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Phone: 703-435-2777 | Fax: 703-787-0111
Website: Financial Commodity Investments
E-mail: info@financialcii.com
- FINANCIAL COMMODITY INVESTMENTS (FCI) – Alternative Investments/Managed Futures blog
July 27th, 2010
CFTC Begins Publishing New Large-Trader Report for Financial Futures Markets
July 27th, 2010Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it will begin publishing a new report that adds further transparency to the financial futures markets. The report, entitled Traders in Financial Futures (TFF), builds on improvements to transparency implemented last year that disaggregated data in the CFTC’s weekly Commitments of Traders (COT) Reports.
“Promoting transparency is at the core of the CFTC’s mission,” CFTC Chairman Gary Gensler said. “The new Traders in Financial Futures reports will provide the public with a better view into the financial futures marketplace. This transparency effort builds upon prior improvements we made to the COT reports and will provide the market with much helpful information. I thank the CFTC staff for their hard work to prepare these new reports.”
For decades, the CFTC has provided the futures industry with COT reports consisting of aggregated large-trader position data to shed light on the changing composition of the markets. The reports are based on a request by Congress for an annual report, upon passage of original enabling legislation in the 1920’s, and have been intensified over time into weekly reports in several formats.
The new TFF report uses the same data that appears in the COT reports, but separates large traders in the financial futures markets into the following four categories: Dealer/Intermediary; Asset Manager/Institutional; Leveraged Funds; and Other Reportables. The “dealer/intermediary” category comprises the sell-side participants that earn commissions selling financial products, capturing bid/offer spreads and otherwise accommodating clients. The remaining three categories represent buy-side participants. These are generally clients of the sell-side participants who use the markets to invest, hedge, manage risk, speculate or change the term structure or duration of their assets.
Like the COT reports, the TFF report provides a breakdown of each Tuesday’s open interest for markets in which 20 or more traders hold positions equal to or above the reporting levels established by the CFTC. The report is published in futures-only and futures-and-options-combined formats. The TFF report will be published concurrently with the legacy COT. The TFF report, however, is not a disaggregation of the COT data for the financial markets. The traders classified into one of the four categories in the TFF report may be drawn from either the “commercial” or “noncommercial” categories of traders in the legacy COT reports. The CFTC also plans to soon release four years of historical data for the new report.
Change to the Definition of an Accredited Investor is Effective Immediately.
July 22nd, 2010By Lance Friedler
On July 21, 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Financial Bill”) into law. Set forth below are certain aspects of the Financial Bill which impact investment managers to hedge funds and private equity funds.
The Financial Bill revises one of the definitions of an “accredited investor” under the Securities Act of 1933 (“1933 Act”). Specifically, in determining if a natural person is an “accredited investor” who meets the $1 million net worth test, the value of such person’s primary residence must now be excluded from the $1 million net worth calculation. Previously, a natural person’s primary residence (net of any mortgage) was included in calculating a natural person’s net worth. The other definitions of “accredited investor” under the 1933 Act are currently remaining the same. This change in definition is effective immediately. As a result, we urge you to contact us as soon as possible as the Confidential Private Placement Memorandum and Subscription Documents for any investment funds you manage will need to be revised for this new definition of “accredited investor”. Please note that, absent further guidance from the Securities and Exchange Commission (“SEC”), we currently believe that the new “accredited investor” definition only applies to (i) new investors in your hedge funds and (ii) existing investors in your hedge funds that make an additional capital contribution. We do not currently believe that you need to recertify existing investors in your hedge funds that are not making additional capital contributions. Likewise, with respect to private equity funds, if an investor has already made a capital commitment to the fund, we do not believe that subsequent draw-downs of capital by the fund from such investor will require you to recertify such investor. However, as with hedge funds, any investor that is making a new capital commitment to the private equity fund would need to meet the new definition of “accredited investor”.
Under the Financial Bill, the Investment Advisers Act of 1940 (“Advisers Act”) will also be amended to require many investment advisers that are currently exempt from registration with the SEC to register. Generally, the Financial Bill requires all investment advisers to hedge funds and/or private equity funds that manage $150 million or more in assets to register with the SEC. Importantly, the “private adviser” exemption which many hedge fund and private equity fund managers relied upon in the past is being eliminated. The “private adviser” exemption enabled an investment adviser to avoid SEC registration if it: (i) did not act as an investment adviser to a registered investment company or business development company; (ii) had fewer than 15 clients (counting each fund as 1 client); and (iii) did not hold itself out to the public as an investment adviser. Please note that the SEC will need to issue additional guidance on numerous aspects of the Financial Bill relating to investment adviser registration and coordinate their efforts with various State regulators. Unlike the change in the “accredited investor” definition set forth above, the new rules under the Advisers Act will become effective on July 21, 2011.
Natural Gas Market Commentary, by FCI
June 30th, 2010(FCI business partners receive account specific analysis via email)
Natural Gas Market Commentary, by FCI - Going into the June 04 trading day, we knew we had observed a major upside breakout in July natural gas the previous day with volume quite active, although there was some short covering by large speculators. Technicals had suggested an intermediate bottom was in place, although fundamentals disagreed. Fundamentally, we had large supplies and questionable demand. The weekly natural gas storage report had shown an injection of 88 bcf with total storage at 2357 bcf or 14.9% above the 5 year average. For the prior month natural gas storage had increased 362 bcf. The market had recently closed above the 9 day moving average, supporting a short-term positive trend. Although the RSI was nearing 70+, giving some indication of a potentially overbought market, natural gas managed to rally and close on June 04 at $4.819.
By the following week, the EIA weekly storage report showed an injection of 99 bcf, bringing total storage to 2456 bcf or 14.4% above the 5 year average. For the week of June 07 to June 11, price action was disappointing to natural gas bulls.
By June 16, 2010, with natural gas managing to put in fresh highs the night before, it appeared that natural gas was due for a decline. A potential tropical storm east of the Western Antilles was downgraded to having a 10% chance of developing into a tropical storm and natural gas didn’t get the positive mention from President Obama in his Presidential address as may have been expected; people were expecting the president to shift the US more towards alternative energy sources; perhaps traders were buying on the rumor and selling on the news.
FCI – Barclay Top 20 CTA Performer Past 5 Years
May 25th, 2010FCI is proud to report a position in the Barclay Top 20 CTA Performers; based on 5-yr compound annual returns, out of a total group of approximately 290 CTAs managing over 10m. Past returns are not necessarily indicative of future returns.
Domestic Public Debt, Do the Numbers Add Up?
May 18th, 2010By Craig Kendall, President of FCI
In 2000, our total debt as a percentage of total GDP, was about 70%. Today it is close to 120%.
In 2008, our total debt as a percentage of GDP was 85%: and now 18 months later it has increased by 41%.
Think about the debt on an individual level; take your income, and figure the amount of taxes you pay. In order for you just to stay even with your standard of living, increase your tax liability by 41% (i.e. your take home is going to be reduced by 41% starting next week).
This is what every US taxpayer is going to have to do, just to keep the US in good credit standing with the rest of the world (holders of US treasuries).
Oh, and don’t forget, you will have to start saving 5% more from every paycheck, because it is now going to take more in life savings to support you during retirement.
Mainstream economists are telling us the economy is in recovery; individuals believe the economy is improving, and individual spending will therefore increase. By the same logic, government spending will decrease.
So in addition to a 41% reduction in your paycheck, a 5% increase in personal savings, an increase in the cost of home ownership (because we are going to have higher interest rates), you are being asked to spend as much as you did in the past. Did I forget to tell you charitable organizations today need more giving from individuals, now more than ever before? So be sure to add to your budget an increase in annual giving to those less fortunate.
Also take into account the 16 million people who have either lost a job, or have taken a reduction in salary. Those facing unemployment and lower wages have additional financing burdens.
In summary, you do the numbers and figure it out. Once you do, you will be known as the one who was able to “Squeeze Blood out of Turnip” as they say.
Consider this; how are the numbers (debt, GDP, etc.) going to add up in a balanced format to allow for a successfully executed debt-reduction-plan under the current terms? Unless each one of us is able to increase our individual annual income by approximately 50% per year, my guess is that something is going to fall short.
Maybe that is why our markets are in such a state of turmoil, why the equity markets are starting to fall, and why certain other countries’ currencies (countries that are starting to default on debt) are starting to devalue quickly.
How can one generate a commendable rate of return by investing in the equity markets given the current forecasts? Remember, the equity market is also counting on more spending in our economy.
Not a sermon, just some thoughts.
FCI May 2010 Disclosure Documents Now Available!
May 17th, 2010We have great news to report! The FCI Disclosure Documents for the CPP and OSS programs are updated and available on the FCI web site. We thank you for your patience, and for the trust and confidence you have shown in Financial Commodity Investments. (FCI). We look forward to actively assisting you and servicing your managed assets for many years to come. Feel free to contact us should you have any questions.
Please click here to access the new CPP and OSS disclosure documents.
Sincerely,
The FCI Team.
Treasurys Gain After 30-year Bond Auction
May 17th, 2010(The article below is a reprint. FCI business partners receive account-specific analysis via email)
Bond Report
May 13, 2010, 4:28 p.m. EDT
Treasurys gain after 30-year bond auction
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices turned higher in afternoon trading on Thursday, pushing yields back down, amid lingering concerns about the ability of Europe to solve its fiscal imbalances.
Long-term bonds briefly declined after the government had to pay a higher yield than traders expected at its auction of 30-year bonds.
Yields on 2-year debt (U.S.:UST2YR) fell 3 basis points to 0.84%.
Uncertainty about the situation in Europe has tended to prompt a shift out of assets considered riskier and into those perceived as safer, including U.S. Treasury bonds. The U.S. dollar rose to the highest level in more than a year. Read about euro, dollar.
“There is talk of cash coming over from Europe seeking the safety of Treasurys as well as the higher yields,” said strategists at Action Economics.
German bunds maturing in 10 years yield 2.88%, while 30-year bonds yield 3.73%.
The current U.S. 30-year bond (U.S.:UST30Y) yields 4.44%, down 5 basis points on the day.
Auction results
The Treasury Department sold $16 billion in 30-year bonds on Thursday at a yield of 4.490%, a little higher than traders anticipated. See bond auction results.
Bidders offered to buy 2.60 times the amount of debt sold, the best for a new sale in two years and compared to 2.33 times at the last four sales of new 30-year bonds.
Indirect bidders, a class of investor that includes foreign central banks, bought 32.5%, versus 38.4% on average at the last four comparable auctions. Direct bidders, which includes domestic money managers, purchased another 21.8%, compared to a recent average of 12.3%.
It’s generally deemed better for the broader bond market when more of an auction is sold to direct and indirect bidders, who are more likely to hold onto the securities, rather than sold to primary dealers, which often have to turn around and sell them into the secondary market, pressuring prices.
This week, the government received good demand at its sales of 3-year notes (U.S.:UST3YR) and 10-year debt, which were both for smaller amounts than the previous, comparable sales. Read about 10-year auction results.
Analysts also tuned in to comments on the economic outlook or monetary policy from Federal Reserve officials slated to speak during the session.
The U.S. central bank is watching consumer expectations about inflation closely and any deterioration would be a matter of concern, Fed Vice Chairman Donald Kohn said in a speech. Even though the Fed doesn’t “put much stock” into simple theories that excess reserves might automatically lead to inflation, these concerns may sway investors, Kohn said. Read more from Fed’s Kohn.
Minneapolis Fed President Narayana Kocherlakota said there “seems to be little threat of inflation” and he supports the Fed’s decision at its meeting last month to retain the pledge that interest rates could stay low for “an extended period.”
Treasurys stayed modestly higher after the Labor Department said 444,000 Americans filed first-time claims for unemployment benefits in the latest week, down from a revised number the previous week. Economists surveyed by MarketWatch expected claims to declined to 440,000.
Financial Investments Inc. (FII) Receives “Fantastic 50 Award” for a Third Year
May 3rd, 2010FOR IMMEDIATE RELEASE Virginia Investment Firm Earns Prestigious Business Award for the Third Consecutive Year
HERNDON, Va. May 3, 2010 The Virginia Chamber of Commerce has recently announced its 2010 “Fantastic 50″ list. For the third year in a row,
Herndon, Va.-based Financial Investments, Inc. (FII) has been named one of the 50 fastest-growing companies in the commonwealth and was recognized at the 15th annual Virginia’s “Fantastic 50″ Banquet held on April 29th, 2010
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This latest award for Washington, D.C.-area investment firm Financial Investments, Inc. (FII) may not be a surprise to president and CEO Craig Kendall, but that doesn’t mean it isn’t rewarding. In fact, Kendall says, he’s particularly proud of how his financial investments company has thrived amid one of the worst recessions in the nation’s history. “To do what we’ve done in this economic climate makes this more special,” says Virginia Chamber of Commerce honorees must be privately held, headquartered in Virginia, post annual revenues between $200,000 and $100 million, and demonstrate revenue growth and positive net income in each of the last four years. FII posted a total growth of 522% from 2005 to 2008, which averages out to nearly 58% annual growth. Awards and recognition are nothing new for FII. In addition to its latest selection to the “Fantastic 50″ list, the Virginia investment firm has twice been honored by Inc. magazine with a selection to its 500|5000 list recognizing the fastest growing, privately-held companies in the United States. FII has also been celebrated for its continued charitable endeavors in and around the Washington, D.C. metro area, including a second-straight top 10 ranking in the Washington Business Journal’s “Corporate Philanthropists” rankings. Kendall says this latest honor speaks to the continued hard work of FII’s small, but dedicated staff. “I’m impressed each and every day with the hard work our employees put in,” says Kendall. “The commonwealth of Virginia’s pro-business attitude has been a big help, and this recognition is really a testament to our employees and what they do for our clients.” Founded in 1997, FII is a registered investment management firm whose principal alternative investment programs consist of alternative investment products dealing with commodities, futures, equities, and equity indexes. The financial consulting company specializes in an alternative investment strategy that targets “Absolute Returns in an Uncommon Market.” As many of their competitors struggled, FII continued to earn an excellent reputation among its institutional and high net worth clients. FII and related entity FCI features approximately 300 institutional and individual clients located in 42 states and 15 countries. For more information about Financial Investments, Inc., please visit www.Financialii.com
 About Financial Investments, Inc.: Financial Investments, Inc. (FII) evolved from the original accounting firm of Kendall & Company, CPA’s, and is a registered investment management firm whose principal alternative investment programs consists of alternative investment products dealing with commodities, futures, equities, and equity indexes. Founded in 1997, FII and related entity FCI serve approximately 300 institutional and individual clients located in 42 states and 15 countries. The Herndon, Va.-based financial consultation and retirement planning firm has twice been selected to the Inc. 500|5000 list by Inc. magazine and to the Virginia Chamber of Commerce “Fantastic 50″ list of the state’s fastest growing companies.
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Kendall. “Now, more than ever, our clients are putting their futures in our hands and trusting us to navigate this tricky financial climate, and this award just speaks to our results and our individualized customer attention.”