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So far blxglobal has created 28 blog entries.

What Bank Earnings Tell Us About the Economy

2020-10-23T21:36:25+00:00October 23rd, 2020|Banks, Earnings Season|

It’s been a wild ride for the Select Bank Revenue(.BLXSBR) and Select Bank Earnings(.BLXSBE) indexes. Revenue for the sector dropped slightly as the Covid-19 crisis started, but remained well above levels from a couple years ago.BLX Select Bank Revenue Index

Bank earnings, however, dropped sharply as banks increased their loan loss provisions in expectation of large future losses:

BLX Global Select Bank Earnings

Last quarter banks complemented their dismal results with gloomy outlooks. Analysts scrambled […]

Key Themes From Latest Hedge Fund Letters

2020-09-07T13:06:02+00:00September 4th, 2020|Hedge Funds, Quantamental|

Hedge fund manager letters are a great source of investing wisdom and market intelligence. In order to better understand the meta game of markets, we analyzed a sample of nearly 200 first and second quarter hedge fund letters using natural language processing (NLP) tools in Python. These funds covered a wide variety of strategies, but all had significant exposure to equity markets. In this piece I highlight the key themes of these letters, along with how sentiment has shifted as the pandemic has run its course, and the stock market […]

5 Reasons Why Now is the Time for Earnings Derivatives

2020-08-31T17:43:30+00:00August 31st, 2020|Earnings Derivatives, Indexes|

In recent years investors have become ever more sophisticated at predicting future company earnings.  Yet there hasn’t been any way to invest directly in company earnings streams, until now.

The invention of any new product is ultimately a response to latent demand or overt demand. Accordingly the latent demand for new markets in the financial sector typically follows a period of major structural economic change.

-Robert Shiller, Financial Innovation: Too Much or Too Little?

Here are 5 reasons why now is the time for earnings derivatives.

Democratization of Investment Research

It used to be that […]

5 Reason PE Ratios Change

2020-08-17T21:11:58+00:00August 17th, 2020|Earnings Derivatives, Indexes|

Historically, PE ratios have varied widely for the broader market, and for individual stocks and sectors. For example, the trailing PE  ratio of the S&P 500 has ranged from 5.9 to 122, between 1927 and 2019.  Why do PE ratios fluctuate so much? In this article we summarize 5 main drivers influencing changes in PE ratios.

Expected Growth Rate

Changes in earnings expectations are the most direct drivers of PE multiples. When management reduces or eliminates future guidance, the stock will often react negatively. Similarly, PE ratios often react to analyst commentary […]

Dividend volatility and earnings derivatives

2020-07-29T13:53:15+00:00July 29th, 2020|Earnings Season|

One second order impact of Covid-19 has been a reduction in stock buybacks. It is possible that companies will buy back less stock for the foreseeable future. Obviously there will be a temporary reduction in share buybacks, at least until the virus is under control. There is also the reasonable possibility that the reduction in buybacks is long term.  This has interesting implications for capital markets in general, and earnings derivatives in particular.

Why would buyback reductions be longer lasting this time around? Criticism of share buybacks is now a near […]

Brace Yourself for 2020Q2 Earnings

2020-07-13T15:53:04+00:00July 9th, 2020|Earnings Season|

The future’s uncertain and the end is always near.

-The Doors, Roadhouse Blues

The second quarter of 2020 was one of the ugliest quarters in US Economic history. Most lockdowns related to the Covid-19 outbreak did not take effect until late March.  Consequently Q2 is bearing the brunt of the economic impact. It’s no surprise that there have been record high cuts to earnings forecasts. How bad will earnings be? It turns out the companies themselves don’t know.

Analysts have been forced to make forecasts with less help from company management. According […]

Inflation and PE Ratios: The Role of Earnings Derivatives

2020-08-17T21:11:20+00:00June 10th, 2020|Earnings Derivatives, Indexes|

Most hedge fund analysts and investors working today have never experienced inflation.  It’s trended downwards over the past few decades.

Long term inflation trends Source: Horizon Kinetics, BLS

Yet the new global rise of populism has led to a dramatic reversal of key factors that kept inflation low for so long. The buildup of new inflationary pressures is being amplified by the policy response to Covid-19 around the world.   Although we are experiencing short term deflation, the greater risk as the world […]

Earnings Season Will Never be the Same

2020-06-02T19:05:37+00:00June 2nd, 2020|Earnings Derivatives, Earnings Season|

Recent media coverage highlighting big changes coming to capital markets as a result of earnings derivatives: “Earnings Derivatives” Could Change Wall Street Earnings Season. 

From the article:

 

What has played out over the last few months is a stock market that has been subject to whipsawing prices based on news headlines, political uncertainty and the daily whims of market sentiment. Some stocks are having unexplainable plunges or surges in price.

One company has stepped in to provide a solution by creating an investment product that gives funds and portfolio managers […]

FAANG Earnings: Is Optimism Justified?

2020-04-28T11:33:46+00:00April 21st, 2020|Earnings Season, Indexes|

FAANG earnings are expected to be one of the few bright spots in a brutal earnings season.    Sell-side analysts have revised forecasts down, but are still expecting continued growth in revenue and earnings for the group.  Yet, given the extreme uncertainty in the market right now,  buyside investors likely have different views.   This is likely setting up an investment opportunity using earnings derivatives linked to the BLX FAANG Revenue Index or the BLX FAANG Earnings Index.

Netflix will report earnings after market close today.   Facebook, Apple, Amazon, and […]

Airline Earnings Are Bad- So What Can You Do?

2020-04-28T11:29:30+00:00April 20th, 2020|Earnings Season, Indexes|

There is no question that airline earnings are going to be terrible this quarter. The key questions for investors are : (1) How bad will they be? (2) How long till they recover; and most importantly, (3) What should investors do about it?

How bad and how long?

TSA Checkpoint traffic started to drop off precipitously towards the end of the first quarter.

 

TSA Checkpoint data provides preview of airline earnings

As we move through the second quarter, US air traffic is around 10% of normal.

 

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