Observations & Notes

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Visualizing Bob Farrell’s 10 Investing Rules

Visualizing Bob Farrell’s 10 Investing Rules

An interesting and relevant read, especially at this point in time where markets react indifferently to all events alike — good or bad — creating a false impression, This Time is Different.

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VIX Contango

VIX Contango

Probably help those who trade VIX futures using ETNs such as VXX, TVIX, UVXY, XIV (inverse VIX), ..

Reference: Contango

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Fed’s Permanent Open Market Operations (POMO) Schedule

Fed’s Permanent Open Market Operations (POMO) Schedule

On 12/12/12, the Federal Open Market Committee (FOMC) announced open-ended purchases of Treasury and Mortgage-backed Securities up to $85 billion per month. This is the Quantitative Easing round 3 (QE3) that media has been talking about for several months.

Out of $85 billion, Federal Reserve is spending approximately $45 billion per month in buying Treasury securities, and the remaining $40 billion on mortgage-backed securities.

At the beginning of the month, Fed usually publishes the schedule for their planned Treasury operations for the entire month. The schedule includes the plan for the purchase of $45 billion Treasury securities, which is part of QE3. Check the month long schedule at:

Fed’s Outright Treasury Operation Schedule

The days when Fed is buying Treasury securities are often referred as “POMO days”. The general impression is that when Fed spends large amounts of dollars purchasing Treasury securities on any scheduled POMO day, that money usually ends up in equity markets pushing the stock market indices upwards. One such example is the May 17, 2013 POMO day when Fed spent approximately $5.5 billion on Treasury securities and all three major indices (DOW, S&P 500 and NASDAQ) ended up more than 0.75% for the day with no market moving news of any sort. Of course, Fed’s $5.5 billion is not alone for the rally in stock market. It is a general belief that the strengthening US dollar and currency devaluation across the globe is making traders/investors across the world to invest in US stock market causing the demand/supply to play.

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FOMC Statement Comparison Tool

FOMC Statement Comparison Tool

Federal Open Market Committee (FOMC) or simply Federal Reserve releases a statement after each of its monetary policy meetings. The statement usually outlines Federal Reserves’ short-term objective for the open market operations, economic outlook and the actions it intends to take.

It appears that FOMC has been using a template to release the statement for the past few years. Since it is a template of big words, usually most of the statement remains the same between two FOMC meetings except for few sentences here and there that reflect the current perspective of Federal Reserve.

Financial Markets are sensitive to (hence may react to) the content of the FOMC statement. So, naturally investors and traders not only need to know the exact changes in Federal Reserve’s view since the last FOMC meeting, but also in a quick manner. Few enthusiasts at the Wall Street Journal built an online tool that compares any two given FOMC statements and highlights the changes between those two. Needless to say, this is helpful to all those traders who have no time to waste but to react right away as soon as the FOMC statement is available.

Check the tool out at the following URL. According to the WSJ page, it was developed by Jeremy Singer-Vine and Phil Izzo.

Fed Statement Tracker