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 […]

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 […]

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.


Earnings Power Indexing

2020-04-27T14:19:15+00:00March 17th, 2020|Earnings Derivatives, Indexes|

Click here to download Earnings Power Indexing as a PDF. 

BLX Global Indexes provide pure exposure to the aggregate financial statement performance of select industries and sectors. Our patent pending methodology turns bottom line financial metrics into an investable asset, creating new opportunities for speculation and hedging.

The basic concepts are similar to traditional stock indexes: a list of companies and a normalized number to describe the aggregate performance. However, the methodology behind our indexes is different than traditional stock indexes. The calculation methods for our indexes are based on the […]

Airline Revenue: The Coronavirus Hedge

2020-03-11T18:03:40+00:00March 10th, 2020|Indexes|

The outbreak of Coronavirus Disease 2019 (COVID-19) started in China, but has now spread globally.  At the time of writing, the latest data show slightly over 100,000 confirmed cases worldwide, and just under 4,000 total deaths.  In the US there has about 600 coronavirus cases and 21 deaths However, testing has been limited, so its likely that are many more cases.  Two weeks ago, the US Center for Disease Control and Prevention (CDC)  warned that Americans should be ready to experience disruption to their daily lives.

Investors […]

BLX Global Indices Now Available on Thomson Reuters Eikon

2020-02-03T21:28:35+00:00February 3rd, 2020|Indexes|

Investors can now access data on BLX Global Indices using Thomson Reuters Eikon by typing in the appropriate ticker symbols.

BLX Global FAANG Revenue Index         (.BLXGLFAANGR )

BLX Global FAANG Earnings Index          (.BLXFLFAANGE )

BLX Global Select Bank Revenue Index   (.BLXSBR )

BLX Global Select Bank Earnings Index     (.BLXSBE )

You can also calll up all indices together by calling  0#BLXINDICE?

Indices price daily at 6:30 EST (11:30 GMT).

3 Threats to Profit Margins in 2020

2020-01-06T11:25:03+00:00December 19th, 2019|Earnings Derivatives, Indexes|

Corporate profits are near all time highs, and high earnings multiples indicate the market expects continued profit growth.  BlackRock’s 2020 Global Outlook identified two key trends that have underpinned high corporate profit margins in recent decades:

Profit margins of publicly listed companies have been on a decades-long march higher. This has been driven by two key trends: globalization (integrated supply chains and labor markets that have, along with technological innovation, reduced input costs) and rising market concentration (the advent of superstar firms that dominate […]

Broader, Deeper Market Exposure: Micro Caps and Owner-Operated Companies

2020-01-06T15:15:14+00:00November 15th, 2019|Indexes|

Most stock indexes are market cap weighted and float adjusted because this is the only way to encourage the development of large, liquid ETFs. Market cap weighting creates a self reinforcing bias towards the largest, most established companies. Even the market cap weighted the Russell Microcap Index is effectively a large allocation to a small tail of the Russell 2000 index, with only small exposure to a long tail of actual microcap companies. Float adjustment excludes most companies with high insider ownership. In fact, often companies get added to indexes […]

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