COMMODITY ZODIAC: Prosperous Horse

Happy Chinese New Year for all celebrating!  As a special tribute, this post will focus on the fact that all 5 commodities that start with the letter “c” (the same letter China starts with) in the S&P GSCI Agriculture and Livestock have had positive returns in 2014.  I picked the agriculture and livestock to symbolize the importance Read more […]

Housing Finance: Déjà vu All Over Again

Bonds May Puzzle But Stocks Could be Worrisome Bonds: Just when people thought we were safe from creative financing applied to bonds backed by homes, a new improved approach is about to surface.  The past year has seen an increase in buying homes for rent by private equity funds and others.  The private equity buyers Read more […]

The Shrinking US Federal Budget Deficit

The US federal budget has a reasonable probability (our base case scenario) of reaching operational balance – revenues equal expenses excluding interest expense – by FY2015. This is an amazing turnaround and it means that budget deficit is now shrinking faster, meaning reduced supply of US Treasuries, even as the Federal Reserve tapers its quantitative Read more […]

Where VIX Comes From

At work, I am sometimes asked this simple but challenging question: “Where does VIX come from?”  There is a reason I am asked this – I am our company’s product manager for volatility indices.  But I admit that I have struggled to come up with an approachable way to explain the methodology of the CBOE Read more […]

Dispersion and Correlation: Which is “Better?”

We recently introduced the concept of dispersion, which measures the average difference between the return of an index and the return of each of the index’s components.  In times of high dispersion, the gap between the best performers and the worst performers is relatively wide; when dispersion is low, the performance gap narrows.  Today’s dispersion Read more […]

A NICKEL For Your Thoughts?

Industrial Metals are historically the most economically sensitive sector besides energy. While Chinese oil demand growth is set at 3.6% in 2014 and HSBC’s Chinese Manufacturing Purchasing Managers’ Index (PMI) edged down to 50.8 in November, barely above the key 50-threshold delineating expansion from contraction, according to IEA’s OMR Report, nickel is the only commodity in petroleum and industrial Read more […]

Nat Gas Is HOTTEST In 4 Years

Every conversation I’ve had today with people from Nashville to Toronto has started with how cold it is outside.  After the shock of the cold and when the heating bills come due, the conversation may turn to how expensive heat was in January.  That, of course, is at least for those who don’t invest in Read more […]

Low Dispersion Implies Low Value Added

Understanding a market’s dispersion provides important insights into its internal dynamics and the opportunities and pitfalls that might await both active and passive investors.  Dispersion measures the average difference between the return of an index and the return of each of the index’s components.  In times of high dispersion, the gap between the best performers Read more […]