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Small CTAs getting squeezed out of representation at the NFA At the upcoming 2015 NFA Board Elections, the nomination committee has decided to run giants Winton and AQR against local heroes James Koutoulas and John Roe of CCC fame.  Where would former MF Global customers be without all of their efforts? CTA/CPO representation would then be […]

Those of a certain age will remember the “gas crisis” of the 1970’s, when prices at the pump shot to record highs felt keenly in the economy and individual households. Subsequent statistics revealed no decline in imports, domestic production, or refinery run times, i.e., no supply reduction had occurred. It was demand that went wild, touched off by panic over statements out of would-be monopolist OPEC. A substantial percentage of motorists simultaneously acted to keep tanks topped up as security, abruptly increasing purchases to a record peak that could not be met. What seemed prosaic to individuals purchasing an additional five gallons per week was collectively a sudden, vast increase in demand far out of proportion to actual miles driven. Gas lines extended for blocks and media coverage fed the impression of a crisis which drove more to the pumps. Congressmen were quick to decry oil-company gouging, point fingers at speculators, and convene official investigations thereto.

This fall – the initial quarter of the 2014-15 crop year – has seen more extraordinary and “record” supply/demand events in more separate categories than any such period in memory. Soybeans left over from the previous year’s crop had dwindled to the tightest availability ever relative to pace of usage, followed by the largest soybean and corn crops in history, generating export business in the largest volume of soybean-equivalent (i.e., including soymeal) in history, resulting in the largest U.S. soybean export-loading week in history – to name just a few.

Trend following is the most prevalent strategy utilized throughout the managed futures industry. What is the best way to objectively analyze, measure, and compare the performance of a particular group of trend following CTAs? Last fall we attempted to answer this question by publishing a research paper that introduced our own metric that measures and compares the “goodness” of similar managers’ returns. This article updates that original piece, and the measurements and ranking methodology that we initially introduced remain the same.

Grain and oilseeds prices continue an abrupt transition from high-priced relative famine of the last five years to a low-price feast of plentiful supply. Farmers who did not prudently hedge before the big decline would say “overly plentiful,” but government subsidies will restore much of that. Recent years of demand growth undeterred by high prices had encouraged every farmer to plant and fertilize more, followed by Northern Hemisphere weather rivaling perfect greenhouse conditions. The result is the spectacular yields that high-tech seed companies advertised.

CTAs are always looking for opportunities to provide their firms additional exposure. Since IASG compiles data within our database, we thought it was relevant to provide CTAs with more marketing power when trying to reach their investing audience. Starting later this month, IASG will provide CTAs with access to a badge for ranking in the categories that meet their trading program. These categories include: discretionary, systematic, agriculture, Trend Following, Stock Index. The rankings badges will be provide monthly to the CTA for using on their email signature, embedding in their website, or within their marketing literature. Users of the IASG database will also get access to these badges on the CTA pages located in the right sidebar of the program page.

August trading results improved markedly as one of the metrics with which we track ourselves, the ratio of winning trades to losers, rose dramatically. Summer crop development was uncharacteristically dull, with unchanging, uncannily positive growing conditions. Since we refrain from exposing investor capital to weather forecasts anyway, we trained our attention on the wheat crops already harvested and the old-crop soybean market still working out its supply tightness.

NIBA holds three membership meetings per year – Chicago in September is the largest of the three. NIBA Chicago is a full-day conference, presented at two iconic financial institutions — the Chicago Board of Trade building and the Chicago Mercantile Exchange building. NIBA’s fall membership meeting in scheduled for September 22, 2014 in Chicago, IL. […]

The sweeping nature of this summer’s price declines in grains and oilseeds has at every moment been dependent on unusual season-long consistency of rainfall and below-average temperatures. Owing to many years of observing sudden weather changes generate wrenching turnarounds in direction of futures, the managers felt that committing to price direction was tantamount to forecasting weather. Monthly returns remained flat, but the two successful trades were strategies formulated to end-run weather risk.

Until the end of last month and as outlined in June’s letter, calm and confidence was not only reflected in the equity markets but in numerous gauges related to U.S financial conditions and the shadow banking system. In this context a recent report from the Federal Reserve Bank of Atlanta attempts to measure the shadow Federal Funds Rate (“SFFR’) based on a model that was developed from Wu and Xia. Since December 2008 the Federal Funds Rate has been in the 0 to ¼ percent range targeted by the Federal Open Market Committee. This 50 page research report is used to summarize the macroeconomic effect of unconventional monetary policy at the zero lower bound. In the bank’s own words; “The result gives us a tool for measuring the effect on monetary policy at zero lower bounds”. Based on their analysis the SFFR level had roughly flat lined for two years ending July 2013 in the range of -1.25 to -1.5%, but in the past year declined sharply and in the past two months has hovered in the vicinity of -3.00%. The extremely low levels on the SFFR had a beneficial impact on several other Federal Reserve reports that reflect US financial health. Composites of these measures from government reports were detailed month as they were at the most favorable levels in 20 years. The liquidity spigot is not just domestically evident, the shadow banking system in Europe has surged as well.

After persistent rain-delayed spring planting, a clearing window allowed its completion – and consistently excellent crop-development weather has prevailed since. On May 18 U.S. planting was decidedly behind average pace, verging on price bullishness, but only a week later it had leapt ahead. About 90% of the Corn Belt received normal to above-average spring rainfall, which together with moderate temperatures has supercharged growth progress. The result is no less than a sea change in prices which have been kept high in recent years by harvests lagging amid demand growth.