Lighthouse Investment Management

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Month: April 2010

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  • A Greek Drama

    Alexander Gloy

    Monday the S&P 500 made a new 52-week high. On Tuesday hell broke lose after S&P downgraded Greece by 3 steps to junk (from BBB+ to BB+) with negative outlook. Expected recovery in case of default: 30-50%. Greek government bonds (10yr yield 10.5% this morning, 2yr above 18%) would no longer be eligable as collateral…

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  • Recent rise in bond yields might offer decent real returns

    Alexander Gloy

    Despite the Fed’s continued ZIRP (zero-interest rate policy) US government bond yields have recently shot up across the curve (see below). A 28-year US Treasury STRIP (zero coupon) can be bought at 24.30%, yielding 5.09%. With inflation to remain subdued due to constrained consumer spending real return on such an investment might be as high…

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  • Number of stocks above a moving average

    Alexander Gloy

    Stocks go up and down. If you calculate a moving average (say, last 50 or 200 days), the stock will sometimes be above, sometimes below that average. One thing is sure: the stock will meander around its average, and it will always come back to its average. If it moves far away from the average…

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  • Equity options put-call ratio

    Alexander Gloy

    Looking at the volume of all equity options traded you can calculate the ratio of put options to call options. Call buyers expect strongly rising prices (let’s call it “+2” on a bullish-ness scale) while call sellers expect falling, flat or slightly rising prices (-0.5). Combined, their expectations can be summed up as +0.75. Put…

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  • New Highs vs New Lows ratio: better indicator

    Alexander Gloy

    A better indicator to sniff out trend changes is the ratio between new highs and new lows. The ratio bottoms when the market bottoms (late November, beginning February) and crests when the market does (mid-January, now?).

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