Absolute Return as an Investment Objective

Originally posted on Asymmetry Observations:

Absolute Return objective fund strategy

In Absolute Return: The Basic Definition, I explained an absolute return is the return that an asset achieves over a certain period of time. To me, absolute return is also an investment objective.

Absolute Return as an investment objective is one that does not try to track or beat an arbitrary benchmark or index, but instead seeks to generate real profits over a complete market cycle regardless of market conditions. That is, an absolute return objective of positive returns on investment over a market cycle of both bull and bear market periods irrespective of the direction of stock, commodity, or bond markets.

Since the U.S. stock market has been generally in a uptrend for 6 years now, other than the -20% decline in the middle of 2011, we’ll now have to expand our time frame for a full market cycle to a longer period. That is, a full market cycle…

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The Untapped $140 Trillion Innovation For Jobs Market

Originally posted on TechCrunch:

Editor’s note: David Nordfors is the co-chair and co-founder of the i4j Innovation for Jobs Summit together with Vint Cerf. 

It’s a popular sport nowadays, discussing if tech is going to kill or create jobs. The answer is simple if you ask me. If we care more about tasks than about people, then tech will replace people. If we care more about people than about tasks, then tech will leverage people.

Think about it this way: I work in your company, I wash the dishes. You buy a dishwashing machine. You can either say “David, good luck!” or you can say “let’s rock!”

“Good luck” is the task-centered economy. You replace me with a machine. You lower the cost and raise the efficiency. In the innovation economy, this is the race against the machine.

“Let’s rock” is the people-centered economy. You buy a machine so that we can do…

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The carry trade’s bond doppelganger

Originally posted on MKTSTK:

The carry trade is an integral part of global financial markets. While in the past we highlighted the relationship between the Yen and the stock market, the simplest form of the carry trade consists of borrowing money at a low interest rate in one currency and investing it at a higher rate in another currency.

Given it’s deep liquidity, the US Treasury curve is a favored destination for flows related to the carry trade. When interest rates rise in the US it becomes increasingly attractive to borrow money in a cheap currency (such as the Yen) and use the proceeds to finance the purchase of a Treasury bond. For example, late last week yields on the US 30 Year Treasury bond rose above 2.5% for the first time since mid-January. At the same time the value of the Yen fell sharply against the dollar.

The relationship between the Yen and…

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Traders violently revise their expectations for interest rates

Originally posted on MKTSTK:

us_interest_rate_complex

Look at the heatmap above: it shows the 1 minute correlation matrix for the US interest rate futures complex including the first 16 Eurodollar contracts and the Treasury curve. Unlike heatmaps of the stock market, this matrix is smooth from cell to cell: note the beautifully sloping gradient from the front end of the curve (GEH5) to the back (UBH5). No one would blame you for thinking that any market with such an ordered correlation structure must be one of the most efficient in the world.

As the second chart shows, however, the market has a funny way of shattering consensus opinion. Buoyed by the prospect of QE from Europe and stagnant prices at home, US Treasury bonds had begun to enter bubble territory. Short term interest rate traders bid up the price of Eurodollar futures, pushing back their expectations for the date of the first rate increase.

But early this week the…

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What You Need To Know About Zero Knowledge

Originally posted on TechCrunch:

Anonymity? Privacy? How quaint. We live in a world bedecked with ever more cameras, ever more sensors, ever more drones, ever more data, ever fewer things that can be hidden. TLS and Tor can hide your online browsing, true — but, realistically, everything important you do, online or off, can easily be audited and tracked.

True, you can still send private messages. Signal/RedPhone/TextSecure from Open WhisperSystems are the gold standard for secure messaging, and Dark Matter looks interesting. But if you want to go beyond messaging into transacting, your luck runs out.

Consider Bitcoin. It’s infamous as the currency of choice for dark markets — but it’s also, “in a sense, the least anonymous money that has ever existed, since every transaction is observable by anyone with a bitcoin account,” to quote economist David Friedman. Just ask alleged Silk Road kingpin Ross Ulbricht, who had 700,000 bitcoin on his…

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Update: Now transitioning to rooster360.com and private hosting

As of this weekend, I’ll be posting to rooster360.com having moved this blog to private hosting as I prepare to make changes to Rooster360 going forward from November 2014.

Trades in 60 Seconds for week of 10/27/2014


$CVLT $DUK $GLF $MACK $MJN $NKE $P $PANW $SO $SWN $UTEK

The market’s daily chop, decline and “V” have made short work of shorter time frame traders who were overexposed or didn’t size and time in their favor. Utilities ($DUK $SO) come out on top, consumer related plays ($NKE $MJN) continue to climb (We need to feed the kids and run to work) and depending on where your tech business is, you’re either riding high like $PANW or continue to break like $CVLT (which plays out in oversimplified terms as “Security” beats “backups”. Price followers doing a long/short pair trade of over the last 12 months would have felt like geniuses). $SWN and $GLF show how little esteem energy has at the moment, so much for the super-spike of 2008. $P would be appealing only to investors tone-deaf to price action.

CVLT_102714

short 45, stop 52.1

DUK_102714

long 80.3, stop 75.4

GLF_102714

short 28, stop 34.7

MACK_102714

long 9.3, stop 6.1

MNJ_102714

long 103.3, stop 91.4

NKE_102714

long 90.9, stop 83.8

P_102714

short 20, stop 24.9

PANW_102714

long 108, stop 88.1

SO_102714

long 47.4, stop 43.5

SWN_102714

stop 31.6, stop 37.1

UTEK_102714

short 17.7, stop 21.8

Futures/Macro update for week of 10/20/14: it’s easy as ABC or $FXA $FXB $FXC + $IWM

The USD rally has hit everything… else, including in recent weeks.Using the same weekly price bar time frame and methodology, find below the stock market version, since most traders out there are stock traders. $FXA $FXB $FXC or $6A_F $6B_F $6C_F $AUDUSD $GBPUSD $USDCAD

FXC_102014

short 87.6, stop 90.9

FXB_102014

short 158.1, stop 161.5

FXA_102014

short 88.1, stop 90.5

6C_102014

6B_F_102014

6A_102014

and “bonus” chart and sell idea $IWM and/or Russell 2000 futures
IWM_102014

short 107.4, stop 116.1

RJZ14_russell2K_102014

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Ninety percent of US families are no wealthier than they were in 1986

Originally posted on Quartz:

The long-simmering issue of economic inequality in the US got moved to the front burner yesterday, with Federal Reserve head Janet Yellen noting in a speech that the effects of income and wealth disparity “greatly concern” her.

One key distinction in the debate is whether economic inequality is transient or permanent. Rising income inequality may be a temporary phenomenon, where skilled people earn high compensation without permanently distorting the distribution of wealth in the economy. But economists like Thomas Piketty worry that these super high-earners could catalyze a cycle of accelerating inequality.

Now, a working paper released this month by Gabriel Zucman and Emmanuel Saez (economists at the London School of Economics and the University of California, Berkeley, respectively) shows that growing income inequality is fueling a commensurate disparity in total wealth. The two economists used tax data to build the most complete picture to date of US wealth. Their findings are…

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Trades in 60 Seconds: SELLING $AGU $ABX $MOS $MDRX $AU $GES $MAT $OMI $CPA $TS

$AGU $ABX $MOS $MDRX $AU $GES $MAT $OMI $CPA $TS

This is a fascinating list, following last week’s 60 Seconds list. Usually I filter the list for volumes, highest high, lowest low, etc and give you tidbits for a 60 second slide show. There are NO highs here to speak of, no new longs from this filter, for trade price, high, trading volume and trading volume averages. That being said, there aren’t many new lows on this list, most of the “damage” was done in past weeks already.

The market has been selling off for weeks, with fewer and fewer leaders, for those of you who look at metrics like New Highs minus New Lows (aka “NH-NL”), and small caps were long gone, as have all “inflation” plays, and bonds are back. Energy is characterized as “oversold” in a time when you have warfare and strife in EVERY country known for energy, and yet oil sold off week after week during the recent quarter. The “discounting mechanism” within and the “forward looking” aspect of the market is saying “SELL”.

Short-time frame traders will be looking for swings and “bottoms’. Not my system or time frame on a consistent basis. There will be occasional punts but I wouldn’t rely upon it for my bread & butter trade approach.

ABX_101714

short 134, stop 15.3

AGU_101714

short 82.8, stop 90.2

AU_101714

short 10, stop 14

CPA_101714

short 97.9, stop 111.2

GES_101714

short 20, stop 22.3

MAT_101714

short 28.7, stop 31.9

MDRX_101714

short 12.8, stop 14.2

MOS_101714

short 40.8, stop 44.2

OMI_101714

short 31.7, stop 33.1

TS_101714

short 38, stop 43