Comments on: Line in the sand http://sovereignspeculator.com/2009/08/17/line-in-the-sand/ Thoughts on the markets and the decline of the west Tue, 15 Nov 2011 23:15:05 +0000 http://wordpress.org/?v=2.6 By: Pej http://sovereignspeculator.com/2009/08/17/line-in-the-sand/#comment-5253 Pej Tue, 18 Aug 2009 08:22:29 +0000 http://sovereignspeculator.com/?p=2663#comment-5253 Graphite: Very good points. I was just thinking that interest rates are close to zero, but that the dividend yield as well, so that the two would compensate each other. But maybe not then! Graphite: Very good points.

I was just thinking that interest rates are close to zero, but that the dividend yield as well, so that the two would compensate each other.

But maybe not then!

]]> By: Graphite http://sovereignspeculator.com/2009/08/17/line-in-the-sand/#comment-5251 Graphite Tue, 18 Aug 2009 07:20:07 +0000 http://sovereignspeculator.com/?p=2663#comment-5251 With interest rates near zero, the carrying cost of the underlying basket of stocks which comprises the index is also near zero. Since the futures do not pay dividends, they trade at a discount to the underlying index, which does pay dividends. The relationship between the stock index futures price and the underlying index is driven by short-term interest rates (which represent the cost to borrow the money needed to buy the entire basket of stocks, instead of putting up some minimal futures margin), and market expectations of dividends (the higher the expected dividends, the greater the discount on the futures contract). With interest rates near zero, the carrying cost of the underlying basket of stocks which comprises the index is also near zero. Since the futures do not pay dividends, they trade at a discount to the underlying index, which does pay dividends.

The relationship between the stock index futures price and the underlying index is driven by short-term interest rates (which represent the cost to borrow the money needed to buy the entire basket of stocks, instead of putting up some minimal futures margin), and market expectations of dividends (the higher the expected dividends, the greater the discount on the futures contract).

]]> By: PEJ http://sovereignspeculator.com/2009/08/17/line-in-the-sand/#comment-5244 PEJ Mon, 17 Aug 2009 22:22:59 +0000 http://sovereignspeculator.com/?p=2663#comment-5244 Mike: question for you as I cannot find the answer. Would you know why the futures on US indices have consistently traded under the level of the actual spot index for many months now? I don't get it... Mike: question for you as I cannot find the answer. Would you know why the futures on US indices have consistently traded under the level of the actual spot index for many months now?
I don’t get it…

]]> By: PEJ http://sovereignspeculator.com/2009/08/17/line-in-the-sand/#comment-5243 PEJ Mon, 17 Aug 2009 21:22:25 +0000 http://sovereignspeculator.com/?p=2663#comment-5243 oops, embedding didn't work... here's the link to the page: http://www.cnbc.com/id/15840232?video=1217397249&play=1 oops, embedding didn’t work… here’s the link to the page:
http://www.cnbc.com/id/15840232?video=1217397249&play=1

]]> By: PEJ http://sovereignspeculator.com/2009/08/17/line-in-the-sand/#comment-5242 PEJ Mon, 17 Aug 2009 21:20:41 +0000 http://sovereignspeculator.com/?p=2663#comment-5242 Robert Prechter on CNBC today: Robert Prechter on CNBC today:

]]> By: Axclr8 http://sovereignspeculator.com/2009/08/17/line-in-the-sand/#comment-5241 Axclr8 Mon, 17 Aug 2009 21:07:08 +0000 http://sovereignspeculator.com/?p=2663#comment-5241 Next Bubble to Burst Is Banks’ Big Loan Values: http://bloomberg.com/apps/news?pid=20601039&sid=a04oVutXQybk Next Bubble to Burst Is Banks’ Big Loan Values:

http://bloomberg.com/apps/news?pid=20601039&sid=a04oVutXQybk

]]> By: Axclr8 http://sovereignspeculator.com/2009/08/17/line-in-the-sand/#comment-5238 Axclr8 Mon, 17 Aug 2009 19:50:25 +0000 http://sovereignspeculator.com/?p=2663#comment-5238 Watch Out – Even This Rally Parallels The Great Depression http://www.etfguide.com/research/207/8/Watch-Out---Even-This-Rally-Parallels-The-Great-Depression/ Watch Out – Even This Rally Parallels The Great Depression

http://www.etfguide.com/research/207/8/Watch-Out—Even-This-Rally-Parallels-The-Great-Depression/

]]> By: Axclr8 http://sovereignspeculator.com/2009/08/17/line-in-the-sand/#comment-5237 Axclr8 Mon, 17 Aug 2009 19:48:55 +0000 http://sovereignspeculator.com/?p=2663#comment-5237 Lawsuit Filed against ProShares August 7, 2009 "SAN DIEGO (ETFguide.com) – A lawsuit seeking class-action standing against ProShare Advisors, sponsor of the ProShares ETFs has been filed. The suit filed by New York, NY-based Labaton Sucharow alleges ProShares violated securities law and didn’t properly disclose all the risks associated with its UltraShort Real Estate ETF (NYSEArca: SRS) in its prospectus and registration filings with the Securities and Exchange Commission. SRS is designed to deliver double the daily inverse performance of the Dow Jones U.S. Real Estate Index. Over longer time periods, however, it’s failed to do so. This is not unusual though, because the impact of index volatility, tracking error and fees compounded over time often causes the longer-term performance of such funds to deviate from daily index returns. The one-year performance through June 30th, 2009 for the Dow Jones U.S. Real Estate Index is negative 42.59%. Over the same period of time, SRS has fallen by 79.73%. Currently, SRS has around $1.2 billion in assets. The lawsuit is another dramatic turn in a series of recent events that has seen leveraged and short ETFs come under fire. In June, the Financial Industry Regulatory Authority (Finra) issued a regulatory warning to brokerage firms and brokers concerning these particular ETFs. It said in part, “Inverse and leveraged ETFs typically are not suitable for retail investors who plan to hold them for more than one trading session, particularly in volatile markets.” Negative publicity still hasn’t quelled investor’s appetite for leveraged and short ETFs. At the end of June, the two largest providers of these specialized ETFs (ProShares and Direxion Shares) amassed $32.6 billion in such funds. Despite soaring assets and popularity among active traders, a number of brokerage firms like Ameriprise, Edward Jones, LPL Financial, Morgan Stanley and UBS have either banned or temporarily halted the sale of leveraged ETFs. Firms say this stance against leveraged ETFs is because they aren’t compatible with the long-term investment objectives of their clients. The class action lawsuit was filed in the United States District Court for the Southern District. " Lawsuit Filed against ProShares
August 7, 2009

“SAN DIEGO (ETFguide.com) – A lawsuit seeking class-action standing against ProShare Advisors, sponsor of the ProShares ETFs has been filed.

The suit filed by New York, NY-based Labaton Sucharow alleges ProShares violated securities law and didn’t properly disclose all the risks associated with its UltraShort Real Estate ETF (NYSEArca: SRS) in its prospectus and registration filings with the Securities and Exchange Commission.

SRS is designed to deliver double the daily inverse performance of the Dow Jones U.S. Real Estate Index. Over longer time periods, however, it’s failed to do so. This is not unusual though, because the impact of index volatility, tracking error and fees compounded over time often causes the longer-term performance of such funds to deviate from daily index returns.

The one-year performance through June 30th, 2009 for the Dow Jones U.S. Real Estate Index is negative 42.59%. Over the same period of time, SRS has fallen by 79.73%. Currently, SRS has around $1.2 billion in assets.

The lawsuit is another dramatic turn in a series of recent events that has seen leveraged and short ETFs come under fire.

In June, the Financial Industry Regulatory Authority (Finra) issued a regulatory warning to brokerage firms and brokers concerning these particular ETFs. It said in part, “Inverse and leveraged ETFs typically are not suitable for retail investors who plan to hold them for more than one trading session, particularly in volatile markets.”

Negative publicity still hasn’t quelled investor’s appetite for leveraged and short ETFs.

At the end of June, the two largest providers of these specialized ETFs (ProShares and Direxion Shares) amassed $32.6 billion in such funds.

Despite soaring assets and popularity among active traders, a number of brokerage firms like Ameriprise, Edward Jones, LPL Financial, Morgan Stanley and UBS have either banned or temporarily halted the sale of leveraged ETFs. Firms say this stance against leveraged ETFs is because they aren’t compatible with the long-term investment objectives of their clients.

The class action lawsuit was filed in the United States District Court for the Southern District. “

]]>