SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

   Strategies & Market TrendsThe Art of Investing


Previous 10 Next 10 
From: Sun Tzu8/26/2021 12:03:51 PM
   of 3399
 
Thank you @POTUS for convening a critical conversation on cybersecurity. Microsoft will invest $20 billion to advance our security solutions over the next 5 years, $150 million to help US government agencies upgrade protections, and expand our cybersecurity training partnerships.

=+=+=

BUG has been a core holding of mine and I added to it when I heard the CEOs are getting invited to the White House for cybersecurity.

Share RecommendKeepReplyMark as Last Read


From: Sun Tzu8/26/2021 12:49:53 PM
   of 3399
 
Wavering US investors cut leverage for first time since start of pandemic

Borrowings to buy securities dipped to lowest level since March

The decline in loan balances follows a stellar run for US stocks, with the S&P 500 up 19.7% this year © Bloomberg

August 26, 2021 4:00 am by Eric Platt , Ortenca Aliaj , Madison Darbyshire and Joe Rennison in New York

Investors in the US have started to dial back their use of leverage for the first time since financial markets were rattled by the coronavirus crisis last year, removing some of the borrowed money that has since fuelled a rally in stocks.

Investors had borrowed $844bn against their portfolios in July, down from a record $882bn a month earlier and the lowest level since March, according to data collected by Wall Street’s self-regulatory body, the Financial Industry Regulatory Authority.

Separate data from Goldman Sachs, which runs one of the largest prime brokerages in the world, showed that the investment bank’s hedge fund clients had cut both net and gross leverage in recent weeks. Morgan Stanley has also reported long-short equity hedge funds that trade through it reducing their leverage, while bankers at other large New York-based prime brokers said a similar trend was under way.

Finra does not publicly disclose who is driving the shifts in leverage each month, and it was unclear if the many retail investors who began day trading during the pandemic have also curtailed use of margin loans. More comprehensive data from the Federal Reserve on hedge fund leverage is not yet available.

Interactive Brokers, which serves 1.5m customers, disclosed this month that margin loan balances among its clients had declined 2 per cent in July from the month before to $47.9bn. At Charles Schwab, margin balances in July rose by the smallest pace since the retail broker began disclosing the figure on a monthly basis this year, although it still hit a record of $79.9bn.



Mark Aldoroty, who runs prime services for Pershing, a division of Bank of New York Mellon, said fund managers had less faith in how the market might trade in the months ahead.

He pointed to the unexpected move by Chinese regulators to tighten their grip over both the technology and education sectors, which wrongfooted funds that owned Chinese stocks. The swings in US stocks in recent weeks, as economic data has broadly fallen short of expectations, has also shaken investor confidence in the rally.

“You have to start thinking, ‘My conviction might be right but does it matter?’” Aldoroty added. “Because of the way the market has traded, it’s not necessarily that pure fundamental research drives decisions any more.”

The losses on Chinese tech stocks have been particularly painful for large hedge funds. The Nasdaq Golden Dragon China index has fallen just over 46 per cent from an all-time high set in February.



In an analysis of 813 hedge funds with nearly $3tn of gross equity positions, Goldman Sachs noted that a third held Chinese stocks at the start of the third quarter, with many making large bets on one: Alibaba. The company was among the 10 largest holdings at Bridgewater, the world’s largest hedge fund, and was also a sizeable stake at Tiger Global Management and David Tepper’s Appaloosa Management at the end of June, according to filings with the Securities and Exchange Commission.

Many large hedge funds cut their stakes in Chinese securities during the second quarter, given the share price declines.

In the US the economic picture has also grown hazier, as coronavirus cases have surged and economic indicators such as consumer sentiment and manufacturing indices have shown a cooling trend.

The reduction in borrowing follows a stellar run for US stocks, with the benchmark S&P 500 index up 19.7 per cent so far this year. The rise has been supercharged by economic stimulus out of Washington. But the fact that many investors have bought into the market with borrowed money has raised red flags for regulators, particularly given the limitations of data that do not capture some trades involving swap derivatives.

It was a point crystallised by the implosion of Archegos Capital Management in March. The investment group’s soured bets resulted in more than $10bn in losses for its trading counterparties including Credit Suisse and Morgan Stanley. And the fact the investment group used total return swaps, instead of buying the stocks outright, meant regulators had little insight into brewing troubles.

The Federal Reserve warned in May that the tools it and other regulators had to gauge hedge fund leverage “may not be capturing important risks”. Many hedge funds also use options to magnify returns.

Banks have tightened the terms of margin lending with some clients after the Archegos affair, requiring some hedge funds to post additional collateral, according to bankers at several large dealers. But the bankers said those reviews were mostly undertaken months ago and were not driving the recent decline in leverage.

Recommended
  • Margin debt and leverage are flashing red, again
  • Trading activity has also moderated in the months since Archegos captivated Wall Street, including in many of the stocks that had been propelled by new retail traders who had taken to free apps such as Robinhood to try their hand in markets for the first time.

    “There was a certain level of aggressiveness in the trading early this year that made people more willing to make levered bets,” said Steve Sosnick, chief strategist at Interactive Brokers. “Now the levels of margin we are seeing seem to be less about speculating via margin, and more about investing via margin.

    “The levels of participation we were seeing at the start of the year were unprecedented and probably unsustainable.”

    Share RecommendKeepReplyMark as Last Read


    From: Sun Tzu8/26/2021 2:44:46 PM
       of 3399
     
    Who wants to bet that the rates will be lower next week regardless of what the Fed says tomorrow?

    Share RecommendKeepReplyMark as Last ReadRead Replies (1)


    To: Sun Tzu who wrote (2104)8/26/2021 3:19:02 PM
    From: ajtj99
       of 3399
     
    That means they'll start tapering in October at $20-billion/month. That's sooner than expected.

    Share RecommendKeepReplyMark as Last ReadRead Replies (2)


    To: ajtj99 who wrote (2119)8/26/2021 3:32:14 PM
    From: Sun Tzu
       of 3399
     
    I don't know if that is what it means. Powell does not like to surprise the market. If Ballard's call is to be heeded, they will still begin near the end of the year at an increasing pace that will be done by April.

    To me the most significant part of that call was we now have a hint of when the end date will be. There has been speculation about the pace of the tapering, and Ballard is putting some parameters around it.

    And as I said, I don't think that pace is priced into the market.

    Share RecommendKeepReplyMark as Last ReadRead Replies (1)


    To: Sun Tzu who wrote (2120)8/26/2021 3:51:57 PM
    From: ajtj99
       of 3399
     
    I've read GS and a few others expect $20-billion a month in tapering. If it ends in March, that means it starts in October.

    The Fed likes to do things gradually in situations like this. They're not going to go 20-30-35-40-45.

    Share RecommendKeepReplyMark as Last ReadRead Replies (1)


    To: ajtj99 who wrote (2121)8/26/2021 4:05:26 PM
    From: Sun Tzu
    1 Recommendation   of 3399
     
    I think they might, if there are enough calls for it internally.

    Now you know that I expect a flat to negative growth manifesting itself around the end of the year or next March at the latest. So I give it less than 40% chance they will actually finish tapering by March or even by May.

    But you never know. Did you see my post about what the Korean central bank said? Yes, the Delta variant is a concern, but we expect that the economy has learned how to deal with Covid by now so we are going to raise the rates anyways.

    That is going to be the picture in the US before the year ends. In fact that should be the picture now, except that the Fed wants to inflate its way out of debt, so they drag their feet.

    Share RecommendKeepReplyMark as Last Read


    To: Sun Tzu who wrote (2115)8/26/2021 4:40:18 PM
    From: Sun Tzu
    2 Recommendations   of 3399
     
    I wonder what Greenspan would say now.


    Share RecommendKeepReplyMark as Last Read


    To: Sun Tzu who wrote (2104)8/26/2021 5:15:02 PM
    From: Real Man
       of 3399
     
    The Fed does not do what Bullard says it should do. He isn’t even a voting member? Not until 2022.
    He is a Dove? Uh oh -g-

    fingfx.thomsonreuters.com

    Share RecommendKeepReplyMark as Last ReadRead Replies (1)


    To: Real Man who wrote (2124)8/26/2021 5:23:33 PM
    From: Sun Tzu
    1 Recommendation   of 3399
     
    From where I stand, we should ride up all the way to the mother of all melt ups.

    So long as there is money on the side, there won't be a crash.

    Share RecommendKeepReplyMark as Last Read
    Previous 10 Next 10