RVX

Bank Earnings Pour In

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The banking industry is on solid footing, and while Wells Fargo is creating negative headlines, the first quarter of 2018 was a good one for many financial institutions. Expanding revenue and net income, increased capital-return programs, solid returns on equity, and generally positive commentary, despite an increasingly competitive lending environment, were the norm. A narrowing of spreads on US Treasury instruments may pose a challenge to net interest margin expansion in the group, but there are other opportunities to capitalize on a surging LIBOR and the increasingly volatile equity market environment. All in, the performance in the first quarter of 2018 was “more good than bad” for the banks, and we continue to look for the right price to consider … Read more

The Sell Off February 5 Remains Minimal Compared to the Gains of Past Years

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Image shown: The SPDR Dow Jones Industrial Average ETF (DIA) share price performance since mid-2009. The pullback the past few days hasn’t amounted to much, but it has caught the attention of investors.   Recent equity market price declines don’t add up to much compared to the huge gains of recent years. Typical bear markets result in the evaporation of nearly 40% of investor wealth, on average. By Kris Rosemann and Brian Nelson, CFA The recent sell-off in equities accelerated in the trading session February 5 as concerns regarding an uptick in inflation (embedded in discount rates within valuation frameworks) and potentially materially tightening monetary policy in the US are weighing on investors’ minds. When the dust finally settled at … Read more

Volatility Spikes, Oh Cisco, the Mighty US Dollar, and More

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Image Source: CBOE Let’s talk about recent market events May 17. There’s a lot going on. By Brian Nelson, CFA It looks like volatility is back in a big way, with “all 29 volatility indexes at the CBOE ris(ing) today,” one more-than-doubling, the CBOE Short-Term Volatility Index (VXST). The ridiculously-named “fear gauge” or “fear index” or the CBOE Volatility Index, the VIX (VIX) leapt nearly 50%. On May 17, we effectively bought volatility intraday by adding put options to the newsletter portfolios, both on the S&P 500 SPDR (SPY) and Netflix, a company whose valuation we think remains ridiculous. We may continue to add put options on entities whose equity prices we believe have become too stretched, positions that may … Read more