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October 17 2017

Commentary by Eoin Treacy

October 17 2017

Commentary by Eoin Treacy

Market and Volatility Commentary

I asked around for this note from Marko Kolanovic for JPMorgan back in June but it finally turned up in my inbox today. Despite the fact the trading advice is dated, the discussion of the animating factors behind low volatility remain valid and I commend it to subscribers. Here is a section: 

Low Volatility is not a new normal or fundamentally justified – it is result from macro de-correlation and massive supply of volatility through yield generation products and strategies. Finally, Big Data Strategies are increasingly challenging traditional fundamental investing and will be a catalyst for changes in the years to come. 

And

What is really driving the low volatility? As we discussed recently low correlations (driven by quant flows, sector and thematic trading) are temporarily reducing volatility by 2-4 points, and a massive supply of volatility pressures implied and extension realized volatility by another 2-4 points. We estimated that supply from yield seeking risk premia strategies grew by $1Bn vega (30% of the S&P500 options market). In addition to these, large inflows in passive funds put further pressure on volatility. Keep in mind that passive investors almost never sell. Quant investors don’t take large directional bets and don’t overreact either (at least not for the same reasons humans do). Regardless of those, we think current low levels of volatility is not a new normal and will not last very long given the amount of leverage, rising rates, and the approaching reduction of central bank balance sheets. 

 

Eoin Treacy's view

A link to the full note is posted in the Subscriber's Area.

Volatility has not increased to any meaningful extent since April but there have been occasional pops on the upside which have not been sustained. These occurred in May, June and August so it has been two months since the last one. 

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October 17 2017

Commentary by Eoin Treacy

Amazon to make sportswear push in industry-jolting move

This article by Lindsey Rupp and Daniela Wei for Bloomberg may be of interest to subscribers. Here is a section:

Amazon has developed its own brands in part because they fill gaps in its inventory. If customers are searching for a certain type of shoe or skirt, and don’t see much of a selection from established brands, Amazon wants to be able to offer its own options. Oftentimes, shoppers may not realize that the names -- such as Scout + Ro and North Eleven -- are owned by Amazon.

This also sends a message to brands reluctant to sell their full inventory on Amazon. If shoppers can’t find your products on the site, Amazon will make its own substitutes and become your competitor.

For suppliers like Eclat, forging alliances with e-commerce companies reflects shifting demand from consumers, Chiu said in a note.

“Online apparel sales accounted for 19 percent of all apparel sales in 2016, up from 11 percent in 2011,” Chiu said.

“Online sales are primed for strong growth.” Eclat expects new clients to contribute as much as 12 percent of 2018 sales, she said. The shipments to Amazon began in August, according to Chiu. “The contribution this year will be small, but the potential is high,” she said.

Eoin Treacy's view

Amazon has a wealth of data about what people search for and can also cross reference that with what people in fact end up purchasing and returning. That puts it in an enviable position to design product lines around what people want rather than guessing what the next fashion forward idea is going to be. 

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October 17 2017

Commentary by Eoin Treacy

London House Prices Fall Most Since Financial Crisis

This article by Jill Ward for Bloomberg may be of interest to subscribers. Here is a section: 

In London, values fell for a sixth consecutive month. If the provisional estimates are confirmed, the average price of a home in the capital was less than 582,000 ($773,000), the lowest since the end of 2015.

The downbeat picture was confirmed in a separate report from Rightmove Plc, which said asking prices in London fell an annual 2.5 percent in October. While they rose 3.1 percent on the month, driven by owners of more expensive properties, achieving these prices is far from assured as buyers now have more choice, according to Rightmove director Miles Shipside.
Values at the top end of the market have come under the most pressure, with prices falling in almost half of London’s 33 boroughs in the year through August, according to Acadata. It illustrates the toll being taken by Brexit uncertainty, higher property taxes for landlords and the prospect of the Bank of England raising interest rates for the first time in a decade.

 

Eoin Treacy's view

Increasing supply is finally beginning to come to market in London at just the same time that property taxes have risen and the Bank of England’s looks likely to raise rates.  

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October 17 2017

Commentary by Eoin Treacy

48th Year of The Chart Seminar

Eoin Treacy's view

The Chart Seminar 2017 

Our remaining venue for the 48th year of the seminar is:

London November 16th and 17th 

If you are interested or would like to suggest a venue please contact Sarah at sarah@fullertreacymoney.com 

The full rate for The Chart Seminar is £1799 + VAT. (Please note US, Australian and Asian delegates, as non EU residents are not liable for VAT). Subscribers are offered a discounted rate of £850. Anyone booking more than one place can also avail of the £850 rate for the second and subsequent delegates.

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