Leverage
full recourse loan for volatile stocks
Wrote a piece on the current state of Margin Trading Facility offered by brokers: Leverage.
Markets this Week
More here: country ETFs, fixed income, currencies and commodities.
Links
Research
Bitcoin Price Volatility (SSRN)
We estimate and decompose Bitcoin's realized volatility into jump volatility and continuous volatility components. Our results suggest that retail trading positively influences the continuous component of Bitcoin volatility, while the preference for transaction anonymity positively affects the jump component of Bitcoin volatility.
Correlation neglect in asset prices (SSRN)
The U.S. stock market's return during the first month of a quarter positively predicts the second month's return, which then negatively predicts the first month's return of the next quarter. The pattern arises from a model in which investors do not fully recognize that earnings announced in the second month of a quarter are inherently similar to those announced in the first month, thereby overreacting to such predictably repetitive earnings. The same pattern exists in the cross-section and time series of industry returns.
Air Pollution and Managers' Forecasting Ability (SSRN)
This study examines the relation between U.S. managers' short-term exposure to air pollution and their forecasting ability. We show that the short-term ambient PM2.5 level at the firm's headquarters before a management earnings forecast issuance is negatively associated with the accuracy of the forecast. Also, the short-term ambient PM2.5 level before an earnings announcement is negatively related to the likelihood of a concurrent management forecast issuance.
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India
Jane Street is seeking to overturn SEBI’s July 3 order, arguing that it has been denied access to crucial documents it needs to fight accusations of market manipulation. More importantly, it said the regulator’s own surveillance department had already previously reviewed the same trades and found no evidence of manipulation in most cases (bloomberg).
GST 2.0: A reform that has gone much deeper than expected (livemint)
Winners and losers in India's sweeping GST overhaul (reuters)
Companies with pricing power will retain the benefits of GST reductions as increased profits, while companies without pricing power will pass the benefits to consumers through lower prices (fundooprofessor).
India's National Commodity and Derivatives Exchange (NCDEX) plans to launch equity and equity derivatives trading (reuters). Will they succeed where MCX tried and failed?
Speculation is like water—it always finds a way (bebhuvan)
row
Japan has agreed to let Donald Trump decide where $550bn worth of its capital is invested in the US as part of a deal to avoid high tariffs. Japan has just 45 days to fund projects earmarked by the president — or face the reimposition of his steep tariffs. The countries will evenly split the cash flow generated until Japan’s investment is paid off — at which point the US will take 90% of the proceeds (ft, japantimes, yahoo).
China has always believed that, while it could exploit some features that come with more open markets, international co-ordination and the mutual benefits of reciprocal trade and commerce, its principal interests and focus should be on the mercantilist harnessing of trade and trade policy – the other side of the coin of industrial policy – in order to strengthen its military, industrial, financial, and technological power (engelsbergideas).
Rather than railing against tariffs, the world needs a broader conception of trade policy—one that moves beyond the surface-level debate over tariffs and looks inward at how economies allocate income (imf).
Do you know where the U.S. gets its goods from? (reuters)
US hiring stalls with employers reluctant to expand in an economy grown increasingly erratic (apnews).
US manufacturing contracts for sixth straight month amid tariff drag (reuters)
FOMC rate cut expectations from CME's Fedwatch tool push to the highest since May with now a Sept cut back to 100% priced (2% chance of 50bps). Two 2025 cuts are 98% priced, three 69% priced (from 48% Thurs). 67bps of cuts priced for this year, another 82bps for next year (@neilksethi).
China’s homegrown robot makers are driving a wave of low-cost automation that is helping local factories churn out more goods at lower prices, allowing the country to increase its share of exports, even in labour-intensive products (ft).
Inside China, the country often seems to be not taking over the world so much as sinking into an autocratic abyss (theatlantic).
The Ukraine war has catalysed exceptional growth in the United States defence-industrial base, evident in record exports and orders, valuations, and profits, as well as an ecosystem expansion unprecedented in recent decades. This revitalisation has given renewed potency to the US military-industrial complex, whose structural reliance on sustained demand will shape political decision-making and incentivise the creation of new conflict zones, with profit-seeking approaches reinforcing a rearmament cycle whose consequences will resonate far beyond the current conflict (orfonline).
US President Donald Trump signed an executive order on Friday that directs the Department of Defense to be known as the Department of War (bbc).
Florida surgeon general says state will eliminate all vaccine mandates (nbcnews)
In the year since the violent, military-backed overthrow of Prime Minister Sheikh Hasina’s government, Bangladesh has descended into chaos. The economy is reeling, radical Islamist forces are gaining ground, young people are becoming increasingly radicalized, lawlessness is taking hold and religious and ethnic minorities are under siege. The country’s future has never looked bleaker (japantimes).
Tesla offers Elon Musk pay package worth $1 trillion (washingtonpost)
A.I.
Anthropic agrees to pay $1.5B to settle lawsuit with authors (nbcnews)
OpenAI is set to produce its own artificial intelligence chip. OpenAI’s move follows the strategy of tech giants such as Google, Amazon and Meta, which have designed their own specialised chips to run AI workloads (ft).
Any job where you ask a human to act like a robot, a robot will eventually do the job better. Every form of knowledge work will soon have a software copilot. That makes engineers more valuable, not less (@reidhoffman).
If AI and workers were strong complements, what would we see? (joshuagans)
AI avatars of deceased people — or "deadbots" — are showing up in new and unexpected contexts (npr).
When a billion people have access to advanced AI, we've entered what we might call the era of Mass Intelligence. Every institution we have — schools, hospitals, courts, companies, governments — was built for a world where intelligence was scarce and expensive. Now every profession, every institution, every community has to figure out how to thrive with Mass Intelligence (oneusefulthing).
Meme of the Week
