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Securities Lending

Shorts in Action: Short Sellers in 3 D Systems Inc. (DDD) Remain Undeterred by Creeping Share Price


3 D Systems, the US-based 3-D printing solutions company, regains the “top pick” position this week as short interest volume records another new 12-month peak, up 4 percent before falling back slightly to end the week up a net 2 percent. Moving in line with the advance, utilization moved up from just over 97 percent to end the week at the maximum 100 percent of the available supply, driving fees up by some 37 percent as supply dwindled. Over the week, the share price continued its slow recovery, up 6 percent from $8.98 to close the week at $9.53. While this may have brought some cheer to those holding long positions, with 100 percent of the available shares being borrowed, the short sellers are not being deterred from keeping their exposure to a falling share price at the maximum.

 

  1. AMC Entertainment Holdings Inc. (AMC) – Moving up from our number four slot last week, AMC, a US-based operator of over 10,000 screens across the US and a further 2,200 in Europe, occupies the number one slot as short interest volumes continue to decline. Volume fell by 9 percent during the week, but, in contrast to the previous week, utilization fell largely in line with the volume fall, dropping from 84 percent to 74 percent. The company share price regained its upward momentum, adding 5 percent over the week to close up $0.65 at $14.65. The reducing short position and the recovering price are both positive signals, but as the shares remain some 59 percent below the 12-month peak, the short sellers have plenty of room for maneuver yet.
  2. J C Penney Company Inc. (JCP) – The beleaguered high-street store is rarely off the hot stocks list and is back this week as short interest volume increases and a proportion of the available supply decreases. Volume rose 3 percent on the week, but utilization fell just 1 percent, from 92 to 91 percent. While this is a small change, it is particularly significant as volumes rise, suggesting an increased supply as long investors extend their positions, potentially as a result of the expansion into the clothing subscription business, specializing in big and tall sizes. Over 90 percent utilization is still extremely high, however, and J C Penney is far from in the clear, particularly as the shares edged 4 percent lower on the week, but the changes are still positive, if only slightly.
  3. Roku Inc. (ROKU) – Down two positions from last week, Roku, a provider of video streaming gadgets that came to the market via an IPO on September 28, is back this week as short interest volume falls by 17 percent and utilization ends its brief time at the maximum of 100 percent. Ending the week at 88 percent, utilization fell more slowly than absolute volume, suggesting that supply also decreased during the week. Fee levels have risen with the borrowing demand remaining strong despite the shares closing up again, if only by 3 percent or $1.24 at $44.79. While this is substantially over the IPO price, it is down from the 12-month peak of $51.80 seen on November 28. Despite the rising share price, short selling demand remains high in the expectation that the current share price is not sustainable.
  4. Carvana Co. (CVNA) – Having made its debut on the hot stocks list three weeks ago, Carvana, the e-commerce platform for buying used cars through a mobile app, is back this week as short interest volume makes the first meaningful decline post IPO. Since November 17, short interest volume has decreased some 27 percent as the company share price rose steeply. Having seen its post-IPO share price peak at $23.39 in June, the shares fell back as low as $12.50 in October, only to recover once more to close last week at $21.24, just below the last peak. Over the same period, utilization, which had been at the maximum 100 percent, has also fallen, but less quickly, falling just 16 percent as supply dwindles, potentially as more investors cash out of Carvana.
  5. Tesla Inc. (TSLA) – The US-based manufacturer of electric vehicles and energy storage systems has been absent from the hot stocks list for a short while, but squeezes in this week as short interest volume had been declining, although not smoothly, since the end of January. The 12-month low was reached in the middle of October, down some 37 percent from the peak, but since then volume has been on the rise, adding 26 percent and pushing utilization back above 81 percent for the first time since May, before falling back to end the week at 75 percent. This final drop suggests that supply had once again increased as investors buy into the Tesla story, pushing the shares up at the end of the week to $315.13, way above $198 from 12 months ago, but also below the $389.61 peak seen in September.

 

DISCLAIMER: This document has been prepared by FIS Securities Finance LLC’s Astec Analytics business (“FIS”). The content of this document is intended for informational purposes only. FIS and its affiliates make no representation as to the accuracy or completeness of the information contained herein. In no event shall FIS and its affiliates be liable to you or anyone else for any decision made or action taken by you or anyone else in reliance on or in connection with the information contained herein. FIS is not in any manner providing any type of brokerage or investment advisory services nor is it acting in any capacity as a broker-dealer or investment advisor and the document should not be a basis for making any investment or financial decision. You should seek the assistance of a financial or other professional advisor for advice before taking any action or making any decision based on the information contained herein.
 

This article is from FIS' Astec Analytics and is being posted with FIS' Astec Analytics' permission. The views expressed in this article are solely those of the author and/or FIS' Astec Analytics 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 it's not too late to embrace risk


We see the economic expansion—and the outperformance of risk assets—having more room to run. Richard explains.

We believe the synchronized global economic expansion has plenty of room to run in 2018 and beyond—more than many investors think. We like equities and see emerging markets (EM) at an earlier stage of expansion, boding well for EM assets.

The BlackRock Growth GPS (the green line in the chart below) shows that growth among G7 countries is cruising at above-trend rates. Yet consensus expectations have largely caught up with our GPS. That catch-up helped drive risk asset gains this year but now suggests less room for upside surprises to play such a role. Sustained growth amid low market volatility should underpin risk assets—especially if many investors, fearing a near-term downturn, start to embrace the upbeat outlook.

We believe the broad global expansion is not as long in the tooth as many assume. See our 2018 Global Investment Outlook for more. Emerging markets are at an earlier stage of expansion and reinforcing the growth backdrop, benefiting from better trade activity and firmer commodity prices. We expect the EM world to weather any mild slowdown in China. The U.S. may soon receive a decent dose of fiscal stimulus from tax cuts. European economies are posting solid growth but have plenty of lingering spare capacity that could take years longer to absorb. The Federal Reserve is normalizing policy at a gradual pace, while other major central banks are still nurturing recoveries with stimulus.

Our conviction on the expansion’s durability, coupled with still subdued inflation and low interest rates, argues in favor of risk assets. And yet 2017 will be a tough act to follow. We believe returns in many asset classes will be more muted, even as structurally lower interest rates mean equity multiples can stay higher than in the past. We believe equities offer greater upside than credit as the cycle matures. And we see more earnings upgrades next year, though a higher base of comparison will make it harder to top expectations.

We prefer equities outside the U.S., where fuller valuations are less of a drag. We are positive on EM equities due to increasing profitability and relatively attractive valuations. In developed markets, we like tech and financials—with the latter poised to benefit from U.S. deregulation. We also see this environment as positive for the momentum style factor, albeit with potential for sharp reversals. Bottom line: We see the economic expansion—and the outperformance of risk assets—having more room to run. Read more market insights in my Weekly Commentary.

Richard Turnill is BlackRock’s global chief investment strategist. He is a regular contributor to The Blog.

 

Investing involves risks, including possible loss of principal.

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 December 2017 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 forecasts made will come to pass. Reliance upon information in this post is at the sole discretion of the reader. Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.

©2017 BlackRock, Inc. All rights reserved. BLACKROCK is a registered trademark of BlackRock, Inc., or its subsidiaries in the United States and elsewhere. All other marks are the property of their respective owners.

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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.


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Macro

More Evidence of Strain on the System


  • The U.S. PPI continues to show evidence of pipeline pressures on inflation, from low levels to a bit less low.
  • Operating rates from the ISM are starting to show strain on the system, and these lead by a year. Bottom line: inflation is not dead.
  • If the corporate tax rate cut is delayed in the U.S. until 2019, expensing provisions will be key (ie, there could be a rush for capex in 2018).  That’s more strain.

PIPELINE U.S. INFLATION PRESSURE STILL BUILDING

 

 

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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Bonds

Fund Spy: High-Yield State of Mind


High-yield bonds have been on an impressive run since the financial crisis. But what are their prospects going forward?

A version of this article was originally published in the December 2017 issue of Morningstar FundInvestor. Download a complimentary copy of FundInvestor here.

Despite a few hiccups along the way, high-yield bond funds have been on an impressive run since the 2008 financial crisis. From April 2009 through November 2017, the median high-yield bond fund returned 10.9% annualized. By comparison, the Bloomberg Barclays U.S. Aggregate Bond Index (often used as a proxy for a core investment-grade fixed-income allocation) only returned 4.0% annualized over the same period.

Spreading Holiday Jitters

But what are the prospects for junk bonds going forward? One way to answer that question is to look at the spread (or difference in yield) between high-yield bonds and U.S. Treasuries. The spread is a simple, short-hand way of assessing high-yield bond valuations. All other things equal, when the spread is narrow, high-yield bonds are relatively expensive. When it widens, they are relatively cheap.

On Dec. 8, 2017, the spread between junk bonds and Treasuries stood at just 3.63 percentage points. This spread has reached lower levels over the past 20 years--it hit 2.41 in June 2007, immediately preceding the financial crisis--but not very often. Until very recently, the post-crisis low was 3.39, reached on June 1, 2014, right before a commodity sell-off thrashed junk bonds and sent the spread soaring to a recent high of 8.87 on Feb. 11, 2016. Since then, high-yield bonds have been on a tear, with the median fund returning 14.3% annualized from Feb. 12, 2016, to Nov. 30, 2017. Following that impressive run, the spread hit a new post-crisis low of 3.38 on Oct. 24, 2017. High-yield bonds sold off very slightly in the weeks that followed but appear to have stabilized as of this writing.

The long-term average spread is roughly 5.7 percentage points, so current levels are well below that norm. As a result, managers are on edge and concerned about a potential sell-off. Many managers with whom we have recently spoken are taking the opportunity to increase the credit quality of their portfolios and swap into what they view as more liquid bonds.

If their prospectus allows them, some managers are also increasing their allocation to bank loans. These loans, which pay a floating coupon and are typically junk-rated, are often used by high-yield managers to increase the defensiveness of their portfolios. The securities have historically held up better than high-yield bonds during credit sell-offs and generally have higher recovery values in the event of a default. However, their effectiveness is reduced by at least two factors. Loans are frequently called at par, which reduces potential upside. Meanwhile, the defensive properties of bank loans stem from their seniority in a company's capital structure, which gives them a priority claim on a company’s assets in the event of a bankruptcy. With a significant proportion of new loans issued by companies with loan-only capital structures, this advantage is less pronounced.

Making Moves
The managers of https://im.mstar.com/im/premIcon.gif BlackRock High Yield Bond (BHYAX), which was recently upgraded to Silver from Bronze, have pared back their energy exposure and have limited their CCC exposure to bonds they believe are due for an upgrade. Meanwhile, https://im.mstar.com/im/premIcon.gif PIMCO High Yield (PHYDX) has increased its allocation of short-duration cash instruments up to roughly 10% as of June 2017, from a recent low of 3% in September 2016. Even the managers at https://im.mstar.com/im/premIcon.gif Artisan High Income (ARTFX) and https://im.mstar.com/im/premIcon.gif Fidelity Capital & Income(FAGIX), two of the Morningstar Category's more aggressive offerings, have been steadily upgrading the credit quality and liquidity of their portfolios over the last year.

However, there is a counterargument to these managers' concerns. Corporate America is arguably at its strongest since the financial crisis, with strong revenue and earnings growth and record profit margins. Demand also remains strong, especially from foreign investors who are looking to squeeze out extra yield wherever they can find it. This means that, while the current spread level might make investors nervous, there are no obvious catalysts that could trigger a sell-off, and default rates could remain relatively low. High-yield bonds could continue to rally, but investors should beware that there may be limited upside left in the current market.

Morningstar provides a constant source for investment ideas with our comprehensive analyst reports on equities, ETFs, and credit ratings from more than 100 analysts. U.S. Interactive Brokers clients can sign up for a free trial of these reports in Account Management.

This article is from Morningstar and is being posted with Morningstar's permission. The information provided in this article is from Morningstar 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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Technical Analysis

Technical Analysis (Gold, Dollar, Oil and more) heading into Thursday's open with Dan Gramza


 

Technical Analysis (Gold, Dollar, Oil and more) heading into Thursday's open with Dan Gramza

Dan Gramza takes a look at some key charts heading into Thursday's open, including gold, oil and the dollar.

This Daily Market Studies are presented by an unaffiliated third party and Interactive Brokers LLC does not create the content of these presentations. You should review the contents of each presentation and make your own judgment as to whether the content is appropriate for you. Interactive Brokers LLC does not provide recommendations or advice. This presentation is not an advertisement or solicitation for new customers. It is intended only as an educational presentation.

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