Wajahat Gilani

TL;DR: May inflation data was very good and moves us closer to interest rate cuts from the Federal Reserve, but we need to see more like it to actually get there. 1/ The Federal Reserve's inflation target is 2% annualized on the PCE price index. We don't have May data on this indicator, but expert inflation forecasters (not me) use already-released CPI and PPI data to generate very high quality PCEPI forecasts. 2/ May's probable core PCEPI data, if it repeats for the rest of the year (orange line), will *easily* meet the bar for interest rate cuts in 2024 - and possibly as soon as the September FOMC meeting. 3/ July's meeting is in play if we see a sharp near-term deterioration in the labor market before then, but I doubt that will happen. 4/ The bar for *any* rate cuts (at least 1 at the December meeting) is probably a little lower, but not much lower. An average of 0.19% M/M on core PCEPI (green line) gets us to the Fed's year-end projection (black dotted line). 5/ The average M/M gain for core PCEPI during the last 7 months of 2023 (not shown) sits halfway between the orange and green lines. 6/ If performance during the rest of the year matches April's M/M gain (grey line), odds of a rate cut in 2024 are low IMHO.

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"Midcap Tech Stocks and ETFs: What Lies Beneath" - TalkMarkets article using ValuEngine Inc. data, stock and ETF reports along with data pulled from ETFdb.com Inc, a VettaFi company. Please read article here: https://lnkd.in/ez4rhPQY However, as impressive as the rise of NVDA has been, opportunities in the tech sector clearly stretch below this one stock and its peers in the “Magnificent Seven.” With an eye towards potential broadening of the tech sector opportunity set, this blog focuses on a few selected Technology ETFs, three of which target a broad segment of ETFs, most of which are not in QQQ, followed by a quick look at a few technology stocks most highly rated by ValuEngine. Featured ETFs include: First Trust Technology AlphaDEX (now called StrataQuant) Fund (FXL) Invesco US S&P SmallCap Information Technology ETF (PSCT) Invesco Nasdaq Next Gen 100 ETF (QQQJ) Featured stocks include: ServiceNow (NOW); Pinterest (PINS); DoorDash (DASH); Snap Inc. (SNAP) and Western Digital. Another company that we rank a strong Buy in this group but didn't make the market cap cut for the article. is Toast (TOST). Overall, our predictive model and valuation model both are bearish on technology in general but they’ve unearthed a few hidden gems. Investors interested in staying in the sector but paring positions in Apple, Nvidia and Tesla may find some of these stocks worth investigating. However, such investors should fasten their seatbelts as all of these stocks are very volatile and many experts predict increased market volatility for the next 6 months. Thanks for assistance to Rajesh Jain; Paul Henneman and Trish Twining. Shouts to: Patricia Baronowski-Schneider;Michael Cronan; Jeff West; Jerilyn Klein; Dorothy Hinchcliff; Peter Wright; Wayne Nef; Mary Ann Bartels; Deborah Fuhr, CFA fellow; Lauren Davis, M.A.; Gayathiri Sri Rangan; Fernando Domecq; Anchal Tandon; Gareth Parker; Elle Worrell; Anil Ghelani, CFA; James Pacetti; Elisabeth Kashner, CFA; Cinthia Murphy; Lara Crigger; Todd Rosenbluth; Sam Stovall; James Eagle; James Picerno

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THE 10YR YIELD BOND 💹 The recent statement from the Federal Reserve has provided investors with a clear signal of "HIGHER FOR LONGER," underscoring the central bank's commitment to a data-dependent approach amidst indications of ongoing inflationary pressures. Despite pockets of strength in the labor market, particularly in certain sectors, the overall picture remains mixed, potentially introducing unexpected volatility spikes in financial markets. This cautious but optimistic stance from investors is leading to a notable inversion in the bond market, with yields on longer-dated bonds, such as the 10-year and 30-year, inching towards 5%. Simultaneously, there's a heightened interest among investors in short-term bonds, like the 2-year and 5-year, as they anticipate rising bond yields. This dynamic could catalyze further turbulence in equity markets as investors reassess risk-return dynamics amid shifting interest rate environments. Adding to market jitters are geopolitical tensions, particularly the escalating discord between Israel and Iran. Such geopolitical developments often exacerbate market sentiment, introducing additional layers of uncertainty that investors must navigate. In light of these factors, many investors are adopting a cautiously bullish stance, recognizing the potential for further market volatility while remaining cautiously optimistic about the broader economic outlook. Navigating this landscape requires a keen understanding of macroeconomic indicators, central bank policies, and geopolitical developments, all of which shape market sentiment and investment decisions in the short and long term. #hedgefund #markets #10y #30y #fed #banks #bullish #bearish

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About a year ago, the short-end of the yield curve inverted. Meaning ultrashort-term yields > short-term yields. Not intuitive to loan your money out for shorter periods but receive higher yields for doing so. Inverted curves are a weird quirk that, for people needing short-term security, upends a classic investing tradeoff: if you want more certainty, you need to give up some expected investment returns. That's not the case when the yield curve inverts. Anyone holding cash in treasury bills, from everyday folks to global institutions, had basically nothing to think about — just roll 0-3 month treasury bills and keep targeting this ~ 5.5% yield. Today's Fed announcement will undoubtedly put these yields on the move. We could easily see the curve revert across various maturity profiles. Illustrated here is the recent rally in 1YR yields leading into today's announcement. And finally, if it occurs, investors might have tradeoffs to manage with their cash positions again. And that feels right, which is why the formal name for a reverted curve is so fitting: "normal." YCharts #interestrated #fixedincome

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Major Shift in the Quant Industry: FTC Bans Non-Competes! The Federal Trade Commission (FTC) has just rolled out a landmark decision to ban noncompete clauses, signaling a monumental shift in employment dynamics, particularly within the high-stakes quant industry. Traditionally, noncompete agreements have been crucial for firms in safeguarding their proprietary strategies and information. In the quant world, where intellectual capital is a core asset, these agreements have prevented employees from joining competitors, thereby protecting trade secrets and maintaining stability. However, the FTC's new rule is set to dismantle these barriers, championing greater worker mobility and potentially boosting wage growth. This regulatory change could catalyse a more fluid job market, where quant professionals can move where their skills are most valued, thereby possibly driving faster innovation and operational efficiencies across the board. For quant firms, eliminating noncompetes means pivoting towards alternative methods to retain talent and protect intellectual property. Enhanced workplace cultures, competitive compensation packages, and robust legal safeguards will become even more crucial. 𝗗𝗶𝗱 𝗬𝗼𝘂 𝗞𝗻𝗼𝘄? Around 30 million U.S. workers are currently bound by a non-compete! ��𝗲𝘆 𝗣𝗼𝗶𝗻𝘁𝘀 𝗳𝗿𝗼𝗺 𝘁𝗵𝗲 𝗙𝗧𝗖 𝗥𝘂𝗹𝗶𝗻𝗴: - Existing noncompetes with senior executives can remain, but firms are restricted from forming new ones or enforcing existing ones outside this group. - For sit-out periods to be enforceable, firms might need to pay an employee's total compensation. How does that work with a % of trading when you're not trading... who knows! - Despite its potential benefits, this new rule faces opposition, notably from The US Chamber of Commerce, which has vowed to challenge the regulation legally. Stay tuned as this develops! #quantitativefinance #fintech #regulation #FTC #careerdevelopment #hedgefunds #quantitativeresearch Here's the link to FTC: https://lnkd.in/dFAz2VqE https://lnkd.in/dXN6fJyG

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CTD Basis is a Balance Sheet placeholder Trade - I'll explain Everyone knows Balance Sheet space is scarce, every Basis of any kind in STIR has nothing to do with a nominal STOCK of anything (USD), there is no such thing as a "Dollar Shortage" or glut, GSIBs can create USD ex nihilo, it's the cost of renting that ledger space that makes various bases move, especially at Month, Qtr, Yr-End (If you ever hear someone using those phrases: Dollar Shortage, glut, etc, immediately stop listening to them, they're a charlatan) Never a STOCK issue but a FLOW issue (or lack thereof) Dealers pre-allocate the amount of sheet they expect certain shops to use during those tense Month, Qtr, Yr-End period, a certain amount to Citadel, Rokos, Capula, Exodus, Millennium, Brevan, etc, hence any amount that ends up not being used is a loss to the dealer and naturally pisses them off making them want to allocate LESS SHEET to that shop next time, thus HFs are incentivized to use as much as possible - USE IT OR LOSE IT And whats the easiest most liquid and low vol way of using up Sheet? CTD Basis Trades... IT'S THE BALANCE SHEET PLACEHOLDER https://lnkd.in/gEEAgdy4

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Smith’s Research & Gradings US Jobs -Further Down the Rabbit Hole The May 2024 non-farm payrolls report was a surprise to many. The Bloomberg poll of economists expected 180k jobs to be added, but the actual number was 272k, led by healthcare, government employment, and leisure and hospitality. This was a dramatic turnaround from April’s 165k. Wages increased 4.1% year-on-year. Although labor participation marginally slipped to 62.5% from 62.7% in April, participation among prime-age workers (ages 25-54) rose to 83.6%, its highest level in two years. Rounding out the picture, unemployment nudged up to 4.0% from last month’s 3.9%. What to take from the May 2024 jobs number? Considering the number of jobs added, level of labor participation, and ongoing low unemployment, the U.S. economy hardly looks like it is cooling. According to the Federal Reserve Bank of Atlanta, the running estimate for real GDP in Q2 is estimated at 3.1% (as of June 7, 2024). This is all good news for the struggling Biden campaign. The Fed has a difficult path ahead. It needs to maintain credibility, which was hurt by letting inflation get out of control in 2021-2022. It has since worked hard and successfully in taking it down to 3.5%. Inflation, however, remains above the Fed’s 2.0% target. The problem is that many of the inflationary factors at work are beyond the Fed’s mandate, including the structural changes which put the worker ahead of the consumer, onshoring businesses, and transitioning energy. Although the US economy remains relatively strong, some sectors are slowing, which bears watching. The ISM Manufacturing Index contracted in May (48.7%) for the second consecutive month. A number under 50% is considered recessional.  Moreover, credit card and auto loan delinquencies are on the rise. According to the New York Fed, in Q1 about 9% of credit card balances and 8% of auto loans moved into delinquency. The bottom line is that as the US economy goes further down the rabbit hole of contradictory economic data, the Fed is maneuvering through a challenging political landscape. Pressure on the Fed to cut rates is also mounting from recent rate cuts by the European Central Bank and the Bank of Canada. However, the U.S. sits in a different position from Canada and Europe; U.S. real GDP growth is at a faster pace, it has lower unemployment and higher inflation. Canada's April inflation was 2.7% and the Euro Area at 2.4%: the US was 3.4%. The Fed is keenly aware that if it cuts rates too quickly inflation could rise again; if it waits too long, it risks a slide into recession. Our call – no cut in June or July, but a growing chance for September or November. We hate to say it, but the Fed’s path remains data dependent – the question we must ask is whether all of the strong economic data is in the rearview mirror and what comes ahead is softer? We are going deeper down the rabbit hole.  

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If we’re to use history and not consensus as a guide, not only does the 10YR-3M yield curve inverting extremely reliable in predicting recession - more so than 10YR-2YR spread - but it appears to suggest the longer duration the 10YR-3M yield curve remains inverted, the harder the landing for the US equity market. All 9 times the 10YR-3M yield curve inverted since 1927, all ended in a hard landing for the US economy and consequently the S&P 500 observed major drawdowns. There is no mid-1990’s exception, the 10YR-3M spread never inverted then unlike the 10YR-2YR. The chart below shows all 9 cycles with the corresponding # of days inverted and S&P 500 cycle peak to trough decline. I wouldn’t pay much attention to the determining coefficient R2 value, considering it’s a simple linear regression with only 9 data points representing different cycles where variance is expected. That said, we can see a very clear relationship where the longer the 10YR-3M spread remains inverted, the more disappointment market participants ultimately realize. Unfortunately the current 10YR-3M spread inversion duration just surpassed the GFC and is now the second longest we’ve seen this yield curve inverted. The only longer inversion? In 1929 preceding the Great Depression, where the S&P 500 observed nearly a -90% peak to trough obliteration. We still have 160+ days until we hit that duration and in no way am I suggesting I expect those kind of unimaginable consequences today. At the same time, the phrase “history never repeats but often rhymes” has definitively shown to have truth. Even if you’re not a believer in the yield curve, I think it’s a concerning dynamic at the very least. Time will tell. Happy Friday! Sources: OVOM Research, Bloomberg #Research #Economy #Markets #Finance #Macro #Equities #YieldCurve

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Should developers measure #ROCE rather than #ROE? In short, yes. ROCE, or Return on Capital Employed, shows how effectively a company uses its capital— debt and equity—to generate profits. Unlike metrics such as Return on Equity (ROE), which only considers equity, or Return on Assets (#ROA), which only focuses on assets, ROCE is calculated by considering both debt and equity, providing a balanced and comprehensive view into profitability and capital efficiency. At a time when every penny counts, ROCE is a powerful tool for assessing a site's efficiency and profitability, ensuring that every penny invested is working hard. A higher ROCE value usually implies better investment quality, as it suggests that a company can generate a higher return on each unit of capital employed. As more #developers (and #lenders) move towards using ROCE to measure the viability of their sites and make informed investment decisions, Brickflow now shows ROCE in the search results against every #DevelopmentFinance and #RefurbishmentBridging search.

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Per the just-released ISM data, the measure of US factory activity in May, at 48.7, was below the consensus forecast of 49.5 and is the lowest in three months. It is also notable that the decline in the aggregate measure was led by a sharper drop in new orders (to 45.4). These numbers are consistent with other signals of an economy losing momentum at a faster rate than most expect. Yet consensus market expectations for Fed policy action remain relatively hawkish, with many expecting only one (or even no) rate cut this year. Such rate expectations may make sense for an overly data-dependent Federal Reserve; they are less consistent with a central bank seeking to meet both elements of its dual mandate. #economy

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Why do so many fund managers struggle to beat the S&P 500? It's a question that keeps investors up at night, right after they wonder if they left the stove on. The truth is, the S&P 500 is like that one friend who always aces everything effortlessly—representing the largest and most successful companies in the US and making it a tough act to follow. Even if we assume management fees and trading costs are zero, which is about as likely as finding a unicorn in your backyard, the efficient market hypothesis suggests that it’s nearly impossible to consistently beat the market through stock picking. The S&P 500 reflects the collective knowledge and expectations of all investors. And let's face it, no amount of experience or luck is going to let fund managers outsmart a market that’s like a crystal ball with a college degree. So, many investors find that passive investing provides a more reliable path to long-term growth. Passive funds benefit from lower costs and a straightforward strategy, often translating to better long-term performance. It’s like choosing a reliable Toyota over a finicky Ferrari less flashy, but it gets you where you want to go without constant headaches. #investting #ValueCreation

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🔻 Don't let mathematical data and statistics fool you, consensus has been spot on in understanding of how this cycle would evolve after they misidentified "surge" inflation as "transitory". We were then coached to be bearish on mega-caps, who single-handedly reversed the 2022 EQ bear market and led to a strong 2023 in US large-caps. For some time now we've been hearing about an alleged robust #earnings rebound for S&P 500 large-caps. Not only have we not found anything remotely resembling a precedent for that based on historic Fed hiking cycles and it's completely counterintuitive to how earnings began to go into an earnings recession (rising interest rates). The Fed is still higher for longer and I've asked this many times without a response (there isn't one that would logically fit), but can anyone explain where the delta for the positive earnings would come from minus layoffs to shore up profit margins, which are exhausted by now? Rates are still just as high, inflation began to re-accelerate, and we have contractionary monetary policy lag maneuvering through the pipeline. Below is a chart representing the latest 1Q24 YoY EPS estimates for the S&P 500. Five companies - Amazon, NVIDIA, Meta, Microsoft, & NVIDIA - account for +64.3% YoY EPS growth. The other 495 S&P 500 components are expected to contribute a cumulative loss of -6.0%. This is the 4th or 5th straight quarter we're seeing such a dynamic and furthermore, the S&P 500 composite is expected to report essentially flat YoY EPS. How is any of this remotely supportive of a secular bull market in US equities? This is a classic (very) late cycle rally with the caveat of monopolistic tech firms causing a bit of confusion given their tremendous economies of scale. But make no mistake, these monopolistic tech stocks are anything but immune from what the rest of the S&P 500 has been suffering. It'll be delayed due to the enterprise value, but we need look no further than 2022 as a blueprint for what could occur if things begin to go south. I remain highly convinced we'll get there, but even in the meantime these should not be exciting numbers for bulls to put it mildly. US economic dominance is closely tied in with US small businesses flourishing. This combined with the Russell 2000's fight for survival after the rate hiking cycle began let's us know smaller-caps are already struggling and quite mightily. But that's just to say we do not have exciting economic growth expansions on the back of a handful of businesses, which are now going to be direct competitors in the GPU space and likely beyond. It's completely prudent to proceed with extreme caution with such an overpriced market, risk to earnings on the shoulders of a handful of firms, and the looming danger of unexpected but serious economic disappointment. The lack of fundamental growth is a big red flag for us. Time will tell. Sources: OVOM Research, FactSet #Research #Economy #Markets #Finance #Macro #Equities #Valuation

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Jim Simmons The Billionaire Quant GOAT of Pattern Recognition in the Use of Investment Physics Dies At 86 As reported by Bloomberg Billionaires Index in 2023, Simons's net worth was estimated to be $29.4 billion,making him the 52nd-richest person in the world. Simons was known for his studies on pattern recognition.He developed the Chern–Simons form(with Shiing-Shen Chern), & contributed to the development of string theory by providing a theoretical framework to combine geometry & topology with quantum field theory. Basar Global Mansa Musa explains the quantum principle as "One- time is described is as God actively intervening to turn night into day & day into night describing the scientific mathematical patterns of creation a time series'This idea is a contribution to the development of the doctrine of predestination(patternization of all things as One science) patterns of co creation which everything is subject to mathematics.Some claim that quantum physics' wave-particle duality & uncertainty principle reflects the concept of that everything is interconnected. The theory of quantum fields is arguably the most successful scientific theory of all time.In some cases,it makes predictions that agree with experiments to an astonishing 12 decimal places.On top of that, quantum field theory has also been shedding enormous light on certain questions in pure mathematics, especially in the study of four-dimensional shapes &even higher dimensional spaces.In Islamic art the geometric figure of the circle represents the primordial symbol of unity & the ultimate source of all diversity in creation. After living in Indonesia & being forced to leave the IDA due to his public opposition to the Vietnam War,he joined the faculty at Stony Brook University as Chair of the math department. In 1994, Simons and his wife, Marilyn, founded the Simons Foundation to support research in mathematics and fundamental sciences. The foundation is the top benefactor of Stony Brook University, Marilyn's alma mater, and is a major contributor to his alma maters, the Massachusetts Institute of Technology and the University of California, Berkeley. Simons was a member of the boards of the Stony Brook Foundation, the MIT Corporation, & the Simons Laufer Mathematical Sciences Institute in Berkeley as well as chair of boards of Math for America, the Simons Foundation, and Renaissance Technologies.Simmons quant method returns average 61% outperforming Warren Buffet for years. But as we all realize "surely we must die in submission willingly or unwillingly, the rest is the delusions of free will created from the patterns of creation & the spell(dual wave particles) of the seperate self of quatumm theory destiny & thought reveal by Jim Simmon quant investing methods. Jim Simmons revealed relativety of all the scientific quanative principles are relative as One". So the laws that govern the heavens also covers the predestiny of the earth. the market & human nature, itself.

Short VXX within VIX Index quintiles You can see the huge difference in performance of the Short Volatility trade at different VIX levels Now there are MANY far more robust Volatility metrics to use, many of which I share in my daily email, but the VIX is a first step

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So one thing that I am doing is to try to figure out how to move bitcoin into or out of the ETF's. This is in preparation for my panel at Bitcoin Asia on 5/9. What I would *like* to say is *HK bitcoin ETF's are totally awesome and here are the super-cool things you can do with them*, but I think what I am more likely to say is *Okay, people in HK are trying, but they haven't quite got it completely working, but there is some cool stuff coming down the pipe, that's not 100% ready*. The two cool things that you can do if this all works is * get a bitcoin visa * get professional investor status In order to get an investment visa and to get professional investor status you have have money invested in certain types of securities and cash, and having bitcoin set up on HK ETF will qualify. Honestly, Hong Kong is a city of middlemen, so part of the exercise is so that people get paid shuffling papers. So I am not surprised that you have to go through a ton of bureaucracy to get this done because at each rubber stamp you have to pay someone to give you the rubber stamp. The good news is that all the middlemen know that if they charge too much you are going to be flying off to Singapore or Dubai and they get nothing. What *will* happen is that someone will start a business as a consultant, and say "okay pay me X and I will get all of the papers signed and I will take care of all of the stuff." My interest in making this work is not totally altruistic because if I can figure out how to line up everything, I might be the guy that you pay to get everything set up. I should point out that "go to someone and they worry about the paperwork" is how banking used to be, and how banking really *should* be. But the trouble is that bankers are now basically agents of the government and work for the tax authorities more than they do for you, and so ironically they can't get into this business even if they wanted to which they really do.

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📢 Analysing TON's Price Volatility and Adjusted Sharpe Ratio: Implications for Speculators When comparing the Adjusted Sharpe Ratio analysis to volatility, it becomes evident that TON's 7-day volatility consistently exceeds its 30-day volatility over the past two and a half years. This indicates that the TON price has been more susceptible to sudden swings in the short term compared to longer-term activity. 🔗https://lnkd.in/dhutqv3B

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