Michael Stanley

Do positive stock-bond correlations kill the case for #hedgefunds? Using PivotalPath data, the bubble chart below shows the correlation of various #hedgefund strategies to #stocks (horizontal axis) and #bonds (vertical axis) -- scaled by current AUMs. Most strategies are, and have always been, positively correlated to #equities but with lower #volatility. Hence, when stock-bond correlations were negative, hedge funds overall could be positioned as a fixed income substitute, something I wrote about in 2021: https://lnkd.in/endwxVaQ When stock-bond correlations flip to positive, though, most hedge fund strategies will have high correlation to BOTH stocks and bonds. The data below covers both negative and positive regimes. Assuming positive is the New Normal (see research from AQR Capital Management, Verdad Advisers and others), most bubbles will gradually slide down to the lower left -- not a good place to be. Of course, an astute allocator might notice that the #macro and #cta bubbles are quietly floating on the upper right -- the #diversification sweet spot. Maybe it's time to pump those up and deflate the others?

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Paper proposes "to expand the classical single-factor (CAPM) hedging model with the industry beta that is estimated using returns of the relevant industry ETFs. The resulting two-factor model... considerably improves efficiency of stock hedging." https://lnkd.in/e_Pb7ki9

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Monitor: US BSL CLO New Issue Arb Trend Since 2017 The median arbitrage metric YTD at 195 bps is actually lower than in both 2022 and 2023, but this year’s new issue volume has already far exceeded the past two years’ volume on an annualized basis. Similarly, 2018-vintage deals had the lowest median arbitrage metric at 191 bps, but 2018 was a record-breaking year for new issue #CLO volume at the time. On the other hand, 2020-vintage deals had the best median arbitrage metric at 243 bps, but their new issue volume was the lowest. If you’re interested in learning more about the premium content or would like a walkthrough of the website via Zoom, please don’t hesitate to email me at [email protected]. https://lnkd.in/e6sUTfjw

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Technical Analysis - Does it Actually Work? Many traders remain skeptical of technical analysis (TA). However, there are some TA frameworks, such as the "Relative Strength Index" (#RSI), that appear to add informational value. The attached chart shows the distribution of S&P 500 3-month returns over the past 10 years, both: 1) Outright 2) Conditioned on an elevated starting RSI (70+) As you can see, an elevated starting RSI appears to result in a "fatter left tail" for future equity returns. Some food for thought. Feel free to reach out with specific questions! (posts ≠ advice) | (reposts ≠ endorsements)

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Interesting Pic for the Day : Blackrock Q2 2024 Flow data. Total Aggregate flow of 82 bn dollar with organic growth of 3% . ETF continue to be rock star with 83bn dollar new positive flow with consistent growth ranging among 6-9% over long period . In the long run ETF is going to play very significant and Important role in portfolio construction both for capturing market growth and reducing cost at aggregate portfolio level . #ETF #Blackrock #Investing #Global #Opportunity

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An interesting study especially for those claiming that "high stock concentration invalidates rallies" Never, ever forget the SP500 is cap-weighted... In Technical Analysis jargon - a relative strength strategy ===============================================          WHERE TO FROM HERE ? =============================================== "Knowledge is the only Treasure that increases by sharing"... ..that is why I share Charts & Stats about: 💻 Trading / 📈 Technical Analysis / 🌍 Macros If you are interested in these topics, you can receive: 1. NEWSLETTER 📰 Join 2,000 others for my FREE "S.M.A.R.T. Trader Systems" Newsletter https://lnkd.in/eHcz-4Cd 2. NOTIFICATIONS 🔔 Join 8,200 others and click on Alex Spiroglou 🌍 + follow + 🔔 https://lnkd.in/efwd22Cz 3. EMAIL LIST 📩 Join 6,000 others in our email list https://lnkd.in/e2EK2r8S ===============================================

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🌪️ No one thought that a 15 bps hike from #BoJ would lead to this carnage. 📉 JPY/USD is suddenly back to $140, causing a global unwinding of Yen carry trade positions and significantly contributing to the sharp decline in global stocks. 📊 Allow me to explain what this means for the degen and what this could mean for macro and crypto: 1. The Yen Carry Trade: 💸 Think of traders as caffeine-fueled bargain hunters at Japan’s perpetual low-interest coffee shop. They borrow Japanese Yen (JPY) at rock-bottom rates, like getting their caffeine fix for pennies. 💵 They then exchange this JPY for US Dollars (USD) and head to the Wall Street buffet, loading up on high-yielding US stocks. 2. The Impact of Rising Japanese Interest Rates: 📈 Imagine the Bank of Japan (BOJ) as a grumpy barista who’s just hiked coffee prices. This sudden increase in interest rates has turned the JPY into a financial heavyweight, flexing its muscles against the USD. 😱 Now, traders are in a bind. It’s like finding out their bargain lattes come with a surprise surcharge. They must now pay higher interest on their borrowed JPY and are also facing a giant forex hangover because their USD investments no longer cover the beefed-up JPY debt. 3. Unwinding the Trade Positions: 🔥 This situation is causing a frantic unwinding of these trades. Picture traders as chefs in a kitchen disaster, scrambling to put out financial fires everywhere. 💥 Facing mounting losses and margin calls, traders are selling their US stocks faster than a hotdog vendor at a baseball game. They’re converting the proceeds back to JPY to pay off their loans, creating a financial stampede. 4. Short-term Market Implications: 🐘 This mass exodus from US stocks is putting additional pressure on the market, like a herd of elephants stampeding through a china shop. Adding to the chaos are geopolitical tensions in the Middle East and US political drama, turning the stock market into a rollercoaster ride of fear and panic. 💎 For the savvy investor, this turmoil is like finding hidden treasures at a yard sale. The panic-induced sell-offs allow them to snap up high-quality US stocks at bargain prices. By taking advantage of temporary mispricings caused by short-term crises, they can fortify their portfolios and potentially come out richer. ☕ So, while others are running for cover, the wise investor is the one sipping their metaphorical coffee, calmly buying up valuable stocks on the cheap (think Buffett or corporations full of cash). Join my telegram channel for more regular alpha: t.me/hashtalk1

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𝗔𝗿𝗲 𝘆𝗼𝘂 𝗽𝘂𝗿𝘀𝘂𝗶𝗻𝗴 𝗼𝗿 𝗮𝗿𝗲 𝗶𝗻𝗰𝗹𝗶𝗻𝗲𝗱 𝘁𝗼 𝗽𝘂𝗿𝘀𝘂𝗲 𝘁𝗵𝗲 𝗖𝗠𝗧 𝗱𝗲𝘀𝗶𝗴𝗻𝗮𝘁𝗶𝗼𝗻? 𝗥𝗲𝗮𝗱 𝘁𝗵𝗶𝘀… Many have asked me about CMT charter, with questions focused on the impact that it can have on one’s career. I am briefly discussing the pros & cons of the certification in this post. The idea is NOT to criticize (so please hold your fire), BUT to evaluate the CMT in an unbiased way, as per how the investment industry would value it. For the start, CMT is a renowned certification and if you search LinkedIn, it is widely held by industry practitioners. It has a thriving alumni network, in addition to easily being one of the most interesting finance certifications to study. It is an educational delight to go through its study materials. Lastly, the CMT Association invests a fair bit of efforts to hold regular industry networking events both online and offline. This shows the commitment that the CMT Association has made, towards the investment community and furthering the cause of technical analysis as a discipline. On the flip side, depending on what kind of an investor it is, the perception about CMT varies. This is not because of the CMT designation or the topic coverage itself, BUT because of how different investors perceive technical analysis as a discipline. Technical analysis as a discipline is NOT taken seriously by many categories of investors, such as… - Long Only - Fundamental Long/Short - Sovereign Wealth Funds - Mutual Funds Now mind you, these are the funds that have the chunkiest corpuses to invest, and they won’t take technical analysis seriously! Just think- if you were a fundamental investor managing billions of dollars, would you invest based on graphs, charts, patterns, shapes, moving averages & indicators? The answer is a loud NO! You would invest based on fundamental analysis & valuation, right? However, not all is lost for CMT! Retail, HNIs, AIFs, Hedge Funds using momentum strategies & Family Offices- these are the types of investors that usually view technical analysis somewhat favourably, because of its simplified nature. It also pays to bear in mind, that not every retail and HNI investor may have a strong understanding of fundamental analysis & so technical analysis comes handy to those. So, my LinkedIn family- when you go searching for a job based on CMT, you will have a higher chance of acceptance at brokerages that service retail, HNI or family offices types of investors. However, if you are targeting trading desks at bulge bracket investment banks, they will be indifferent to CMT. If you are trying to get an entry level job at one of these desks, then you will find it tough with just CMT Feel free to share your thoughts in the comments section! #students #education #equities #trading #investmentbanking #markets #iimlucknow #iimbangalore #jobs #careers #iimindore #CMTAssociation #CMT #MBA #FRM #CAIA #CPA #CA #iimcalcutta #mentoring #mentor #mentee #manankaro

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ESTR Futures Update: A sharp uptick in ICE's ESTR as it marches towards the 500k mark. Eurex crosses 200k. With just under 65k on CME that makes almost 765k O.I cumulatively. Euribor open interest remains a steady ~4m Drop me a message if you're curious on where we are seeing the flows etc. #markets #futures #cme #eurex #ice #trading

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Interesting to periodically check-in on the M2, #SP500 and 10-year yield relationships. I used to use MZM until the Fed abruptly discontinued it, but I digress... The plot was originally meant to visualize the effectiveness of the normalization method in #NNS vs. standard standardization and quantile normalization: https://lnkd.in/d7STW7P The causal analysis adds further insights. How good is NNS.caus()? See the following where #NNS causal analysis between Fed Assets and other macro variables is demonstrated with some random noise terms thrown in to try and confuse it. https://lnkd.in/eASD3-bQ #statistics #econometrics #macroeconomics #timeseries #forecasting #datascience #NNS #rstats

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Reexamining the Performance of Passive Options Strategies More than 40 years ago, Merton et al. published two papers examining the performance of passive options strategies. At the time of their studies, options data was not widely available, so they used historical volatility to calculate options prices. Since then, the options market has become highly liquid, with significant structural changes. A recent article reexamines the strategies studied by Merton et al., along with additional strategies, using actual options data from the period 2012 to 2023. Findings: -The original option strategies recommended by Merton et al. no longer provide a favorable return-to-risk ratio, likely due to assumptions in their simulation-based approach. -Recent data show that simple options strategies no longer add value to a portfolio or index. -However, three dynamic options strategies have outperformed the S&P 500 Index on a return-to-risk basis. -The favorable performance observed in prior studies can be replicated by incorporating simple market regime signals into strategy construction. -The Protective Put (PPUT) strategy consistently outperforms the S&P 500 Index on a return-to-risk basis. -Adding a simple logic of avoiding puts after a one-standard-deviation drawdown enables PPUT to outperform the index on a return basis with significantly lower risk. -A possible reason for the PPUT strategy's superior performance is that increased use of covered call strategies by firms reduces implied volatility levels, underpricing tail risk. Join the quant community—subscribe to the newsletter! Link in profile. References: -Andrew Kumiega, Greg Sterijevski, and Eric Wills, Black–Scholes 50 Years Later: Has the Outperformance of Passive Option Strategies Finally Faded?, International Journal of Financial Studies 12: 114. -Merton, Robert C., Myron S. Scholes, and Mathew L. Gladstein. 1978. The Returns and Risk of Alternative Call Option Portfolio Investment Strategies. Journal of Business 51: 183–242. -Merton, Robert C., Myron S. Scholes, and Mathew L. Gladstein. 1982. The Returns and Risks of Alternative Put-Option Portfolio Investment Strategies. Journal of Business 55: 1–55. #options #portfoliomanagement #quantitativeresearch Abstract Slightly over fifty years ago, the Black–Scholes option pricing model revolutionized investing by enabling a shift from linear to non-linear payoff structures. Myron Scholes later published two papers documenting the performance of passive option strategies that outperformed the underlying index on a risk–return basis. The options market has evolved considerably over the last fifty years from an open outcry trading structure with options being single-listed to a high-frequency computer-based market. This paper re-evaluates the trilogy of foundational studies to determine whether passive-option-enhanced portfolios still produce superior performance in the current high-frequency options market environment.

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FREE FX MANUAL FROM LEHMAN. Another chance to get hold of this sort after manual. I was reading it only yesterday and many of the insights you can glean still stand up in today's world. What I also love about are the chapters on Options and Swaps. Then there is of course the gold on Forwards. As a non bank trader I never used FWDS only outright Futures so looking at how to calculate the points was a real eye opener when i started to read it over 10 years ado. If you would like a PDF copy LIKE, comment and sign up to my new FREE insight list: The Adamis Gold. You can get the link in the comments. Share and enjoy the gift. BTW I will be sending out the full PDF copy this Saturday. Along with key interviews with trading legends, deeper insights on USD and RISK and of course key details for our new events we are planning this year.

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If 525 bps rate hikes did not impact the equity markets, will a cumulative of 75 bps of cuts make a difference ? The markets did not get impacted by rate hikes due to the enormous liqudity infusion and duration purchases by the Fed in the years preceding 2022. The liqudity infused earlier multiplied many times over and served as a buffer to rate hikes and benign QT. The markets seem to be over estimating the impact of rate cuts on equities expecting a broadening out of the rally into the mid-caps and small caps. It will be hard for them to rally when the broader markets correct. Will not be prudent to buy the rumour and buy the fact again. A 6 to 8 pct correction in the headline index in the next couple of months should be par for the course

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#Lunarcycle on stock and seeing its power all the way on the upside, every single time the stock has rallied higher post the formation of this cycle - you will be shocked to see this science of trading - join me : https://lnkd.in/dUk3nTXn

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The recent step up in the markets implied probability of a 50 basis point cut this week, rather than 25 bps, has made it the most likely outcome in traders’ opinion. It was not a function of new data or a changed view of the Federal Reserve’s risk mitigation mindset. Rather, it’s a reflection of last Friday’s “informed reporting” by the WSJ and FT, together with no apparent pushback by Fed officials after the resulting market moves. And all this ahead of tomorrow’s retail sales numbers. Among the questions I’ve been wondering about and would appreciate your insights:   How does the Fed push back against media reporting during the “quiet period,” and   Will top Fed officials now feel significantly more compelled to opt for a 50 bps cut given it’s the highest probability market outcome? Underlying all this is the deeper issue of the Fed’s current phase of fluid policy guidance, including little clarity on the destination for rates and the journey there. #economy #markets #federalreserve

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FX LEHMAN MANUAL. Another chance to get this. It doesn't matter how experienced you are as a trader I really recommend you read this. Just for the Forwards calculation alone (which changed my game) I recommend all traders go through the whole manual. Back pre GFC some say Lehman was THE other Alpha bank (GS being the rival) I never worked there BUT I have mentored ex-traders who did. They are the finest traders I have ever met. Take outs for me: 1. The FWDS formula to work out a quick and dirty spot price based on rates today. 2. Crosses - say no more but if you want to know how I look at crosses DM me. 3. Swaps and Options - a nice brief outline of these. Please LIKE and make a comment for a PDF Copy. You can also join our institutional insights list The Adamis Gold to never miss out on all the future Manuals and interviews with FX legends. Click in the comments as the link is there too.

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Kaal Chakra (Master Of Cycles): Time trading can make a lot of difference for Options traders. To learn this science of trading Options using Hurst's Time cycle,Lunar Cycle, and Gann, register for the time trading event on the 20th-21st of July https://lnkd.in/dDhAaaNp

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