Michael J Bommarito II's blog

"Fannie Mae Eases Credit To Aid Mortgage Lending" circa 1999, NY Times

2008-09-28T05:36:24-07:00

http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260&sec=&spon=&partner=permalink&exprod=permalink
Paragraph 8:
"''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''"

Comparison of ETFs and CEFs: Dollars Traded Per Day vs Total Assets

2008-04-19T11:41:13-07:00

This picture should be pretty straightforward. The numbers are the natural log of the average dollars traded per day YTD and the natural log of total assets held. Note the distinct clustering of the two asset types.

Using Matlab's Database Toolbox with MySQL Connector/J

2008-04-13T13:34:09-07:00

I normally don't delve too much into the programmatic details of my work, but I've seen enough interest in this topic that I figured I'd lend a helping hand to those fellow frustrated souls.

There are a few awkward, non-native MEX implementations of various database interfaces. However, Matlab has its own database toolbox built around ODBC/JDBC, and when developing distributable software, one always hopes to minimize third-party library usage. As a result, I've put a good deal of effort into integrating Matlab with both MySQL and SQLite. In fact, the data for every post on this site is stored in a 2GB MySQL database server running on my laptop.

As you can see, this requires only that you distribute the platform-independent JAR. No DLLs, no MEX compilation.

% Database Server
host = 'localhost';
% Database Username/Password
user = 'user';
password = 'password';

% Database Name
dbName = 'assets'; 
% JDBC Parameters
jdbcString = sprintf('jdbc:mysql://%s/%s', host, dbName);
jdbcDriver = 'com.mysql.jdbc.Driver';

% Set this to the path to your MySQL Connector/J JAR
javaaddpath('mysql-connector-java-5.1.6-bin.jar')

% Create the database connection object
dbConn = database(dbName, user , password, jdbcDriver, jdbcString);

% Check to make sure that we successfully connected
if isconnection(dbConn)
    % Fetch the symbol, market cap, and last close for the 10 largest
    % market cap ETFs
    result = get(fetch(exec(dbConn, 'SELECT info.symbol,info.marketcap,series.close FROM info, series WHERE info.type=''ETF'' AND info.id = series.symbolid AND series.date = ''2008-04-11'' ORDER BY marketcap DESC LIMIT 10')), 'Data');
    disp(result);
% If the connection failed, print the error message
else
    disp(sprintf('Connection failed: %s', dbConn.Message));
end

% Close the connection so we don't run out of MySQL threads
close(dbConn); 
 
Output:
    'SPY'     [8.2300e+010]    [133.3800]
    'EFA'     [4.5420e+010]    [ 72.6400]
    'EEM'     [2.3850e+010]    [139.3400]
    'GLD'     [1.9260e+010]    [ 91.3000]
    'QQQQ'    [1.7040e+010]    [ 44.2800]
    'IVV'     [1.6410e+010]    [133.5200]
    'IWF'     [1.2860e+010]    [ 55.2500]
    'DIA'     [1.0830e+010]    [123.3400]
    'IWM'     [1.0470e+010]    [ 68.7200]
    'VTI'     [9.7800e+009]    [132.2900]

Marketocracy ETF Portfolio: April 12, 2008

2008-04-12T10:47:48-07:00

Marketocracy, in their own words, is:

"""Marketocracy Data Services is a research company whose mission is to find the best investors in the world and then track, analyze, and evaluate their trading activity. The company's affiliate, Marketocracy Capital Management, is the investment advisor for the Marketocracy family of mutual funds and uses the research generated by Marketocracy Data Services."""

This isn't an endorsement for Marketocracy, but last October, I started a portfolio there as part of the activities for a club here at the University of Michigan. While I'd originally intended it to be allocated strictly from the Select Sector SPDR ETFs, Marketocracy rules led me to increase the scope of the fund to include commodities, currencies, and geography-based ETFs.

You can view the portfolio performance at this link: www.marketocracy.com/cgi-bin/WebObjects/Portfolio.woa/ps/FundPublicPage/source=DeDoDkLbEhAdLcIhMaKiAbDd

Mine

m100

S&P 500

DJIA

Nasdaq

	RETURNS	S&P500 RETURNS	RETURNS VS S&P500
Last Week	-1.80%	-2.69%	0.88%
Last Month	3.36%	1.98%	1.39%
Last 3 Months	0.42%	-4.36%	4.78%
Last 6 Months	-2.34%	-13.76%	11.42%
Last 12 Months	N/A	N/A	N/A
Last 2 Years	N/A	N/A	N/A
Last 3 Years	N/A	N/A	N/A
Last 5 Years	N/A	N/A	N/A
Since Inception	-1.63%	-12.48%	10.85%
(Annualized)	-3.08%	-22.38%	19.31%

My largest positions at the moment are DUG @ 14%, SHV @ 11%, UPW @ 7%, and EWA @ 5%. I doubled my exposure in DUG, the double short Oil & Gas fund, this week as it hit a new 52-week low, despite downgrades in both the funds' constitutents and projected consumption. I'll be looking to lighten the position in the short-term treasuries SHV in the coming month for bottom plays, possibly in the double long financials ETF UYG or some mixture of country ETFs.

Capitalization Coupling: The Dow, S&P, and Russell At Correlation Highs

2008-04-12T09:59:54-07:00

Last summer, I often covered the difference in short-term performance between the Russell 2000 and S&P 500. I suggested that the VIX, as a measure of implied volatility, was a good predictor for this capitalization premium, and that claim often held up. I even went so far as to analyze the high-amplitude periods of this relationship. However, as the actual volatility of volatility has increased dramatically since last fall, my suggestions have been more and more difficult to implement.

I wanted to explore why this relationship had changed, and so I've taken a look at the Dow 30 (DIA), S&P 500 (SPY), and Russell 2000 (IWM) since 2002. The figure below shows the cumulative return of each index ETF in the top pane. The bottom pane shows the trailing 100-session percentage-correlation between each pair of indexes.

One of the most striking features of these plots is that all three indexes are trading at or above their highest historical correlations on this range. The only timespan of comparable length was during late 2002 and early 2003 as a short bear market held sway.

The other relationship that caught my eye was that the trend in correlation between the indexes was inversely related to the overall market performance. In other words, as the correlation between indexes fell, the markets rose on average. Furthermore, during these falling correlation periods, the Russell often outperformed its counterparts, and vice versa in rising correlation periods. This relationship likely reflects the fact that the capitalization premium and discount on small caps and large caps is very much a function of the strength of the economy and credit market.

In the future, I'll be watching closely for a decline in the correlation between these indexes as a confirmation of overall market uptrend.