Danger, Danger, UWTI holders!

Among the muddied waters of exchange-traded products lie the highly leveraged exchange traded notes (ETNs). UWTI, the 3x leveraged long crude oil product offered by Credit Suisse AG is finally reaching its demise and is to be delisted December 9, 2016. UWTI will be sorely missed among “moms and millennials", who loved trading this vehicle.

UWTI is a probable casualty of the SEC's increased scrutiny of the shadowy world of leveraged investment vehicles and may be a move by Credite Suisse to forestall action which may have been taken by the regulator. The problem with investment vehicles like UWTI is that the high cost of front-month futures contracts destroys the underlying value of the product over time, which makes this type of vehicle only appropriate for VERY short holding periods. Plenty of alternative leveraged notes still exist for gamblers - erm, traders - to play around with.


https://www.prnewswire.com/news-releases/credit-suisse-ag-announces-its-intent-to-delist-and-suspend-further-issuances-of-its-dwti-and-uwti-etns-300364595.html

S&P 500 posts fourth-largest reversal in USA history

Bulls vs Bears: this time, the Bears lose!

What happened? Analysts projected around -6% in market declines if Trump unexpectedly defeated Clinton. During overnight hours, the latter definitely happened, and sparsely-traded S&P 500 futures did indeed fall to the circuit breaker of -5% (since only professional investors can trade futures at those terrible hours, who in their right mind would sell at -5% in the S&P 500 futures market is another question). In any case, smarter professional investors took over from the circuit-breaker, effectively forming a market bottom. By the end of the NYSE trading day, the S&P 500 had risen more than a percent, for a total market move from bottom to top of about +6.1% for the fourth largest S&P 500 reversal in USA history.

With uncertainty gone, investors were jumping into the markets, shorts were forced to cover their bets, and possibly a whole lot of money sitting on the sidelines decided that Trump would actually have an overall positive effect on the economy (see my last post). Far more sectors may benefit from his policies than suffer from them. Momentum has shifted and some analysts now expect markets to move higher.

And what of the currency markets? The US dollar / Mexican peso trading activity rose 63x normal rates and hit a historic low of 20.77 / USD overnight before giving up some of that weakness into market open.


https://www.bloomberg.com/news/articles/2016-11-09/s-p-500-reversal-is-the-biggest-since-crisis-days-of-2008-chart

Donald Trump elected President of the United States

In an incredible political feat, Donald Trump emerged as the winner of the USA presidential election. In a continuation of popular repudiation of democratic establishments worldwide (think Brexit), Donald Trump defeated first the Republican establishment and then the Democratic candidate with a message of economic protectionism and strong border controls.

Trump's economic policies are generally considered to be supportive of:

• Tax reform
• Energy, including coal
• Investment in infrastructure
• American-made products (economic protectionism)
• Deregulation

This would potentially be of most benefit to small companies, the energy sector, infrastructure-related sectors, and the financial sector. To a lesser extent, this may also benefit healthcare companies with less regulatory scrutiny. Benefit to large corporations with international holdings and sales may be limited (little effect from tax reform, risk from Trump's protectionist policies). Effect on the Discretionary sector at high risk from Trump's protectionist policies since most goods manufactured oversees and then shipped to the United States.

https://www.nytimes.com/2016/11/09/us/politics/hillary-clinton-donald-trump-president.html

Earthquake strikes Cushing, Oklahoma

Over the weekend, a 5.0 Moment Magnitude quake hit Oklahoma and originated just outside the town of Cushing, Oklahoma. Cushing is a key storage facility for commercial crude oil and is the destination terminus for many oil pipelines. Any effect on this storage facility impacts crude prices worldwide. This time, however, the damage appeared to be minimal.

https://www.npr.org/sections/thetwo-way/2016/11/07/500998673/earthquake-shakes-oklahoma-oil-storage-hub