Archive for the ‘MF Global’ Category
Thursday, November 21st, 2013
When is enough, enough? That’s the question you might be repeating to yourself if you’re a Gold Bull. Or maybe, that’s what you might be thinking if you’re invested in a long Gold ETF. Upon surfing the interwebs for useful financial commentary and statistics, we stumbled upon the Worst 10 ETF performer’s YTD from Index Universeâ€¦ and can you guess what most of them have in common? Continue Reading…
Here’s what’s happening in the world of managed futures this week. Continue Reading…
Tuesday, August 13th, 2013
Fear and greed are powerful motivators, especially when it comes to investing. In this blog, I speak to those who are fearful, and are looking for safety, potentially outside the US. I look for the regions of the world that are currently priced as “Value”, defined as low Price/Earnings and high dividend yield. The following graph shows the current situation.
As you can see, the US is currently not the best “Value”, having the highest P/E and the second lowest dividend yield. But it’s not clear from this graph which is the best value. On a P/E basis, Emerging Markets and Asia X Japan are the better buys, but Australia-and-New Zealand and the UK are the higher yielding.
To resolve the confusion, I’ve created a composite measure that adds earnings yield (the reciprocal of P/E) to dividend yield, and come up with the following scores:
And the winners are Australia-and New-Zealand and Emerging Markets. If you’d like to stay closer to home, Canada looks good. The run-up in US stocks has made them expensive relative to the rest of the world. 18 months ago Japan would have been the best value play, but its recent performance has changed that.
Now you know. I hope you find this useful.
PPCA Investment Strategies
Monday, July 29th, 2013
What does the Average CTA Look Like?
This great question was brought to us by a prospective client the other day, and while it seems simple, the question is actually a bit more complex.
But we suspected the investor was asking more of a statistical question, as in â€“ what do the monthly gains, losses, drawdowns, and so forth look like for an average CTA. Now, the knee jerk reaction used by 95% of the industry is to simply point the investor to the various CTA indices and say that’s what an average CTA looks like. But is that really true? After all, the CTA indices are made up in many different ways and mostly contain the biggest of the biggest CTAs, not really your run of the mill managed futures program.
This got us thinking of the question a different way that our database can understand: what is the average monthly performance, gain, loss, drawdown amount, and so forth across all CTAs. And while we’re at it, let’s look at not just the CTAs active as of today, but also all of the CTAs which have come and since gone (getting rid of the so called survivorship bias). Now that seems to be a bit better view of what an ‘average’ CTA should look like.
Without further ado, here’s the stats on over 48,698 monthly returns for 2,603 CTA programs going back to 1977: Continue Reading…
For the futures industry, we covered a quick refresher on the word Contango in regards to Crude Oil. Otherwise this week has been rather calm. As we head into the weekend, there’s an update on the MF Global scandal to top off weekend reads. Continue Reading…
Wednesday, July 17th, 2013
1st at Morningstar = 144th in the Real World
361 Capital’s Managed Futures mutual fund has been named the best performing fund over the past 12 months, according to Morningstar, but we can’t help but think this is a little like being the cleanest dirty shirt. We couldn’t help but wonder where their 8.12% return over those 12 months would rank amongst the 784 programs in our database and against our recommended list. Hint, 361 isn’t #1. Continue Reading…
Our apologies if we offended anyone’s sensitivities with the latest newsletter title, but you know we’re big readers around here and we just finished reading one of the highest rated investment books on Amazon (4.7 out of 5 stars) titled, “Jackass Investing”. The book tackles a host of market “truths”, “axioms”, and “words to live by”, systematically taking them apart in a way that warms our heart. We’ve giving away free copies! Continue Reading…
What’s your Futures Market Marked to?
What do you get when three banks are fined over $2 billion for rigging the Libor rate to make money on derivatives? The British government practically gives it away to the NYSE for the cost of a small cup of coffee. Now, futures exchange ICE will own NYSE Euronext, and that’s where things get interesting. ICE is a direct competitor with the CME in interest rate futures tied to Libor, and the CME just happens to have their biggest product (Eurodollar futures) benchmarked to LIBOR. Continue Reading…
Midyear Asset Class Scoreboard
June was not a pretty month to be an investor â€“ no matter the asset class, with all of the asset classes we track seeing losses for the month. At the half way point of the year, however; most asset classes remain positive for the year. Managed Futures put in best first half since 2010, but still trails most other asset classes YTD. Continue Reading…
CFTC Catching the Minnow, Ignoring the Juicy Walleye
It’s full steam ahead for the CFTC, sending a CTA to prison for lying to customers. They brought legal action against System Capital for misrepresenting the company’s prior experience in trading futures. We’re happy the CFTC got this guy, but left wondering how they’re able to catch this guy, but unable to build a criminal case against Corzine? Continue Reading…
Hand on the Trigger, with No Bullets
Managed Futures investors have a case of whiplash. Every time Fed Chairman Bernanke opens his mouth, the markets act like a 5 year old at their birthday party. Last month, managed futures experienced risk off days after Bernanke shared the news of the potential end of the QE3 by the end of 2013. Not even a month later, Bernanke holds an impromptu press conference delaying the end of quantitative easing, leading to a Risk On day. Continue Reading…
Wednesday, July 10th, 2013
Here are the latest posts from Attain’s Managed Futures Blog…
PFGBest One Year Later: Where’s my Money?
For those who had accounts at PFG â€“ the overriding questions beyond what happened, what has changed, and all the politics and drama surrounding those items â€“ is when am I going to get more of my money back and how much of my money will I be getting back? To tackle that, we talked with the PFG Bankruptcy Trustee Ira Bodenstein:Continue Reading…
PFGBest One Year Later: a Chat with James Koutoulas
Thereâ€™s no question that after the 1-2 punch of scandals involving PFG and MF Global, the managed futures community toke it upon themselves to advocate for changes. Shortly after the MF Global incident, the Customer Commodity Coalition was formed to conceptualize the frustrations of the customers into visible results. It only seems fitting that on the 1 Year Anniversary of the PFG scandal, we sit down with friend and colleague, James Koutoulas of the CCC and chat. Continue Reading…
PFGBest One Year Later: New Rules
But beyond talk about the hard work people have been doing in managed futures â€“ more than a few former PFG (and MF Global clients, too) want to know what exactly has been put in place since the PFG fraud to move the industry forward. Without further ado, the most important new rules and changes weâ€™ve seen in the past year: Continue Reading…
PFGBest One Year Later: Linkfest
We have fought tooth and nail on behalf of PFG customers to recover funds, repair the regulatory landscape, and more over the past year (with work still to be done), and thank all those who have stood by us during that time. For all those who like to slow down and look at car crashes on the other side of the highway â€“ hereâ€™s a linkfest with the bulk of our coverage of the PFG fraud over the past year. For those who donâ€™t like guts and gore, turn away:Continue Reading…
For more managed futures news and analysis, head over toÂ Managed Futures Blog.
Thursday, March 21st, 2013
The fastest growing segment of the financial services industry was the one hardest hit by MF Global’s suspicious demise and overt fraud at Peregrine Financial Group (PFG).
The managed futures industry, which had grown from $14 billion under management in 1991 to over $329 billion to end 2012, was a shining star of the new economy. Offering the unique ability to zig when other investments zagged, the lack of correlation and performance during crisis were key points of attraction. This attraction came to a screeching halt with the MF Global and PFG criminal incidents. Not only were investors getting acquainted with the asset class shocked to learn their accounts were looted of assets, but more troubling criminal behavior appeared the cause - casting a shadow over all participants.
“There is a severe loss of trust, a loss of confidence. There is incredible anger and frustration. Things need to change,” said Diane Mix Birnberg, president of Horizon Cash Management. Her firm just released a study, The Aftermath of MF Global and Peregrine Financial Group Meltdowns: A Crisis of Trust, showing that a whopping 91% of respondents believed there was a breakdown in audit procedures.
The study themes that emerged included:
- The laws and rules that govern the industry need to have ‘teeth’ â€“ and those involved in fraud and theft need to be punished.
- Customer segregated funds must either be kept completely out of the FCM and/or be verified in real-time by regulators.
A strong and rare female voice inside a Type A male dominated industry, Ms Birnberg’s firm, Horizon Cash Management, has become the top cash management firm for participants in the managed futures industry. Starting in the 1970s as a secretary in a stock brokerage firm in Atlanta, where “women generally didn’t think about career aspirations,” she later joined Lehman Brothers in the bond business. After moving to New York City to work on Wall Street, she was recruited in 1980 by investors to operate a cash management firm in the futures industry and in 1991 founded Horizon Cash Management, which currently has $2 billion under management.
In MF Global “there was very little institutional leadership (from exchanges, regulators and major firms),” she said. “This resulted in rumor, innuendo and ultimately a lack of trust. The void in leadership is terrifying.”
Looking back on the MF Global and PFG disasters, Ms. Birnberg has the experience of witnessing 10 FCM implosions. “In every FCM implosion it has negatively touched the CTA / CPO segment of the industry.”
“Think about a plane crash,” she said. “When it happens? Key issues and facts are addressed by the airline, the FAA and even the US president. Information is available regarding what happened, why it happened and steps being taken to address the problem.”
With MF Global a plane crashed and there was silence.
This is the first part of a two part article.
Mark Melin is author of three books and taught a managed futures course for Northwestern University’s Executive Education program. To read additional blog posts visit www.UncorrelatedInvestments.com (requires free registration).
Wednesday, March 20th, 2013
The voluntary return of $546 million in MF Global customer assets, the subject of hard fought 2 Â½ year battle, was not motivated solely by the kindness of JP Morgan.Â Rather, it could be considered fruit from a likely hard investigation now gearing up if not already under way.Â This investigation, declared “dead” many times over in leaks to the press from official sources, has heated up, asÂ first discussed here.
The return of illegally transferred MF Global customerÂ assetsÂ was always a key bone of contention.Â JP Morgan had summarily dismissed regulatory and public pressure to return customer assets, so the question is: why submit to authority now?
In 2012 the National Futures Association (NFA) went so far as to send the bank a public letter, which was generally brushed aside as were numerous verbal requests and mounting public pressure from groups such as the Commodity Customer Collation and its leaders James Koutoulas and John Roe.Â This significant pressure was dismissed, yet an attempt by bankruptcy trustee James Giddens was successful. Â The fact this occurred at this moment in time is not aÂ coincidence.
Speculation is JP Morganâ€™s normally dismissive attitude towards government regulators might have changed in the face of what is expected to be a no holds bar CFTC / DoJ criminal investigation.Â In other words, the specter of government actually asserting itself and allowing career investigators to do their jobs unimpeded is enough motivation for JP Morgan to return what are documented to be illegally transferred customer assets.
But perhaps more important to the future, a real investigation could also be motivation for JP Morgan to provide critical testimony regarding the criminal activity of MF Global executives, including that of Jon Corzine.
The need for deterrence that derives from a Jon Corzine conviction is more important because the future that matters most.Â Since 2008, when financial crimes that damaged the US financial system were was documented not to be investigated by DoJâ€™s former assistant attorney general in charge of criminal investigations Lanny Breuer, Wall Street crime has imploded in its brazen disregard.Â MF Global is one example, but the case of HSBC laundering money for terrorist organizations and drug cartels â€“ after being warned on several occasions not to do so â€“ is a sign of complete disrespect and a breakdown of law and order on Wall Street. Â Â When the full story is known, Mr. Corzineâ€™s disrespect for the US financial system and its cogs of justice will likely stand as the turning point in a long battle.
Is this real?Â Is the investigation a serious point where the rule of law might actually apply to once exempt Wall Street players?Â We donâ€™t know for certain at this point, but one key tell is going to be the type of charges filed against MF Global executives.Â If RICO charges are used, this will send the powerful message that a cop is in fact back on the beat.
Mark Melin is author of three books and taught a course on managed futures for Northwestern University’s Executive Education program. Â To read more of his blog posts, click here (requires free registration). Â Contents Copyright (C) 2013 Mark Melin.
Friday, November 16th, 2012
Richard Beales and Breakingviews columnists Antony Currie and Agnes Crane discuss criticism of Jon Corzine’s legacy after the collapse of MF Global and the likelihood that two overlapping U.S. regulators will ever merge.
Tuesday, October 23rd, 2012
Our weekly newsletter is out, and now that it’s been a year after MF Global declared bankruptcy and left the futures industry in a state of disarray, where are we? Do we really understand what transpired? Have we made the reforms necessary to prevent it from happening again? Here, we take a look at how the story played out, the reforms we’ve instituted to date, and the steps we need to take moving forward, both as an industry and as individual investors, to avoid a campy sequel.
This time of year, our homes and streets are swathed with cotton cobwebs, goblins and ghouls as we indulge in the chills and thrills of the latest horror movies and ghost stories of the year. The monsters beneath our bed come to life in polyester costumes and garish face paint, and macabre goes mainstream. It’s a time where, instead of running from our fears, we embrace them â€“ if only momentarily â€“ for a rush of adrenaline and a few good laughs.
Except, last Halloween, the worst fears of the futures industry played out in agonizing slow motion without the superficial sheen of the holiday season. Amidst the candy corn and taffy apples came a sharp blow to investor confidence. The demon plaguing our central cast of characters did not don a cape nor boast a set of horns; he wore a suit and scraggly beard. Victims did not lose their lives, but some lost their livelihoods.
It has been a year since MF Global began a maddening descent into bankruptcy and scandal, but for many of us, it feels as though it was just yesterday. The story has, by and large, faded from the headlines, but the lessons of the past remain poignant today, and there is still much work to be done. We take a moment here to look back over the past year at what happened, how things have changed since, and what challenges await us on the horizon.
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To read more Managed Futures research pieces, visit Attain’s Managed Futures Newsletter archive and our Managed Futures Blog.
Forex trading, commodity trading, managed futures, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors.
The entries on this blog are intended to further subscribers understanding, education, and â€“ at times- enjoyment of the world of alternative investments through managed futures, trading systems, and managed forex. Unless distinctly noted otherwise, the data and graphs included herein are intended to be mere examples and exhibits of the topic discussed, are for educational and illustrative purposes only, and do not represent trading in actual accounts.
The mention of asset class performance is based on the noted source index (i.e. Newedge CTA Index, S&P 500 Index, etc.) , and investors should take care to understand that any index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices: such as survivorship and self reporting biases, and instant history.
Managed Futures Disclaimer:
Past Performance is Not Necessarily Indicative of Future Results. The regulations of the CFTC require that prospective clients of a managed futures program (CTA) receive a disclosure document when they are solicited to enter into an agreement whereby the CTA will direct or guide the client’s commodity interest trading and that certain risk factors be highlighted. The disclosure document contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA.
Copyright Â© 2011 Attain Capital Management, licensed Managed Futures, Trading System & Commodity Brokers. All Rights Reserved. Reprinted with permission.
Wednesday, August 1st, 2012
The Senate Agriculture Committee gets an update from regulators on two probes under way into scandals at futures trading firms MF Global and Peregrine Financial Group. (more…)