Economic Imbalances
In the opinion of TechTrading Corporation, the average investor with holdings in the stock and bond markets are taking on a
disproportionate amount of risk relative to expected returns. Certainly they take on more risk than institutional investors who have an
array of sophisticated investment options available.
The U.S. equity market has gone sideways since 1997, which included two massive asset bubbles and their collapse. These events have caused tremendous damage to the world economy, devastating savings, the job market, and the psyche of people around the world.
Over the last two years, The Federal Reserve and U.S. Treasury has added more than $2 trillion in new money supply to purchase treasury and mortgage–backed securities (aka "quantitative–easing"), and have spent more than a $1.5 trillion in bail–outs to banks, AIG, Fannie/Freddie, the auto companies, and stimulus spending to keep states afloat. This spending has helped fuel the S&P 500 index to rise by more than 100% since March 2009 –– one of the largest increases in history; while unemployment and under-employment in America is above 17%. Meanwhile, U.S. Treasury Bond yields are near 30 year lows. The 30 Yr T–Bond yield has fallen from 18% in 1981 to a present yield of approximately 4.5%. This dramatic drop in bond yields has happened as U.S. Federal Government Debt has risen from $678 Billion in 1981 to more than $14.4 Trillion in 2011.
The U.S. equity market has gone sideways since 1997, which included two massive asset bubbles and their collapse. These events have caused tremendous damage to the world economy, devastating savings, the job market, and the psyche of people around the world.
Over the last two years, The Federal Reserve and U.S. Treasury has added more than $2 trillion in new money supply to purchase treasury and mortgage–backed securities (aka "quantitative–easing"), and have spent more than a $1.5 trillion in bail–outs to banks, AIG, Fannie/Freddie, the auto companies, and stimulus spending to keep states afloat. This spending has helped fuel the S&P 500 index to rise by more than 100% since March 2009 –– one of the largest increases in history; while unemployment and under-employment in America is above 17%. Meanwhile, U.S. Treasury Bond yields are near 30 year lows. The 30 Yr T–Bond yield has fallen from 18% in 1981 to a present yield of approximately 4.5%. This dramatic drop in bond yields has happened as U.S. Federal Government Debt has risen from $678 Billion in 1981 to more than $14.4 Trillion in 2011.
Some economic risks to consider:
♦ How long can interest rates stay at these levels? (How many more rounds of "Quantitative Easing" will happen given the
fall–out and inflation from the past two rounds?) What will it
take for this failed experiment and extreme hubris by the Federal Reserve to
end? (a move away from the dollar as the reserve currency, and avoidance and
mass selling of U.S. Treasury Securities by foreign central banks, are a few
possibilities that come to mind)
♦The U.S. Dollar Index ( a measure of the value of the dollar against a basket of major currencies) has fallen 15% over the last twelve months, and currently sits at a historic low. We see the effect of it by much higher prices, especially in food, energy and commodities.
♦The 2011 projected budget deficit = $1.6 Trillion, which is $4,808 per person in the U.S. The debt ceiling of $14.29 trillion will be reached by May 16. The Federal Govt’s budget deficit is projected to be over $1 trillion for many years, resulting in a projected doubling of this debt by 2020. (according to Congressional Budget Office)
♦Tax receipts of the Federal Government will be only 15% of GDP in 2011. That’s the lowest level since 1950.
♦The President and Congress have promised significant cuts in spending to try to address the deficit. How will these cuts and the resulting large number of layoffs affect the economy and markets?
♦State governments are projected to run $185 billion in deficits over the next two years, and have to enact severe cost cutting measures to address these deficits. How will these cuts and the resulting large number of layoffs affect the economy and markets?
♦The U.S. Dollar Index ( a measure of the value of the dollar against a basket of major currencies) has fallen 15% over the last twelve months, and currently sits at a historic low. We see the effect of it by much higher prices, especially in food, energy and commodities.
♦The 2011 projected budget deficit = $1.6 Trillion, which is $4,808 per person in the U.S. The debt ceiling of $14.29 trillion will be reached by May 16. The Federal Govt’s budget deficit is projected to be over $1 trillion for many years, resulting in a projected doubling of this debt by 2020. (according to Congressional Budget Office)
♦Tax receipts of the Federal Government will be only 15% of GDP in 2011. That’s the lowest level since 1950.
♦The President and Congress have promised significant cuts in spending to try to address the deficit. How will these cuts and the resulting large number of layoffs affect the economy and markets?
♦State governments are projected to run $185 billion in deficits over the next two years, and have to enact severe cost cutting measures to address these deficits. How will these cuts and the resulting large number of layoffs affect the economy and markets?
With such large imbalances, and after being burned twice in the last 10 years, it is not surprising that investors are worried about investing
in the stock market, and many are realizing with interest rates so low and the debt so high, there is a disproportionate amount of risk to
reward for holding treasuries and most fixed–income products.
Over the last 13 years, a buy and hold approach to investing has proven to be ineffective. Our approach is to use computer algorithms to help determine the best time to buy and sell, and to use structured trades (primarily using options) to profit from these trends while managing risk. This approach will help to protect past gains, and benefit from natural periods of economic decline, as well as, periods of economic growth.
We offer professionally managed futures programs with minimums as low as $25,000 so that more investors have the opportunity to participate in investment vehicles whose performance is not correlated to the general stock market. Our goal is to provide an alternative to risky stock and bond investments, which can yield high returns in any economic environment, especially the one we find ourselves in now.
Over the last 13 years, a buy and hold approach to investing has proven to be ineffective. Our approach is to use computer algorithms to help determine the best time to buy and sell, and to use structured trades (primarily using options) to profit from these trends while managing risk. This approach will help to protect past gains, and benefit from natural periods of economic decline, as well as, periods of economic growth.
We offer professionally managed futures programs with minimums as low as $25,000 so that more investors have the opportunity to participate in investment vehicles whose performance is not correlated to the general stock market. Our goal is to provide an alternative to risky stock and bond investments, which can yield high returns in any economic environment, especially the one we find ourselves in now.
INVESTORS SHOULD BE AWARE THAT PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. THERE IS SUBSTANTIAL RISK OF LOSS IN TRADING FUTURES
AND OPTIONS AND SUCH AN INVESTMENT IS NOT SUITABLE FOR ALL INVESTORS. YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU
IN LIGHT OF YOUR FINANCIAL CONDITION. THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN COMMODITY FUTURES, AND OPTIONS CAN WORK AGAINST
YOU AS WELL AS FOR YOU. THE USE OF LEVERAGE CAN LEAD TO LARGE LOSSES AS WELL AS GAINS.
THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER SIGNIFICANT ASPECTS OF THE FUTURES AND OPTIONS MARKETS. YOU SHOULD THEREFORE CAREFULLY STUDY THE DISCLOSURE DOCUMENT BEFORE YOU INVEST, INCLUDING THE DESCRIPTION OF THE PRINCIPAL RISK FACTORS AND FEES OF THIS INVESTMENT.
THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER SIGNIFICANT ASPECTS OF THE FUTURES AND OPTIONS MARKETS. YOU SHOULD THEREFORE CAREFULLY STUDY THE DISCLOSURE DOCUMENT BEFORE YOU INVEST, INCLUDING THE DESCRIPTION OF THE PRINCIPAL RISK FACTORS AND FEES OF THIS INVESTMENT.
