Monday, 1 February 2016
Death and Taxes
I'm not afraid of dying; I just can't afford it. Ahead of NFP this week there's lots of useful data. Have a look, and see my twitter for the highlights.
Saturday, 30 January 2016
More Fun with Math
The price of gas in Tucson, Arizona - according to my relatives - is down to $1.37 per gallon. Here, in London, the price per gallon equals $5.40! See my previous blog - 'Fun with Math' - for my calculations.
Thursday, 28 January 2016
Trade of the Afternoon, 28Jan16
Just returned from a trading session with colleague Justin. The trade of the afternoon was to sell the 158.00 weekly puts that expire tomorrow on 30-yr Treasuries at 4 and 5 ticks, while the March future traded down to support at the 159 area. Now working a 1 tick bid as the market rallies.
Thursday, 21 January 2016
Fun with Math
Now it's time for (drum-roll) FUN WITH MATH!
UK motorists are 'pleased' to find petrol (gas) below £1 per liter. Wow! They're almost getting excited!
So let's compare the UK cost to the US cost. Everyone get out your pencil and paper to verify my calculations. Class, are we ready? Here we go!
The current US/UK exchange rate is $1.46 per £1.00 sterling, so £1.00 per liter equals $1.46 per liter, right?
But in the US, the cost of gas is measured in gallons, so we need to convert. There are appx 3.7 liters per gallon. So the equivalent cost per gallon in US dollars is $1.46 x 3.7 = $5.40. Tell me if I'm wrong.
Let's say you tank up at Costco in Texas. The price there is currently $1.87 per gallon. This is an unfair comparison, because a price is always cheapest where they grow the stuff. But still, Texas is a price driver.
Now class, let's convert the Texas cost of a gallon into the UK cost per liter.
Stay with me.
If the US cost is $1.87 for 3.7 liters, then the UK cost for a liter, in dollars, would be $1.87/3.7=$0.50, or fifty US cents per liter. Right or wrong?
Now to get the equivalent cost in £Sterling we divide the dollar cost by the exchange rate, or $0.50/1.46=£0.34. That's thirty-four UK pence per liter, ok?
To summarize, the UK pays £1.00 per liter, while the US pays £0.34 per liter. The UK pays $5.40 per gallon, while the US pays $1.87 per gallon.
But before members of our class object to this comparison, I wish to offer one bit of anecdotal evidence:
Several years ago the Saudi oil minister stated that the UK earns more in petrol tax revenue than his country earns in production revenue.
If my calculations are wrong, I want to be the first to know. Class adjourned.
UK motorists are 'pleased' to find petrol (gas) below £1 per liter. Wow! They're almost getting excited!
So let's compare the UK cost to the US cost. Everyone get out your pencil and paper to verify my calculations. Class, are we ready? Here we go!
The current US/UK exchange rate is $1.46 per £1.00 sterling, so £1.00 per liter equals $1.46 per liter, right?
But in the US, the cost of gas is measured in gallons, so we need to convert. There are appx 3.7 liters per gallon. So the equivalent cost per gallon in US dollars is $1.46 x 3.7 = $5.40. Tell me if I'm wrong.
Let's say you tank up at Costco in Texas. The price there is currently $1.87 per gallon. This is an unfair comparison, because a price is always cheapest where they grow the stuff. But still, Texas is a price driver.
Now class, let's convert the Texas cost of a gallon into the UK cost per liter.
Stay with me.
If the US cost is $1.87 for 3.7 liters, then the UK cost for a liter, in dollars, would be $1.87/3.7=$0.50, or fifty US cents per liter. Right or wrong?
Now to get the equivalent cost in £Sterling we divide the dollar cost by the exchange rate, or $0.50/1.46=£0.34. That's thirty-four UK pence per liter, ok?
To summarize, the UK pays £1.00 per liter, while the US pays £0.34 per liter. The UK pays $5.40 per gallon, while the US pays $1.87 per gallon.
But before members of our class object to this comparison, I wish to offer one bit of anecdotal evidence:
Several years ago the Saudi oil minister stated that the UK earns more in petrol tax revenue than his country earns in production revenue.
If my calculations are wrong, I want to be the first to know. Class adjourned.
Wednesday, 13 January 2016
Saturday, 9 January 2016
Dec NFP was a whopper. So was the upside revision to Nov.
I am perennially surprised by the market’s failure to understand how the US economy can adjust.
But at the close, it’s striking that the SPX settled lower after what was on the surface great news. What could be the reason?
Earlier, the Chinese CSI 300 was down 2%, but London traders say that after state fund buying it closed up 2% (Evening Standard 08Jan16)
That means that the state needed to step in, in order to rally stocks by 4%. A nice little turn around.
To me that’s bearish, and it may be a reason why the SPX closed down, and the VIX rallied to 27%. Still, there’s no cause for alarm.
We’re not at a crisis point. One indicator would be if the SPX makes a substantial break below 1900. By substantial, I don’t mean dipping down for a swim under the surface; I mean disappearing, and then the life guard needs to dive in.
Another indicator would be if the VIX breaks through resistance at 27-28%. Then the notoriously volatile VIX could see at least 30%.
Meanwhile, that little VIX options trade that I discussed, when the index was at 20.5%, is doing nicely:
It was buy 17Feb 28c, sell 17Feb 18p for a buck, now worth appx $1.46.
You could cash in asap or wait until we see what China does next week. NFP may be quickly forgotten by Tuesday.
Now forget the markets, and have a weekend.
I am perennially surprised by the market’s failure to understand how the US economy can adjust.
But at the close, it’s striking that the SPX settled lower after what was on the surface great news. What could be the reason?
Earlier, the Chinese CSI 300 was down 2%, but London traders say that after state fund buying it closed up 2% (Evening Standard 08Jan16)
That means that the state needed to step in, in order to rally stocks by 4%. A nice little turn around.
To me that’s bearish, and it may be a reason why the SPX closed down, and the VIX rallied to 27%. Still, there’s no cause for alarm.
We’re not at a crisis point. One indicator would be if the SPX makes a substantial break below 1900. By substantial, I don’t mean dipping down for a swim under the surface; I mean disappearing, and then the life guard needs to dive in.
Another indicator would be if the VIX breaks through resistance at 27-28%. Then the notoriously volatile VIX could see at least 30%.
Meanwhile, that little VIX options trade that I discussed, when the index was at 20.5%, is doing nicely:
It was buy 17Feb 28c, sell 17Feb 18p for a buck, now worth appx $1.46.
You could cash in asap or wait until we see what China does next week. NFP may be quickly forgotten by Tuesday.
Now forget the markets, and have a weekend.
Thursday, 7 January 2016
'Amusing that the newspapers became hysterical earlier this week about a market sell-off of 2%. Perhaps these journalists weren't yet born during sell-offs of 10% and even 20%. Then things got really scary.
Meanwhile the VIX is at a ho-hum 20%: typical for a stock index.
If, however, the real truth emerges about the failing Chinese economy, 20% looks like a buy.
The folks out East are still novices at capitalism - they don't understand the consequences of economic bubbles. My hunch is that things over there will get a lot worse before they get better, and all the propping up will only slow the descent.
But hey, what better way to spend our money?'
Meanwhile the VIX is at a ho-hum 20%: typical for a stock index.
If, however, the real truth emerges about the failing Chinese economy, 20% looks like a buy.
The folks out East are still novices at capitalism - they don't understand the consequences of economic bubbles. My hunch is that things over there will get a lot worse before they get better, and all the propping up will only slow the descent.
But hey, what better way to spend our money?'
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