Tagged: analytics

March 17: The machination of machines!

Couldn’t blame you if you missed it.

 

For many, these past few weeks and the ones coming up are the busiest on the IR calendar. Board presentations, ASMs, virtual analyst conferences and investor days. You just finish year-end events and Q1 reporting is rushing at you.

 

Maybe you missed last week’s Market Structure Map. Tim Quast did an excellent job sharing our most-up-to-date view on how the Market works. If you missed it you can find it at: modernir.com/msm – it’s worth revisiting and sharing with your entire IR team, including the senior-most members of your investor and media facing IR team.

 

If you are a regular reader, you may have already considered putting constraints on no-longer preeminent sell-siders (data show their primary audience – yes, including still important long-term institutional holders – Active Investment in our parlance – consistently reflects less than 9.5 percent of all trading Market wide.

 

…with all respect and due appreciation to Python (Monty) Pictures.

No today, even after the recent storied, but largely isolated uptick in retail day trader influence – its machines, acting far faster with mathematical indifference driving the pricing for nearly, if not all equities. These Fast Traders – collocated to exchange computers running increasingly tactical algorithms (53 percent of all trading in the S&P500® last week) are no longer simple amplifiers of nuanced investor behavior, they search the web for data and reference points, trading both agnostically to whether it moves your equity price up or down and increasingly with intent to seemingly do just that.

 

Similar algorithmic behaviors now amplify the trading of the contextually correct, but perhaps inferentially misleading Passive Investment segment (last week: 20 percent of all Market trading). Regular readers know our growing focus on ETF-related trading that has now come to dominate this category.

 

Certainly many traditional index funds and indexed asset allocators continue to hold major positions in our companies, but any material trading is typically around known re-balancing events – like the twice annual S&P Global™ indices re-weighting, next, after this Friday’s close.

 

ETF plan sponsors on the other hand have grown increasingly “active” in their trading behaviors. Strategic sector weighting shifts, tax-related selling, and the use of machine-driven trading seemingly more common. Their influence frequently lifts Passive Investment to the Key Behavior in client’s Market Structure reports.

 

The Market has traded with some volatility recently in anticipation of monthly option expirations – not at all unusual; our calendar of such events should be a key input in your Investor Relations planning efforts and is available here – call us to learn how to avoid calendar missteps.

 

Today begins the cycle of monthly option expirations. First the widely followed CBOE Volatility Index (VIX) index. Thursday, AM-settled options expire, mostly index products. Friday brings the main events. March single stock options, single stock futures, stock index options and stock index futures all expire Friday – a so called, “quadruple witching” day. This happens just once a quarter.

 

A wide gamut of Market participants including – model-driven ETF sponsors, Hedge Funds, derivative traders, etc., with expiring options or futures positions must decide how to redeploy funds this week.

 

Little to do with fundamental business performance or valuations, the increased volume and volatility of these routine Market events queue exaggerated machine trading and can meaningfully impact the trading and response to your Investor Relations outreach and messaging. Good news often gets lost. The impact of less good news – often amplified. Its important to know what’s making the difference. Ask us how.

 

PD Grueber

Are You 2.0?

Are you 2.0?

I know.  You’re tired of clichés.

Especially in a pandemic that birthed a lexicography – social distancing, mask-up, nonessential, emergency executive orders, comorbidity.

After all that, you don’t want to hear you’re 1.0, not 2.0.

On the other hand, I’m notorious for not wanting to upgrade. I’ll stay 1.0 rather than risk 2.0 jacking up the performance of some app.  An update downloads, and now I can’t connect to the printer.  Been through that?

So has the investor-relations profession.

Aside:  Investors, you’re getting a ringside seat. IR, as we call it, is the liaison between public companies and Wall Street. A painful evolution from 1.0. to 2.0 is underway.

In the 1970s you had a rotary phone on your desk and you called investors. IR 1.0 is telling the story.

The IR profession formalized by association in 1969 with the advent of the National Investor Relations Institute (NIRI).  I’m currently on the national board representing service providers. A year from now, I’ll hand off that baton to our next emissary.

IR Era 1.0 lasted from 1969 till 2005 when Regulation National Market System changed the market. Telling the story was the chief function of IR for more than 35 years.

If you don’t know Reg NMS, read this.

Continuing, I had the honor of vice-chairing the 50th Anniversary NIRI Annual Conference in 2019, in Phoenix.  Back when people innocently shook hands, hugged, packed conference halls.  We had famed stock-picker Lee Cooperman, market-structure expert Joe Saluzzi of Themis Trading, SEC head of Trading and Markets Brett Redfearn.

We were standing there looking at IR 2.0. Man, that was fun.

I doubt we’ll dispute rotary phones are obsolete.  Sure, we’ve got ringtones that sound like them. But punching buttons is easier.

Speaking of easy, attending the NIRI 2020 Annual Conference is easier than a button. And it’s upon us.  We’ve spent a long time apart.  Socially distanced, I guess. While that continues at the AC, we can still be virtually together. I’ll be there.

Come join me!  It’s simple. Go here and register (you’d spend a lot more on hotel rooms – and we had sponsored your keys at the Miami Fontainebleau, by the way. Sigh. Ah well.) and instead of checking in to a room, check out the schedule.

Come see our Express Talk. See our two-minute video called, “What Do I Do With It?” See the 2021 IR Planning Calendar to help you navigate the minefield of derivatives expirations when you report results (don’t blow a limb off your story. So to speak.).

I just watched our Express Talk.  I look rough in the first clip – like I’ve been through a Pandemic. I’m cleaned up in the next, even wearing a tie. Then I’m settled in by clip three to share what matters about IR 2.0.

Come view them. Support our community.  After all, 2020 is going to end, despite indications at times this year that it never would. We’re almost there!

Back to IR 2.0.  Understand this: Our profession is a data enterprise now. Not a phone-dialer, meeting-setter.  There’s financial data (your story), ESG data (governance), Alt data (what the buyside is really tracking, like jobs, credit card transactions, port-of-entry satellite views).

And there’s Market Structure. This is the only measure that’ll tell you what sets price. If Activism threats exist. When Passive money rotates. If it’s about your story. How to run buybacks. What happens when you spin off a unit. The best time to issue stock. How deal arbs bet on outcomes (and if they think you’re about to do a deal). What drives shareholder value.

I’ll repeat that.  It’s the only measure that tells you what drives shareholder value. Headlines and financials don’t. Buyers and sellers of stock do.

Do you want to pick up the phone and call people?  Or do you want to advise the executive team and the board?

Okay. IR 2.0 is not for everyone. Some of us just belong in IR 1.0. Give me a desk and a phone and let me call people and convince myself that it matters.

Have at it.

But that’s yesterday. It’s an infinitesimal speck (like a virus) of today’s job. And even dialing should be guided by data, measured by data.

It’s almost 2021. I know the mullet is trying to make a comeback. I know I listen to 80s music.  But that’s no reason to do the IR job like it’s 1984.  Don’t do that. It’s not a good look.

Come see ModernIR and the rest of the vendor community (there are 22 others with us in the virtual exhibit hall) at this year’s disruptive event, the NIRI Annual Conference. See you there.

And let’s start 2021 with good hair and good data.

Sun and Goggles

Mayday!

That’s the word quarterback Peyton Manning should’ve used Sunday, instead of Omaha! But we congratulate Coach Pete Carroll, a gentleman, and his bruisers from the Puget Sound.

Speaking of bruising, earnings season and macro factors collided like particles in an accelerator as January slopped into February. With just 58% of our client base reporting thus far, it could be premature to deconstruct it. But I know the question burns in IR minds: Can we understand what’s going on?

People sequenced the human genome. We can measure variance in light as finite as a flashlight blinking…on the moon. We can create money from nothing. Surely we can map market behaviors.

I was skiing in Steamboat last week during a whiteout. It was though I was floating. I had no clear sense of where the slope was until I carved, and I could not gauge my speed until I turned. Powder is forgiving so I wasn’t worried.

But this is how the market seems many times, right? It’s amorphous. There’s no definition to movement. No clarity.

The next day in Steamboat, the sun shone brightly and with goggles suited to light, fresh powder took on the rich and textured characteristics of a Wayne Thiebaud painting. Slopes were luxuriant and vivid.

There are two pillars to market movements, like bright light and the right goggles. I’m not suggesting one can perfectly matrix outcomes. But core principles can be observed.

Remember: We said the market reached a statistical top in our behavioral data on Dec 27. We then warned that if institutions shifted from equities with options-expirations Jan 16-22, the first shoe to drop would be Jan 23-24.

That happened.

In the days since we’ve warned that Shoe No. 2 of a process of retrenching from equities and shoring up institutional risk-hedges could occur during January window-dressing, which would mean Feb 3-4 could be ugly.

That happened.

Markets reached a statistical market bottom, behaviorally, on Feb 3. The same sentiment-reading registered in our data-analytics roughly June 28, 2013, and again about Aug 11, 2013, the last two times data indicated market bottoms (markets then rebounded).

(Warning: This time could be different. We’ve never massively removed central-bank support from global risk assets before.).

You must cease viewing the market as just investment and instead see it as risk-management and data. These are the pillars. One is sun, the other goggles. If risk managers shift resources in asset classes, it will impact trading data that machines consume, because movements depend on mathematical models now. (more…)