Conspiracy Fact

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Conspiracy Fact I have speculated in this column for the past couple of years as to who continues to buy equities to record levels even in the face of often poor economic data and a precarious geo-political situation. Well, we have an answer as another conspiracy "theory" becomes conspiracy "fact." Investigative work by the Financial Times has found that central banking investors have become major players on world equity markets. According to Zero Hedge: The report, to be published this week by the Official Monetary and Financial Institutions Forum (OMFIF), confirms $29.1tn in market investments, held by 400 public sector institutions in 162 countries, which "could potentially contribute to overheated asset prices." China's State Administration of Foreign Exchange has become "the world's largest public sector holder of equities", according to officials, and we suspect the Fed is close behind (courtesy of more levered positions at Citadel), as the world's banks try to diversify themselves and "counters the monopoly power of the dollar." Which leaves us wondering where are the central bank 13Fs? While most have assumed that this is likely, the recent exuberance in stocks has largely been laid at the foot of another irrational un-economic actor - the corporate buyback machine. However, as The FT reports, what we have speculated as fact for many years now (given the death cross of irrationality, plunging volumes, lack of engagement, and of course dwindling credibility of central planners)... is now fact... Central banks around the world, including China's, have shifted decisively into investing in equities as low interest rates have hit their revenues, according to a global study of 400 public sector institutions. "A cluster of central banking investors has become major players on world equity markets," says a report to be published this week by the Official Monetary and Financial Institutions Forum (Omfif), a central bank research and advisory group. The trend "could potentially contribute to overheated asset prices", it warns. The report, seen by the Financial Times, identifies $29.1tn in market investments including gold, held by 400 public sector institutions in 162 countries China's State Administration of Foreign Exchange has become "the world's largest public sector holder of equities", as the report argues is "partly strategic" because it "counters the monopoly power of the dollar" and reflects Beijing's global financial ambitions. In Europe, the Swiss and Danish central banks are among those investing in equities.The Swiss National Bank has an equity quota of about 15 per cent. Omfif quotes Thomas Jordan, SNB's chairman, as saying: "We are now invested in large, mid- and small-cap stocks in developed markets worldwide." The Danish central bank's equity portfolio was worth about $500m at the end of last year. So there it is... conspiracy fact - Central Banks around the world are buying stocks in increasing size. Read Past Issues of Larry's Newsletters at TradeWithLarry.com

The major averages finished off with a small rally on Friday, capping off a see saw week of trading. While trading volume picked up the last 2 days of the week, overall it was still pretty light. We also saw the rally Friday face a bit of suppression from sellers, as fears over the volatile situation in Iraq is weighing on the markets. This is somewhat similar to when the situation in Ukraine weighed on the markets, but now has become something of an afterthought so to speak. I am looking for a possible swing lower today, especially if we open to the downside. If no immediate rally takes place, then I would look for a squeeze on buyers. Read More

TECHNICAL DATA ES 1928.00/1923.00 POC 1927.50 YM 16704/16666 NQ 3772.75/3761.75

Our methodology can be broken into two broad categories: directional and implied volatility mean regression set ups. A directional play is pretty straightforward, we identify an entry point (from either the long or the short side) triggered by either a technical or fundamental basis (often both). We then maximize our reward to risk ratio which clearly defines our potential reward while defining and capping our risk. This can be done in a number of ways. We can buy or sell a call or put, we can buy or sell a vertical spread, or a combination of any number of these. We will take either side of these set ups, whichever opportunity affords us the highest reward to risk ratio. The implied volatility regression type trades are typically based around some sort of event like an earnings report, a regulatory decision, a takeover (or rumor of a take over), etc. Read More

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