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Author: Alexander Gloy

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  • Bailout loop:

    Alexander Gloy

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  • Another red flag: Commercial Paper (CP)

    Alexander Gloy

    What are CP’s? They are unsecured “promissory notes”, sold by large companies and banks with excellent credit ratings to finance short-term needs. They mature within 1 to 270 days (35 on average). Unsecured means there is no collateral (except asset-backed CPs). If the issuer goes belly-up while you hold a CD the joke’s on you.…

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  • How the Swiss National Bank tried to keep the CHF from appreciating – and failed

    Alexander Gloy

    According to preliminary data foreign currency reserves at the Swiss National Bank (SNB) in May went up to CHF 232bn from 153bn in April. Meaning they intervened with 4bn per work day in May, up from 1bn previously. And now they wasted half of GDP on potentially worthless currencies (Euros, Dollars). Why does the SNB…

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  • Is BP worth a buy after losing 50%?

    Alexander Gloy

    Take a look at CDS (credit default swap) for BP (British Petroleum): because of the possible clean-up costs for the Gulf of Mexico oil spill (especially after a hurricane) insurance costs against bankruptcy today increased by almost 50% to 383bps (basis points). That means it would cost $38,300 annually to insure $1,000,000 of debt against…

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  • A rising TED spread signals red flag for banks

    Alexander Gloy

    Introducing: the TED spread. It’s the difference between (formerly) risk-free 3-months Treasury Bills (hence the “T”) and the 3-months Eurodollar Libor (London Interbank Offered Rate, ticker symbol “ED”). The Libor is an average of interest rates banks charge each other for borrowing money. Currently 3-months Libor is at 0.54%, T-bills at 0.12%, hence difference = 0.42%…

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  • LQD: sold all positions, closed short puts

    Alexander Gloy

    Update May 5, 2010: We have closed all our short puts on LQD (June 105, September 106) with nice profits on May 4. We also sold all LQD (US Investment Grade Corporate Debt ETD) in our cash accounts (May 4 + 5). Reasoning: We are uneasy regarding the high proportion of bank debt in LQD.…

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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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