Remember that wake-up we talked about earlier this week that was coming? And how it started yesterday? Well, if we’re sticking with the Matrix analogy, the markets just woke up in the middle of that crazy human harvesting center, and the scramble to protect assets is underway. How do we mean?
Just as we feared and started asking questions about a few weeks ago – the weight of treasury bills as collateral is being called into question, as the CME’s first round of “collateral haircuts” go into effect today. According to the Wall Street Journal, “The increases ranged from half a percentage point for U.S. Treasury bills to one percentage point for Treasury notes and bonds.” Now, that isn’t a whole lot, but the FCMs put an additional haircut on those as well, so you may be looking at double or triple that amount in your managed account (still no follow up from the FCMs on the CME notice, however).
And if the US debt is downgraded regardless of whether or not the debt ceiling gets raised (a real possibility given all the infighting going on – would you feel real comfortable if someone you loaned money to had to argue with everyone in his family for two months in order to get approval to borrow more money to pay you back?) these haircuts on T-Bills could remain in place for the foreseeable future – and even increase.
All of this is falling squarely on the shoulders of the U.S. dollar instead of in bonds (where we would expect to see the threat of default weigh heaviest). The Dollar had stabilized since May, but is now threatening new 2011 lows, as the Aussie$, Swiss Franc, and New Zealand Dollar hit all time highs amidst reports of Asian banks shifting their focus. The ironic thing is that a default in bonds should mean higher interest rates (to lure investors back into the now riskier US Treasuries), which should favor the US Dollar over these other currencies, unless the US does a stealth default through devaluing of the US Dollar.
All in all – keep your eye on the Dollar in the coming weeks.
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.
Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.
Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.
Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.
Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.
RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.