on institutional trading desks and as a stock surveillance analyst. Jeff's diverse professional knowledge includes IPOs, Technical Analysis and Options Trading.

Steven Brown is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over twenty years of experience in equities. With a focus on client retention he currently covers the Financial, Energy and Media sectors.

Christopher Dearborn is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Chris has over two decades of equity market experience including floor and screen based trading, corporate access, IPOs and asset allocation. Chris is responsible for providing timely, accurate and objective market and trading-related information to Nasdaq-listed companies.

Brian Joyce, CMT has 16 years of trading desk experience. Prior to joining Nasdaq Brian executed equity orders and provided trading ideas to institutional clients. He also contributed technical analysis to a fundamental research offering. Brian focuses on helping Nasdaq’s Financial, Healthcare and Airline companies among others understand the trading in their stock. Brian is a Chartered Market Technician.

This article is from Nasdaq and is being posted with Nasdaq’s permission. The views expressed in this article are solely those of the author and/or Nasdaq and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


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The material (including articles and commentary) provided on IB Traders' Insight is offered for informational purposes only. The posted material is NOT a recommendation by Interactive Brokers (IB) that you or your clients should contract for the services of or invest with any of the independent advisors or hedge funds or others who may post on IB Traders' Insight or invest with any advisors or hedge funds. The advisors, hedge funds and other analysts who may post on IB Traders' Insight are independent of IB and IB does not make any representations or warranties concerning the past or future performance of these advisors, hedge funds and others or the accuracy of the information they provide. Interactive Brokers does not conduct a "suitability review" to make sure the trading of any advisor or hedge fund or other party is suitable for you.

Securities or other financial instruments mentioned in the material posted are not suitable for all investors. The material posted does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before making any investment or trade, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice. Past performance is no guarantee of future results.

Any information provided by third parties has been obtained from sources believed to be reliable and accurate; however, IB does not warrant its accuracy and assumes no responsibility for any errors or omissions.

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