The financial sector of the U.S. economy has had nearly a year to address the problems that exacerbated the crisis last fall. But many observers think that the banks haven’t done enough, and that another round of trouble may be developing for the sector. I will outline some of those concerns and then suggest some ways to use options to profit if there is indeed another shoe to drop in banking. The Thesis The primary obstacle facing large banks is that they…
Thursday, June 18, 2009
A Bloomberg item out this morning wonders whether long-term Treasury yields have moved too far, too fast: The CHART OF THE DAY shows the difference between the yields on 10-year Treasuries and the year-over-year consumer price index, known as real yields, over the last 20 years. The gap approached 5 percent yesterday, the most since it was above 5 percent in December 1994, signaling bond investors concerned about inflation have pushed yields too high too quickly, according to Michael Shaoul, chief…
Friday, May 29, 2009
As pictured below, equity indexes have been highly range-bound since the end of April. That trading range has been between about 470 and 510 in the Russell 2000, and 865 and 930 in the S&P 500. I doubt that this range is likely to persist for much longer. Fans of technical analysis will note that SPX and RUT are caught in the narrow space between their respective 50- and 200-day moving averages: a break above or below either average will be…
Monday, April 27, 2009
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Volatility Tracker for April 26, 2009 As the equity rally stalled, implied volatility indexes rose across the board last week. [2] And given last week’s broad decline in IV indexes as well, we will watch for evidence of high correlation among these very different asset classes (oil, gold, currency, equity). Note also the divergence in short term IV indexes and the volatility futures term structures of the Nasdaq 100 and Russell 2000: while the former rose on the week, the latter…
Monday, March 9, 2009
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Citigroup (C) and Bank of America (BAC) are both trading at less than 90% of their peak value, and for several good reasons, not least of which is the possibility than on any given Monday, shareholders may find themselves holding worthless shares. An article this weekend in Barron’s (“Banking’s Evil Twins? Not Exactly“) claims that BAC is the stronger of the two, and that it may thrive where C doesn’t. However, it’s not at all clear from the article why anyone…
Wednesday, August 19, 2009
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