IB Traders Insight


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Macro

MNI US DataWatch


The February 15 week starts off with the President’s Day holiday, but is far from light, with the mid-month releases of PPI, housing starts, and industrial production on Wednesday and CPI on Friday. In addition, regional data for the Empire State and Philadelphia regions will be released this week. Outside of data, the FOMC minutes will be released on Wednesday.

Here is a closer look at the key data in the coming week:

EMPIRE STATE INDEX FOR FEBRUARY, TUESDAY, FEBRUARY 16 AT 8:30 A.M. ET PHILADELPHIA FED INDEX FOR FEBRUARY, THURSDAY, FEBRUARY 18 AT 8:30 A.M. ET

The regional indicators released this week will give the first peek at conditions in the Northeast for February and forecasts suggest a continuation of the trend of negative readings. The Empire State index is expected to rise to a reading of -10.0 after falling to -19.37 in January, still negative, while the Philadelphia Fed index is expected to rise further to -2.8 after an improvement to -3.5 in January.

PRODUCER PRICE INDEX FOR JANUARY, WEDNESDAY, FEBRUARY 17, AT 8:30 A.M. ET

Final demand PPI is expected to fall 0.2% in January. Food prices are expected to rebound modestly, but energy prices should continue to decline, led by gasoline prices. Excluding food and energy prices, PPI is forecast to rise 0.1%. Annual revision released on February 12 will be included in the data.

Over the last 20 years of January data, there been eight overestimates of overall PPI with an average of 0.26 percentage point, and eight underestimates which averaged a much larger 0.54 percentage point. There was an absolute average miss of 0.32 percentage point over the 20 year period, larger than the 0.21 percentage point miss in December. Over the last 10 years, the absolute average miss was 0.25 percentage point, slightly larger than the 0.50 miss in December, with four overestimates and four underestimates and two correct estimates.

For core PPI, there were seven overestimates in the last twenty years that averaged a modest 0.20 percentage point and 10 underestimates, averaging a larger 0.36 percentage point. The absolute average miss over the 20-year period was 0.25 percentage point, up from 0.15 in the previous month. Over the last 10 years, the absolute average miss was 0.16 percentage point, compared with 0.12 in December, with only one overestimate (in 2015), six underestimates, and three correct estimates.

HOUSING STARTS FOR JANUARY, WEDNESDAY, FEBRUARY 17, AT 8:30 A.M. ET

The pace of housing starts is expected to rebound to a 1.180 million annual rate in January after a small decline to 1.149 million in December. Starts were up 5.6% year/year before seasonal adjustment in December, while permits were up 17.4% and housing completions were up 4.8%, an indication of the strength of home building.

INDUSTRIAL PRODUCTION FOR JANUARY, WEDNESDAY, FEBRUARY 17, AT 9:15 A.M. ET

Industrial production is expected to rise by 0.4% in January after declines in the previous three months as manufacturing production should post a sizable gain. Factory payrolls rose by 29,000 in the month, while auto production jobs rose by 4,000. The factory workweek was slightly longer at 40.7 hours, up from 40.6 hours in December. The ISM production index rose to 50.2 in January from 49.9 in December. Utilities production should rise in the month after sharp declines in the last three months, as weather became more seasonable, especially in the Northeast. Mining production, however, should continue to be impacted by low energy prices. Capacity utilization is forecast to rise to 76.7%.

January data over the last 20 years include 12 overestimates which averaged 0.38 percentage point and six underestimates over that period that averaged 0.20 percentage point, suggesting a risk of overestimate. The absolute average miss was 0.29 percentage point, larger than the 0.19 percentage point miss in December. Over the last 10 years, there have been eight overestimates, including each of the last five years. There was only one underestimate over that period, so there is a definitive tilt toward misses to the low side.

Capacity utilization was overestimated 12 times over the last 20 years, averaging 0.30 percentage point, and underestimated only twice, both by 0.1 percentage point. The absolute average miss in January over the last 20 years was 0.19 percentage points, down from 0.33 percentage points in December. Over the last 10 years, the absolute average miss was a 0.24 percentage point, with six overestimates and one underestimate. Like industrial production, a lower than expected reading for capacity utilization is very likely.

WEEKLY JOBLESS CLAIMS FOR FEBRUARY 13 WEEK, THURSDAY, FEBRUARY 18, AT 8:30 A.M. ET

The level of initial jobless claims is expected to rise by 8,000 to 276,000 in the February 13 employment survey week after a 19,000 decrease in the previous week. Claims were at a level of 294,000 in the January 16 employment survey week. The four-week moving average fell by 3,500 to 281,250 in the February 6 week and should fall by 4,500 in the current week as the 294,000 level in the January 16 week will roll off the four-week average calculation, assuming the MNI forecast is correct and there are no revisions.

Seasonal adjustment factors expect unadjusted claims to drop modestly in the February 13 week after falling by 21,136 in the previous week. In the comparable week a year ago, unadjusted claims fell by 46,254, a larger drop than seasonal adjustment factors had expected, so seasonally adjusted claims fell by 17,000 that week.

LEADING INDICATORS FOR JANUARY, THURSDAY, FEBRUARY 18 AT 10:00 A.M. ET

The index of leading indicators is forecast to fall by 0.2% in January after a 0.2% decline in December. Positive contributions are expected from the longer factory workweek, a rise in the ISM new orders index, and rising consumer expectations. Those additions should be offset by negative contributions from higher jobless claims and lower stock prices.

CONSUMER PRICE INDEX FOR JANUARY, FRIDAY, FEBRUARY 19, AT 8:30 A.M. ET

The CPI is expected to fall 0.2% in January after a 0.1% December decline. Analysts expect energy prices to fall even further, fed by the continued plummeting of gas prices, while food prices are seen roughly steady. The core CPI is expected to rise 0.1%. Annual revisions released on February 17 will be incorporated into the data.

Over the last 20 January releases, there have been eight overestimates averaging 0.11 percentage point and seven underestimates averaging 0.14 percentage point, with the other five years correctly estimated. The absolute average miss of the last 20 years was a very modest 0.10, up only slightly from 0.08 in December. Over the last 10 years, there were three overestimates, four underestimates, and three correct estimates (including the last two years), but almost all of the misses were by only 0.1 percentage point.

For core CPI, there were four overestimates and nine underestimates, almost all by 0.1 percentage point. That leaves seven correct estimates, showing how accurate economists generally at estimating core CPI. The absolute average miss over that period was only 0.07 percentage point, owing to the fact that only once was a miss larger than 0.1 percentage point. Over the last 10 years, the absolute average was 0.08 percentage point, with only one overestimates, six underestimates, and three correct estimates, again almost all by 0.1 percentage point. The bottom line is that forecasts for CPI are extremely accurate and rarely result in major surprises.

MNI is a wholly owned subsidiary of Deutsche Börse Group.

This article is from Market News International (MNI) and is being posted with MNI’s permission. The views expressed in this article are solely those of the author and/or MNI 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

Gold Rally Won't Last


The 17% rise in the price of the precious metal is a temporary side effect of the panic sweeping global markets rather than fear of inflation.

 

I’m reminded these days of a neighborhood in Ho Chi Minh City I stumbled into a few years ago full of shops that sold nothing but strongboxes. With inflation back then in the double digits, the currency plummeting and banks on the brink of failing, the strongboxes were for Vietnam’s savers to stash their gold.

After losing 30% of its value in the past four years, gold is enjoying a resurgence, climbing 17% so far this year. Investors are flocking to the barbarous relic not for fear of inflation, but rather as the world’s central banks fend off deflation with interest rate cuts that have fallen below zero in some economies, raising fears for the future of banks there.

Don’t fall for it. It’s all part of the swirling confusion between investors coping with their first U.S. interest-rate increase in almost a decade, and those trying to browbeat the Fed into reversing it. It will most likely end in a situation like last year’s, with funds flowing out of Asia and emerging markets back into the U.S. and its dollar until the global economy rights itself and, with investors disciplined by an end to cheap dollars, value investing returning to the fore.

It would make some sense to hold an inedible, incombustible commodity that bears no interest if the only alternative was parking your money in a bank that suddenly starts charging interest on deposits. But that isn’t the only alternative: there are bonds, which love deflation and are rallying amid the global gloom. And, for brave contrarians, there are stocks, which despite their current malaise should inflate upwards if the central banks debase their currencies or if doing so leads them to victory against deflation.

Gold’s sudden rally seems, then, a temporary side effect of the panic sweeping global markets. Indeed, the rally seems driven primarily by a surge in purchases by China, whose central bank bought 100 tonnes in the second half, according to the World Gold Council. Why? One reason is to diversify its foreign reserves out of U.S. dollars and so reduce its exposure to American monetary policy. But given China’s entry last summer into the global currency wars, it might also make sense for the People’s Bank to stock up on an asset whose value can’t be torpedoed by rival central banks.

Panicked investors are also piling into Asian bonds, pushing yields lower. While yields on Japan’s 10-year bond have slid 14 basis points to 0.06% this month, Australian 10-year yields have dropped 50 basis points to 2.4%. U.S. Treasury yields are falling even faster amid fears the U.S. economy is heading into recession in spite of Fed Chair Janet Yellen’s assurances this week. “Some investors worry that falling bond yields and record low breakevens are a sign that deflation is set to take hold over time, even if the actual inflation numbers don’t show it yet,” notes Bank of America Merrill Lynch’s U.S. economist Michael Hanson.

That’s pushing up the premium between what many Asian governments have to pay over what Uncle Sam does. The only markets where these spreads aren’t rising is Indonesia and Thailand, which highlights a revealing trend: while much of the global market turmoil has been described as a flight from risk into the safety of bonds and safe-haven currencies like Japan’s yen, in reality investors are betting that the turmoil they’ve created will finally spook central banks into unleashing yet more stimulus.

As a result, Asia’s riskiest markets have actually rallied since Jan. 21 when European Central Bank President Mario Draghi signaled that more easing was on the way. Thailand’s baht has climbed 2.1%, Indonesia’s rupiah has gained 3.1% and Malaysia’s beleaguered ringgit has climbed nearly 5%. That’s fueled a recovery in Southeast Asian stocks that has pulled Thai stocks up 5.8% in dollar terms since Jan. 21, Indonesian stocks up 10.9% and Malaysian stocks up 7.9%.

The hot money crowd thinks they have central bankers on the run. And where interest rates are turning negative, they’re probably right. If Yellen succumbs to their dive, the world will once again be awash in cheap money and risk-on bets like those in Southeast Asia.

Is that likely to happen? Maybe. But even as those bets on Southeast Asia debt rise, the price of insuring the region’s debt is soaring. The last time that happened was in early 2013, just before a rally by the U.S. dollar that snuffed out a regional stock rally and set the stage for the Taper Tantrum in May when then-Fed Chair Ben Bernanke announced he would soon begin cutting back quantitative easing.

History in this case may not repeat itself, and Yellen might not pull the plug on the hot-money crowd. But savvy investors are betting she will.

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This article is from Barron's and is being posted with Barron’s permission. The views expressed in this article are solely those of the author and/or Barron's 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

Increasingly Addled


Monthly Investment Outlook from Bill Gross

February 3, 2016

Long ago and far away in the adolescent cauldron known as Los Altos High School, I attended a senior U.S. history class with a man-child named Delos Roman. He was appropriately christened it seems, because his body resembled that of Zeus, the God of Thunder, and at 6’4”/230 pounds, he rumbled down the football sidelines like a Mack truck on a downhill mountain road. If you were a defensive corner, you didn’t want any part of him, nor did you after the 3:00PM Springtime bell, when “fight” became the rallying cry between Delos and any would-be challenger in the school parking lot. Fate, it seems, had predestined him to be a tough guy. His size didn’t necessarily mean he lacked intellect, but it emphasized brawn over brains and he went with his strong suit like many of us did. Homecoming queens, high scoring SAT nerds, chess club leaders, debate champions, even those with less attractive physical and IQ characteristics seemed primarily guided by how they came out of the oven, not by who they might become – if uninfluenced by their genetic makeups. That was not to discount free will (I now understand), but Nietzsche was never required reading back then and four years was too short a time to really judge the measure of a boy or a girl in blossom. “Mirror, mirror on the wall” seemed a better lead indicator than Nietzsche’s “Superman”.

I was reminded of Delos when the phone rang at my office several months ago and my assistant said there was a Mr. Roman on the line. He had had a hard life, he said, and wanted to know how to invest the $50,000 he had received from his mother’s will. He spoke softly and was almost inaudible, “I’ve been in and out of trouble all my life”, he murmured, “beginning in junior high when I was tough enough to beat up high school seniors.” His story had a ring of the famous Marlon Brando soliloquy in On the Waterfront. “I could’ve been somebody”, he said in so many words, “but I was too big for my own good.”

Well, Mr. Roman was just one example in hundreds of the Los Altos class of ’62, many molded by inbred physical and intellectual characteristics that had guided their destinies. But perhaps, I wondered if some of those with a plain vanilla wrapper or an average IQ might in some ways have been better off than the 800 SAT genius or the prettiest girl in the class. Maybe that left them free to determine their own direction, to develop a multitude of skills that then led to a more successful outcome than that of Delos Roman. Bob Dylan once wrote that “I got nothin’ Ma – to live up to.” He did of course – strange little guy with the raspy voice. But Dylan’s and Roman’s lives might just be a lesson for discouraged parents to stay optimistic. If your child isn’t at the head of the class or captain of the volleyball team, a free-will outcome, as opposed to predestination, may be just around their corner.

Some readers might think that there are some autobiographical traces in the above, and I suppose there are. I was “different”. While at 71 it is hard to remember details from a half century past, as recently as 2007, I was the subject of a few revealing comments from a now retired Governor during a Fed meeting chaired by Ben Bernanke. I had been highly critical for several years of the potential housing bubble and the Fed’s neglect of same, which caused the Governor to criticize my written Investment Outlooks and label me as an “odd duck” and “increasingly addled”. Following much laughter, the Governor asked that the remarks be stricken from the minutes, which prompted another Governor to say “and replaced by what?” More laughter, but PIMCO and a few others it turns out had the last hoo-hah. The housing bubble and the Fed’s neglect of it was recognized early on by PIMCO’s Paul McCulley, an economist/investor who should belong in someone’s Hall of Fame. McCulley introduced me and PIMCO to Hyman Minsky and his personal characterization of the upcoming “Minsky Moment”, a phenomena that relied significantly on common sense as opposed to statistical modeling which the Fed used then and continues to. “Stability leads to instability” was Minsky’s mantra, but it still inevitably begged the big question of “when?” We solved that though, by turning credit analysts into pretend home buyers, sending them to Las Vegas, Memphis, Toledo, etc. to learn about “no docs” and “liar loans” long before the Fed did. Shades of the Big Short!

Which reminds me that in 2012, Michael Lewis had come out to interview me several months before his book was written, to explore the historical context of the Great Short and the Great Recession. Perhaps PIMCO’s story wasn’t extreme enough, because we didn’t actually short subprimes, but merely didn’t buy many of them, or perhaps I wasn’t addled enough like co-star hedge fund manager Michael Burry, who I share affection for and affliction with (and it’s not a glass eye). In any case, we weren’t part of Lewis’ story. Nevertheless, it was a fascinating period of corporate and global financial history, but one which continues to the present day in terms of The Fed, global central banks, and their fixation on statistical modeling to influence monetary policy, as opposed to common sense and financial regulation.

Today’s Fed and other model based central banks are, to my way of thinking, the ones that have more and more become “increasingly addled”. Their genetic makeup, like that of Delos Roman, seems to have been determined at origin and has since been centered on changes in the policy rate and the observation that higher short rates slow economic growth/temper inflation, and that low (or negative) interest rates do just the opposite. In recent weeks markets have witnessed Mario Draghi of the ECB speak to “no limit” to how low Euroland yields could be pushed – as if he were a two-time Texas Hold Em poker champion. In turn, Janet Yellen at the Fed, at least temporarily, halted their well-advertised tightening cycle at 25 basis points, followed a few days later by the BOJ’s Kuroda and a 5-4 committee vote to enter the black hole of negative interest rates much like the ECB and three other European central banks.

They all seem to believe that there is an interest rate SO LOW that resultant financial market wealth will ultimately spill over into the real economy. I have long argued against that logic and won’t reiterate the negative aspects of low yields and financial repression in this Outlook. What I will commonsensically ask is “How successful have they been so far?” Why after several decades of 0% rates has the Japanese economy failed to respond? Why has the U.S. only averaged 2% real growth since the end of the Great Recession? “How’s it workin’ for ya?” – would be a curt, logical summary of the impotency of low interest rates to generate acceptable economic growth worldwide. The fact is that global markets and individual economies are increasingly “addled” and distorted, exemplified by some significant examples featured below:

  1. Venezuela – bankruptcy just around the corner due to low oil prices and policy mismanagement. Current oil prices are (in significant part) a function of low interest rate central bank policies over the past 7 years.
  2. Puerto Rico – default underway due to overspending, the overpromising of retirement benefits, and the inability to earn adequate investment returns due to ultra-low global interest rates.
  3. Brazil – in deep recession due to commodity prices, government scandal and in this case, exorbitantly high real interest rates to combat the effect of low global interest rates, and currency depreciation of the REAL. No country over time can issue debt at 6-7% real interest rates with negative growth. It is a death sentence. In the interim, the monetary authorities deceptively issue, then roll over more than a $100 billion of “currency swaps” instead of selling dollar reserves in an effort to hoodwink the world that there are $300 billion of reserves to back up their sinking credit. This maneuver effectively costs the government 2% of GDP per year, leading to the current 9% fiscal deficit.
  4. Japan – 260% government debt/GDP and climbing sort of says it all, but there’s a twist. Since the fiscal (Abe) and the monetary (Kuroda) authorities are basically one and the same, in some future year the debt will likely be “forgiven” via conversion to 0% 50-year bonds that effectively never come due. Japan will not technically default but neither will private investors be incented to make a bet on the world’s largest aging demographic petri dish. I’m tempted to say that “Where Japan goes – so go we all”, but I won’t – it’s too depressing.
  5. Euroland – “Whatever it takes”, “no limit”, what new catchphrases can Draghi come up with next time? It’s not that there’s a sufficient recession ahead, it’s just that the German yield curve is in negative territory all the way out to 7 years, and the shaky peripherals are not far behind. Who will invest in these markets once the ECB hits an effective negative limit that might be marked by the withdrawal of 0% yielding cash from the banking system?
  6. China – Ah, the dragon’s mysteries are slowly surfacing. Total debt/GDP as high as 300%; under the table capital controls; the loss of $1 trillion in reserves to support an overvalued currency; a distorted economic model relying on empty airports, Potemkin village housing, and investment to GDP of 50%, which somehow never seems to transition to a consumer led future. Increasingly, increasingly addled.
  7. U.S. – Well now, the U.S. is impervious to all this, is it not? An 85% internally generated growth model that relies on consumption which in turn, relies on job growth and higher wages, all of which seems to keep on keepin’ on. Somehow, though, even the Fed seems to have doubts, as in last week’s summary statement, where for the first time in 15 years they were unable to assess the “balance of risks”. “We need some time here to understand what is going on”, says Kaplan from the Dallas Fed. Shades of 2007. The household sector has delevered, but the corporate sector never did, and with Investment Grade and High Yield yields 200-1000 basis points higher now, what does that say about future rollover, corporate profits and solvency in many commodity-sensitive areas?

OK – that’s it for now. As of this writing, stocks are back up, and the prospects for the USA becoming great again are looking skyward as well, at least according to the polls and Donald Trump. Now there’s an addled guy but … who knows, sometimes they succeed. What I do know is that our finance-based global economy is transitioning due to the impotence of monetary policy which has always, and is now increasingly focused on the elixir of low/negative interest rates. Don’t go near any modern day Delos Romans; don’t go near high risk markets, stay safe and plain vanilla. It’s not predetermined or guaranteed, but a more prosperous outcome should be somewhere around the corner if you do.

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About Janus Capital Group

Janus Capital Group Inc. (JCG) is a global investment firm dedicated to delivering better outcomes for clients through a broad range of actively managed investment solutions, including fixed income, equity, alternative and multi-asset class strategies. It does so through a number of distinct investment platforms, including investment teams within Janus Capital Management LLC (Janus), as well as INTECH Investment Management LLC (INTECH) and Perkins Investment Management LLC (Perkins), in addition to a suite of exchange-traded products under the VelocityShares brand as well as global macro fixed income products under the Kapstream brand. Each team brings distinct asset class expertise, perspective, style-specific experience and a disciplined approach to risk. Investment strategies are offered through open-end funds domiciled in both the U.S. and offshore, as well as through separately managed accounts, collective investment trusts and exchange-traded products. https://www.janus.com

This article is from Janus Capital Group and is being posted with Janus Capital Group’s permission. The views expressed in this article are solely those of the author and/or Janus Capital Group and IB is not endorsing or recommending any investment or trading discussed in the article. This material 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 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.


8643




Fixed Income

A Not So Gentle Reminder of Why You Should Own Bonds


If you’re invested in the market, you’re more than likely well aware of the recent volatility and its impact on your portfolio. But, as Matt Tucker explains, there is one investment that can help soften the blow.

 

You may have noticed that your investment portfolio has been bouncing all around lately. Depending on what you own, “bouncing” may be putting it mildly. If you own only stocks, the “bounce” may feel more like a “thud”. According to Bloomberg data, the S&P 500 Index – which is the leading indicator of large cap U.S. stocks – is down 9.64 percent this year, as of February 8. If you take out dividends, the price is actually closer to -9.383 percent. Ouch.

So where to turn? My colleagues Russ Koesterich and Terry Simpson talk about ways to ballast your portfolio with bonds to balance out equity risk. While I frequently discuss the importance of diversification here on the Blog, I’d like to take a deeper dive into the why and how.

DIVERSIFICATION MATTERS

It’s an investor’s rule of thumb and a rule of life – don’t put all of your eggs in one basket. When it comes to your portfolio, it’s best to spread out your holdings in markets to avoid being hit by the fall in any one investment. This is called “diversification”. It works when building a portfolio of individual stocks or bonds, and works equally well when building your overall investment portfolio.

CONSIDERATIONS FOR INCLUDING BONDS IN YOUR PORTFOLIO

As Terry and Russ note, many investors have steered clear of the Barclays Aggregate (Agg) bond index since 2013, believing its higher duration, or interest rate risk, left them exposed to large losses in the event that interest rates skyrocketed. Well, the Federal Reserve raised its key interest rate in December from a range of 0 percent to 0.25 percent to a range of 0.25 percent to 0.5 percent. But in an unexpected twist, most interest rates have actually fallen so far this year.  As a result, according to Bloomberg data, the Agg is up 2.05 percent through February 5. That’s right. It’s up. And while it’s not enough to save you from falling equity markets, it can help cushion the blow.

Let’s look at a side-by-side comparison. To illustrate our point, we looked at the S&P 500 to represent equity performance and the Agg to represent bond market performance, both YTD through February 8, 2016. The chart below shows the return numbers for a portfolio made up entirely of stocks, a portfolio made entirely of bonds and portfolios with blends of both stocks and bonds:

As you can see, the diversified portfolios have done much better in the equity market downturn, cushioning some of the stock market losses.

Now some of you may be looking at the markets and saying “Sure Matt, I get that this works when equities fall.  But most people believe that equities will have higher returns than bonds over the long run.  So I am going to stay in equites and just ride the market out”.  I hear comments like this a lot, especially from younger investors.  In theory this approach could work, but there are two big issues you may want to consider:

  1. Saying you are going to ride a market out, and then actually doing it when faced with a sliding portfolio, are two very different things. There is lots of behavioral finance research that shows that investors often make bad investment decisions that are driven by emotion.  You may be able to avoid this, but the data says that it is hard for most people to do.
  2. You can live with a highly volatile portfolio so long as you have an infinite time horizon. But what happens when you actually need to liquidate your investment?  Maybe you want to buy a car or a new home.  What if your portfolio is down then? If you sell you lock in those losses.  This is really the core issue with volatility: It can cause your investments to drop in value at the wrong time.  A portfolio with less volatility is less likely to be significantly down at a point in the future.

And the recent market swings really bring this diversification discussion home. When the equity market is performing well, you may be giving up some gains by owning bonds, but you’re also building some cushion should stock markets fall. This balanced portfolio approach helps insulate you from risk, as it is less susceptible to volatility and your portfolio value doesn’t fluctuate as dramatically. This means you have a better sense of how much your investment is worth, and less uncertainty is always a good thing.


Matt Tucker, CFA, is the iShares Head of Fixed Income Strategy and a regular contributor to The Blog.
 

Investing involves risks, including possible loss of principal.  Bond values fluctuate, so the value of your investment can go up or down depending on market conditions.  Fixed income risks include interest-rate and credit risk. Typically, when interest rates rise, there is a corresponding decline in bond values. Credit risk refers to the possibility that the bond issuer will not be able to make principal and interest payments.

Index returns are for illustrative purposes only.  Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results.

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of February 2016 and may change as subsequent conditions vary. The information and opinions contained in this post are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock, its officers, employees or agents. This post may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any of these views will come to pass. Reliance upon information in this post is at the sole discretion of the reader.

©2016 BlackRock, Inc. All rights reserved. iSHARES and BLACKROCK are registered trademarks of BlackRock, Inc., or its subsidiaries. All other marks are the property of their respective owners.

iS-17743

This article is from BlackRock and is being posted with BlackRock’s permission. The views expressed in this article are solely those of the author and/or BlackRock and IB is not endorsing or recommending any investment or trading discussed in the article. This material 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 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.


8642




Stocks

The Best and Worst of the Telecom Services Sector 1Q16


Sector Analysis 1Q16

The Telecom Services sector ranks eighth out of the ten sectors as detailed in our 1Q16 Sector Ratings for ETFs and Mutual Funds report. Last quarter, the Telecom Services sector ranked eighth as well. It gets our Dangerous rating, which is based on aggregation of ratings of six ETFs and 13 mutual funds in the Telecom Services sector as of January 22, 2016. See a recap of our 4Q15 Sector Ratings here

Figure 1 ranks from best to worst all six Telecom Services ETFs and Figure 2 shows the five best and worst-rated Telecom Services mutual funds. Not all Telecom Services sector ETFs and mutual funds are created the same. The number of holdings varies widely (from 24 to 56). This variation creates drastically different investment implications and, therefore, ratings.

Investors seeking exposure to the Telecom Services sector should buy one of the Attractive-or-better rated ETFs from Figure 1.

Figure 1: ETFs with the Best & Worst Ratings – Top 5

* Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

Figure 2: Mutual Funds with the Best & Worst Ratings – Top 5

* Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

Rydex Telecommunications Fund is excluded from Figure 2 because its total net assets (TNA) are below $100 million and do not meet our liquidity minimums.

iShares North American Tech-Multimedia Networking ETF (IGN) is the top-rated Telecom Services ETF and Fidelity Wireless Portfolio (FWRLX) is the top-rated Telecom Services mutual fund. IGN earns an Attractive rating and FWRLX earns a Neutral rating.

iShares US Telecommunications ETF (IYZ) is the worst-rated Telecom Services ETF and Rydex Telecommunications Fund (RYTLX) is the worst-rated Telecom Services mutual fund. Both earn a Very Dangerous rating.

45 stocks of the 3000+ we cover are classified as Telecom Services stocks, but due to style drift, Telecom Services ETFs and mutual funds hold 56 stocks.

China Mobile Limited (CHL: $52/share) is one of our favorite stocks held by Telecom Services ETFs and mutual funds and earns a Very Attractive rating. Since 2012, China Mobile has generated positive economic earnings, maintained a top quintile return on invested capital (ROIC) of 20% or higher, and generated a cumulative $22.9 billion in free cash flow. However, CHL remains significantly undervalued. At its current price of $52/share China Mobile has a price to economic book value (PEBV) ratio of 0.6. This ratio implies that the market expects China Mobile’s profits to permanently decline by 40% from current levels. If China Mobile can grow profits by just 10% compounded annually for the next five years, the stock is worth $123/share – a 136% upside.

Telephone & Data Systems (TDS: $21/share) is one of our least favorite stocks held by FTUAX and earns a Dangerous rating. Since 2009, Telephone & Data systems after-tax profit (NOPAT) has declined by 21% compounded annually. At the same time, its ROIC has fallen from 5% to a bottom quintile 1%. Shares of Telephone & Data remains significantly overvalued given the clear deterioration of its business operations. To justify its current price of $21/share, TDS must immediately achieve pre-tax margins of 3% (0% in 2014) and grow revenue by 10% compounded annually for the next 16 years.

Figures 3 and 4 show the rating landscape of all Telecom Services ETFs and mutual funds.

Figure 3: Separating the Best ETFs From the Worst ETFs

Sources: New Constructs, LLC and company filings

Figure 4: Separating the Best Mutual Funds From the Worst Mutual Funds

Sources: New Constructs, LLC and company filings

Disclosure: David Trainer and Kyle Guske II receive no compensation to write about any specific stock, sector or theme.

About New Constructs

QUESTION: Why shouldn’t ETF research be as good as stock research? Why should ETF investors rely on backward-looking price trends?
ANSWER: They should not.

Don’t judge an ETF by its cover. Take a look inside at its holdings and understand the quality of earnings and valuation of the stocks it holds. We enable you to choose the best ETF based on its stock-picking merits so you do not have to rely solely on backward-looking technical metrics. 

The figure below details the drivers of our forward-looking Rating system for ETFs. The drivers of our predictive rating system are Portfolio Management and Total Annual Costs. The Portfolio Management Rating (details here) is the same as our Stock Rating (details here). The Total Annual Costs Rating (details here) captures the all-in cost of being in an ETF fund over a 3-year holding period, the average period for all fund investors.

 

Cutting-edge technology enables us to scale our forensics accounting expertise so that we can cover enough stocks to cover the ETFs that hold them as well. Learn more about New Constructs. Get a free trial. See what Barron’s has to say about our research.

This article is from New Constructs, LLC and is being posted with New Constructs, LLC’s permission. The views expressed in this article are solely those of the author and/or New Constructs, LLC 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.

 

 

 

 

 


8641




Stocks

The Unbearable Heaviness of the US Dollar


January turned out to be a sorry beginning to 2016. The Dow Jones Industrial Average lost 5.50%, the S&P 500 fell 5.86%, and the NASDAQ dropped 8.61%.  

When 2015 started, the general consensus of most economists was that the economy would experience stronger growth than in prior years, primarily because of a drop in energy prices.
 
When fourth quarter GDP results came in at a very soft 0.7%, that cemented the year as being virtually identical to the previous one.   

Mighty Dollar

In 2015, GDP growth registered 2.4%. Both were impacted by strong gains in the dollar against nearly every major currency.  
In sum, the dollar has appreciated nearly 30% over the last two years, and the continued strength has dramatically hurt US exporters and corporations with the majority of their revenues outside the country.

Fed Policy

US monetary policy makers announced no change in interest rate level or policy, and Fed Fund futures now show the market expecting the Reserve Board to only raise rates one more time during the rest of 2016.  

The Board has repeatedly insisted it is ‘data dependent’ and in official announcements continues to mention the prospect of inflation registering 2% on an annualized basis.  

Commodity markets have cratered and global markets and central banks all over the world keep making plans to fight deflation, not inflation.  

Commodity Bust

The divergence in central banking policy direction keeps currency and commodity traders busy and global investors guessing.  
As for most sectors of the US economy, other than energy, materials, and heavy manufacturing, service-based companies are enjoying the benefits of cheap inputs and stable, but unexceptional demand.  

Housing continues to make its way back as millennials try to find starter homes. Auto sales remain at all-time highs, although many believe they have reached a peak.  
 
Outlook

The financial services area saw a record year in merger and acquisition transactions, which helped offset weak fixed-income numbers.     

As for the equity markets, plenty believe high-yield bond prices show equity indexes must either decline, or the bond market has current conditions wrong.  

Time will tell, but if investors can plan on lower for longer, and GDP plods along at 2%-2.5%, I find it hard to see how equities remain a better alternative to plenty of other asset classes.  

One thing is for certain, we are going to find out.     

Yale Bock is founder of Y H & C Investments, a registered investment advisor in Las Vegas, Nevada. He is also Portfolio Manager of Concentrated GARP and Long Term GARP portfolios on Covestor. Covestor is an online investing marketplace and a division of Interactive Brokers Group.

This article is from Y H & C Investments and is being posted with permission from Y H & C Investments. The views expressed in this article are solely those of the author and/or Y H & C Investments 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.


8640




Fixed Income

MNI U.S. Risk-O-Meter


Sales of new investment-grade bonds fell to just one German state-owned financial firm, a plunge from last week’s modest level, as market turmoil kept corporate issuers sidelined. Jitters about European banks, a precipitous decline in oil prices and global equities, as well as lingering concerns about slowing global growth spurred issuers to await a more stable backdrop for entry. Risk-takers also erred on the side of cautioun, while Federal Reserve Chair Janet Yellen gave her semi-annual Monetary Policy Report to Congress. Additionally, trading flows were relatively thin, with several Asian markets closed for the week, or part of the week, to observe the Lunar New Year holidays. Meanwhile, a backlog of new deals has been swelling, and the primary market is likely to burst once a window opens with sufficient calm.

 

Keep pace with the latest corporate news with MNI's US Risk-O-Meter, a weekly recap of credit risk appetite! For more information and a full version of the US Risk-O-Meter, email Steven Levine at steven.levine@mni-news.com. Click here for more about MNI.
 

This article is from Market News International (MNI) and is being posted with MNI’s permission. The views expressed in this article are solely those of the author and/or MNI 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.


8639




Stocks

Nasdaq Market Intelligence Desk - Equity Market Insight February 12, 2016


Market Update:

Today, the broader market rebounded from sharp losses and equity investors hope that stocks can build on a rally that began in the late afternoon when the Dow was down about 400 points. Ahead of the holiday weekend, the S&P 500 is attempting to close higher for the first day this week. All the major indices are higher this morning, helped by big gains from financial stocks (+2.5%).

  • Gotta get the Milk and Bread? When there is a weather forecast for snow or subzero temperatures, shoppers often flock to stores to buy groceries. It seems the same safety trades are in place with the market racing for bonds and gold and shunning bank stocks on fears rates might see an extended period of “subzero” in many countries. There is even some speculation the US could one day do the same. Whether this turns out to be seen as an overreaction to forecasts or a prudent stocking up on safe things remains to be seen.   
  • Investors got their first sign that consumer are putting the money they were saving at the gasoline pumps and their improving wages into the retail market. January’s US Retail Sales (+0.2%) came in higher than expected (+0.1%), during a volatile trading period. Consumers might be spending more, but don’t appear to be confident about the economy as The U of Michigan Sentiment Index fell to a 4 month-low (90.7), and missing expectations for the 4th time out of the past 5 readings.
  • Speaking of OPEC, “everyone is ready to cooperate,” U.A.E. oil minister says in interview on Sky News Arabia.  Seems when crude prices dip below $30 we hear chatter of production cuts, prices rise a bit, and nothing happens. Global oversupply remains around 1.7 mbps and onshore storage facilities are nearing capacity, so bearish conditions remain in place. Crude prices are in the green today [WTI +10%, Brent +7.6%], but both WTI & Brent are still down 6% and 5% respectively for the week.

Technical Take:
As of 11:05 AM EST
Nasdaq Composite:
Advancers: 1377
Decliners: 756
Advance Volume: 83MM shares
Decline Volume: 49MM shares
New 52 week Highs (prior close): 10
New 52 week Lows (prior close): 500


Possibly or at least partially in reaction to a rebound in oil prices on the back of speculation that producers could work together to cut output, stocks are rallying. We find this curious though since the fact that Oil is being used as an economic gauge means that only news on the demand side of the equation should matter, not supply. More likely, the light volume equity bounce we’re seeing is a result of strength in banks as with DB now planning to buyback $5B in debt and reports that Jamie Dimon personally purchased $26.6MM of JPM stock are taken as an indication that world may not be coming to an end via another credit crisis. At the same time, from a technical perspective there are a couple of signs that a sustained rebound may be budding for equities, though next week will tell us a lot more.  

  • Yesterday the S&P 500 Index (SPX) held our 1810 support, in this successfully testing the 1/20 lows. Some may also make note of a small RSI divergence as the SPX has made new, lower closing lows this week while daily RSI, a measure of ‘overbought/oversold’ failed to register a new low vs the 1/20 low. This along with extreme bearish sentiment as defined by this week’s 49% bear reading from the American Association of Individual Investors (AAII) survey, matching the levels seen coincident with the 1/20 lows, is encouraging from a contrarian’s point of view.  Closing with traction above former support at 1850 would be a modest positive, 1875 more so.  
  • On the Nasdaq Composite Index (CCMP) we see that it too roughly held its 1/20 lows yesterday before reversing.  Today, with less market cap weighting of financials and energy (the leading sectors on the day), the CCMP is lagging. In terms of breadth though it is nearing 2:1 for the advancers. A confident close today above 4350 would get our attention. Otherwise 4220 – 4210 is support to watch.

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.
Vincent Randazzo, CMT is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over 13 years of experience in equity markets having served in equity research sales and desk analyst roles at major banks. Vincent’s specific expertise is in technical analysis and has been a Chartered Market Technician (CMT) since 2007.
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.

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.


8638




Options

Profit From Investor Fear With a Wells Fargo Trade


The options market will literally pay you to agree to buy a blue chip bank’s stock at a lower price.

 

Positioning for bank stocks to rebound and rally is a flying pig trade, but stranger things have happened.

After all, negative interest rates are descending upon the world. Dividend yields are now higher than corporate bond index yields for 44% of the U.S. market and 64% of the European market, according to Goldman Sachs. Some investors might equate those developments as signs of a barking cat.

So, in the spirit of expecting the unexpected, Susquehanna Financial Group is telling clients to consider upside trades on Wells Fargo (ticker: WFC). Recently, we broadly advocated buying bank stocks, largely because valuations were so low.

Some might note that bank valuations are low for a reason, but sun shines on dogs, as one witty trader likes to say, so herewith are a few rays for aggressive traders, courtesy of Susquehanna’s Chris Jacobson.

In a recent trading advisory, the strategist told clients that Wells Fargo is trading at historically low valuations. The stock has declined some 17% this year.

If you think Wells Fargo, often regarded as America’s best-run bank, is undervalued, consider selling July puts and buying calls to position for a rebound.

The risk-reversal strategy is a Striking Price favorite because it monetizes investor fear. The trade often works wonders when fear is high, as is the case with financials right now. The implied volatility of Wells Fargo’s options that expire in three months are trading around a two-year high of 29%. Historical volatility is about 24%.

Elevated volatility reflects investor concern about the near-term future of Wells Fargo stock. Executing a risk reversal thus expresses a view that the fear is overstated, at least for long-term investors.

When Wells Fargo’s stock was at $45.31, Jacobson suggested that clients consider selling the July $42 put and buying the July $50 call. Earlier this week, the put and call each traded at $1.85, so the trade could have been executed essentially for free (not including commissions or margin requirements). In more recent trading, prices were even better.

The July $42 put was bid at $2.33, and the call was offered at $1.37 with the stock around $45. This means the options market is paying investors 96 cents for agreeing to buy Wells Fargo stock at $42, and to control the stock above $50.

If the stock is below $42 at expiration, investors would be obligated to buy Wells Fargo’s stock or cover the put at a higher price. Should the stock advance, investors are in a position to profit further if the stock is above the $50 strike price. At $55, which would be a major move, the call is worth $5. The stock’s 52-week high is $58.76.

“For investors who are not quite ready to buy stocks, but fearful of missing out on a rebound, and willing to buy in the event of another leg lower, the bullish risk reversal may make sense,” Jacobson advised clients in his note.

If you put any faith in price targets, Susquehanna sees Wells Fargo hitting $56. Jacobson’s trade puts investors right into the middle of the action. While he likes Wells Fargo, the risk-reversal strategy can be applied to other blue chip stocks that rank as long-term investments.

Get investing analysis that moves stocks and markets—Subscribe to Barron’s for just $1 a week.
 
This article is from Barron's and is being posted with Barron’s permission. The views expressed in this article are solely those of the author and/or Barron's 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.

8637




Stocks

OTC Markets Group Q4 Indexes Performance & Rebalancing


On January 26, OTC Markets Group announced the fourth quarter 2015 performance and quarterly rebalancing of the OTCQX® indexes, the OTCQB® Venture Index, the OTCM QX ADR Index (“OTCQX30”) and the OTCM ADR Index, which track securities traded on the OTC Markets.

OTCQX U.S. Index (.OTCQXUS) Q4 Performance

The OTCQX Composite Index (.OTCQX) gained 4.5% in the fourth quarter, compared to an 11.6% decline in the prior quarter.  The Index was up 3.9% for the full year 2015.  

The OTCQX Billion+ Index (.OTCQXBIL) was up 4.6% in the fourth quarter, compared to an 11.6% decline in the third quarter.  The Index was up 1.8% since its launch in the second quarter 2015.  

The OTCQX International Index (.OTCQXINT) rose 4.5% in the fourth quarter, compared to an 11.6% decline in the prior quarter.  The Index was up 3.8% for the full year 2015.  

The OTCQX U.S. Index (.OTCQXUS) gained 9.8% in the fourth quarter and was up 20.2% for the full year 2015.  

The OTCQX Banks Index (.OTCQXBK) rose 6.4% in the fourth quarter, compared to a 1.0% gain in the prior quarter.  The Index was up 16.1% since launching in the first quarter 2015.

The OTCQB Venture Index (.OTCQB) declined 7.0% in the fourth quarter and was down 26.8% since its launch in the first quarter 2015.  

The OTCM QX ADR 30 Index (.OTCQX30), powered by BNY Mellon DR IndicesSM, gained 4.89% in the fourth quarter compared to a 9.95% decline in the third quarter.  The Index was flat for the year.

The OTCM ADR Index (.OTCDR) powered by BNY Mellon DR Indices, rose 4.72% during the fourth quarter compared to an 11.95% decline in the prior quarter.  The Index was down 1.06% for the full year 2015.


To view the real time best bid/ask data for 10,000 OTCQX, OTCQB, and Pink securities, customers of Interactive Brokers can subscribe to OTC Markets Group data in Account Management.


Q4 2015 Index Performance & Rebalancing

These indexes are market capitalization-weighted and have a minimum liquidity screen to ensure tradability; and are re-balanced every quarter.

In Q4, the following companies were removed from our indexes as they graduated to an exchange listing during the quarter:
-    Anavex Life Sciences Corp.
-    Klondex Mines Ltd.
-    Xtant Medical Holdings, Inc.
-    Alexandria Real Estate Equities, Inc.
-    COPsync, Inc.
-    Titan Pharmaceuticals, Inc.
-    Trinity Place Holdings Inc.

OTC Markets Group Inc. (OTCQX: OTCM) operates Open, Transparent and Connected financial markets for 10,000 U.S. and global securities.  Through our OTC Link® ATS, we directly link a diverse network of broker-dealers that provide liquidity and execution services for a wide spectrum of securities.  We organize these securities into markets to inform investors of opportunities and risks: the OTCQX® Best Market; the OTCQB® Venture Market; and the Pink® Open Market.  

OTC Markets Group continues to be the global leader in exchange graduates, advancing more than 450 companies to the New York Stock Exchange, NASDAQ and NYSE MKT since 2009. In 2015, 60 companies graduated from the OTCQX, OTCQB and Pink markets to an exchange compared with nine graduates from Canada’s TSX Venture Exchange and four graduates from the London Stock Exchange’s AIM Market.

Our data-driven platform enables investors to easily trade through the broker of their choice at the best possible price and empowers a broad range of companies to improve the quality and availability of information for their investors.  To learn more about how we create better informed and more efficient financial markets, visit www.otcmarkets.com.

OTC Link ATS is operated by OTC Link LLC, member FINRA/SIPC and SEC regulated ATS.

Subscribe to the OTC Markets RSS Feed

Past performance does not guarantee future results. Investors cannot invest directly in any of these indexes.

OTC Markets Group Inc. provides no advice, recommendation or endorsement with respect to any company or securities.  Nothing herein shall be deemed to constitute an offer to sell or a solicitation of an offer to buy securities. Investors should undertake their own due diligence and carefully evaluate companies before investing.


This article is from OTC Markets Group and is being posted with OTC Markets Group's permission. The information provided in this article is from OTC Markets Group and IB is not endorsing or recommending any investment or trading discussed in the article. This material 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 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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