Thursday, December 27, 2012

李克强习近平这回遇到了真老虎(组图)

http://www.creaders.net  2012-12-26 22:53:22  万维读者网  [1条评论,查看/发表评论]
万维读者网记者上官天乙综合报道:加快城镇化,是李克强主政河南时期经济发展战略的一个重要组成部分。现在,无论十八大报告还是中央经济工作会议,都把城镇化列为中国扩大内需,实现向内需主导型经济转型的着力点所在。
日经中文网12月27日文章指出,由于雷曼危机后推出的4万亿元经济刺激政策,中国出现了产能过剩和房地产泡沫等后遗症,而依赖基础设施投资的增长模式的弊端也显露无疑。另一方面,由于受人工费和人民币升值的影响,出口主导型增长也开始难以为继。在这样的背景下,中国剩下的选择就是通过推进城市化来扩大内需。

“未来几十年最大的发展潜力在城镇化”,11月28日中国现任副总理李克强在会见世界银行行长金墉时如此断言。由此可见,中国新领导层对以城市化为动力的增长模式寄予了厚望。
但是,把“推进城市化”定位为增长的主要驱动力,这执行起来并不容易。它面临着改革自毛泽东时代起推行的户籍制度等问题。
文章把中国现有的户籍制度视为“推进城市化”的最大障碍。这种以出生地确定户籍的制度大体分为农村户籍和城市户籍。农村出身者即使迁到城市,也仍然是农村户籍。而在医疗、教育和养老金等等公共服务方面,城市户籍拥有者被优待,因此,仅仅因为出生地在农村,就会在社会福利方面遭受不公平。
中国自建国以来一直没有调整过户籍制度。在防止人口迅速流入城市的名义下,改革一直被推迟。有分析认为改革需要交通和住房等规模庞大的基础设施投资,不但财政负担将加重,还会影响到城市居民的一部分既得利益,因此在北京市和上海市等大城市废除户籍制度并非易事。
文章最后说向内需主导型经济转型是自胡锦涛时代以来的重要课题,但结果却未能取得进展。习近平能否排除既得利益集团的阻碍、大力推进户籍改革,引导经济走上稳定增长轨道,新领导层的执行能力将接受考验。
(日经中文网:户籍制度考验中国新领导层) “将加快户籍制度改革”,主管经济政策发改委主任张平于18日如此强调。这意味着中央经济工作会议提出的新领导层的意志已经开始在政策制定层面得到落实。
此外,中国地方也已出现了改革的迹象。广西壮族自治区南宁市于同一天宣布,将把以往划分为农村和城市的户籍制度合二为一。而获得新户籍的条件是在城市购买住房、在市内工作4年以上、同时缴纳社会保险费3年以上。
据新华网北京12月20日电,李克强19日在北京主持召开经济社会发展和改革调研工作座谈会时明确指出,推动城镇化,把农民工逐步转为城市市民,需要推进户籍制度改革。
路透社据上海证券报报道,中国城镇化规划草案已经基本成型,决策部门目前考虑从户籍制度改革、土地制度改革、住房政策完善、财税体制改革、地方投融资体制改革以及行政区划调整六大方面着手,为今后的城镇化快速健康发展,提供强有力的体制和政策支持.
(古人云:苛政猛于虎。户籍制度堪称是毛泽东时代以来祸害中国人无数的一只其猛无比的大老虎)
知情人士透露,新型城镇化的六大指导原则包括体现以人为本的理念,着力提高人口城镇化水平,降低城镇准入门槛;坚持城乡统筹,把推进城镇化和工业化、农业现代化紧密结合,以工促农、以城带乡,实现城乡经济一体化发展.
在六大原则指导下,今后中国将采取措施增强城镇综合承载能力,全面提升交通、通信、水电气暖、污水垃圾处理、医疗教育、文体等基础设施和公共服务水平.
符合条件的农村转移人口将逐步转为城镇居民,在北京、上海、广州等特大城市控制人口规模的同时,大城市将继续发挥吸纳外来人口的作用,中小城市和小城镇则将放宽落户条件.
经济参考报报道说,国家行政学院经济学教研部副主任张占斌也认为,城镇化需要一系列公共政策的推动。今后一段时期必须把深化体制改革放在十分突出的位置。其中之一就是统筹推进户籍制度改革。深化户籍制度改革,必须以去利益化、城乡一体化、迁徙自由化为目标和方向,在中央的统一规划下,逐步剥离户口所附着的福利功能,恢复户籍制度的本真功能,同时改革嵌入户籍制度之中的其他二元制度,整体推进。

而城镇化对经济增长的作用主要有以下方面:
第一,城镇化是扩大内需的最大潜力所在。因为城镇化带动大量农村人口进入城镇,带来消费需求的大幅增加,同时还产生庞大基础设施、公共服务设施以及住房建设等投资需求。

第二,城镇化是统筹城乡发展的基本前提。通过推进城镇化,大量的农村富余劳动力向非农产业和城镇转移,农村居民人均资源占有量会大幅度增加,这将有利于提升农业生产规模化、市场化水平,加快农业现代化进程。
(虽然韩国自上个世纪60年代就有人提出废除户籍法,但始终未能形成大的气候。究其原因,主要是因为主张废除户籍法的势力敌不过反对势力,所以在电视剧《黄手帕》中,英俊说,现有的不合理的户籍制度即将要修改,但也许那只是编剧美好的愿望。在一个男性为主观念根深蒂固的国家里,要想彻底废除以男性为中心的户主制还有一段路要走。)
第三,城镇化是产业结构调整升级的重要依托。城市的根本特点是集中,是市场中心、金融中心、信息中心、服务中心、文化教育中心等,具有多种功能。城镇化产生集聚效益、规模效益和分工协作效益,极大地推动工业化进程。同时,城镇化不仅能够推动公共服务发展,也能够推动消费型服务业和生产型服务业的发展。

第四,城镇化是转变经济发展方式的重要条件。城镇化带来人们生活方式改变,推动消费结构和消费方式升级。城镇化带来巨大的城镇投资,促进产业聚集,带动基础设施和第三产业发展,推动产业结构升级。城镇化带来人力资本和信息知识聚集,促进市场竞争、技术创新和改善管理,有利于提高资源集约利用,降低工业化排放,实现低碳、低能耗发展。

第五,城镇化是提高中等收入者比重的重要途径。城镇化形成更多的就业机会,提高劳动生产率,有利于提高劳动力的工资和劳动报酬在初次分配中的比重;同时,城市服务产业也是培育中产阶级或者中等收入人群最重要的产业载体。

新华网消息,今年1月17日中国国家统计局发布的数据显示,2011年末,中国有城镇人口69079万人,城镇人口首超农村。中国改革发展研究院院长迟福林认为,中国正进入城镇化从局部突破到全面推进的重要时期,处在由投资主导向消费主导转型的关键性阶段,以服务业为主体的消费型城市的兴起将成为中国城市化的一个基本趋势,而城乡一体化是加快城市化发展的决定性因素。
中国城镇化率已从1978年的17.9%上升至51.27%。
但城镇化绝非单纯的城市空间扩张,其实质是通过相关制度改革和建设,使农民转化为市民,真正融入城市。全国政协经济委员会曾就此调研指出,要加快促进“空间城镇化”到“人口城镇化”的转变,其中各项制度建设,如户籍管理制度、城乡统一就业制度、土地使用和住房制度、农民工子女教育制度、收入分配制度、社会保障制度等是最为根本的。“只有农民变市民,才能真正实现城镇化。”

Wednesday, December 26, 2012

Vietnam Grows at Slowest Pace Since ’99 on Credit Slump: Economy

Vietnam Grows at Slowest Pace Since ’99 on Credit Slump: Economy
 
By Bloomberg News
December 25, 2012 12:44 AM EST

              Motorists drive down a road in Hanoi, Vietnam. Photographer: Justin Mott/Bloomberg
Vietnam’s economy expanded at the slowest pace in 13 years in 2012 as a slump in bank lending damped domestic demand, adding pressure on the government to revamp the financial system and attract more foreign investment.
Gross domestic product rose 5.03 percent this year, down from 5.89 percent in 2011 and the least since 4.77 percent in 1999, the General Statistics Office said in Hanoi yesterday. GDP increased 5.44 percent in the fourth quarter from a year earlier, up from a revised 5.05 percent in July-to-September.
Foreign investment pledges fell 14 percent this year and Vietnam’s credit rating was cut by Moody’s Investors Service as mounting bad debt and weakened state-owned enterprises limited room for policy makers to boost growth. The government has said it may form an asset manager to clean up lenders, and the World Bank and International Monetary Fund are preparing their first review of the banking system as a blueprint for the sector.
“It was only explosive credit growth that allowed for the level of economic growth that Vietnam had previously been achieving,” said Edwin Gutierrez, a portfolio manager at Aberdeen Asset Management in London, which manages about $11 billion in emerging-market debt, including Vietnamese bonds.
Prime Minister Nguyen Tan Dung said on Dec. 10 growth may reach 5.2 percent this year, down from earlier targets of as much as 6.5 percent. The country averaged expansion of 6.5 percent in the five years to 2011 and 7.8 percent in the five years before that. The pace has slowed due to falling productivity linked to inefficiencies in state-owned companies, banks and public investments, the World Bank said last week.
Moody’s cut Vietnam’s credit rating in September, citing “more pronounced weaknesses in the banking system” and costs related to recapitalizing banks. Concerns about the sector are increasing, the World Bank said this month, even as the government said it averted risks to the safety of the lenders.
Banks have reported bad debt to be about 4.5 percent of outstanding loans, while the central bank’s estimate is about 8.75 percent, the IMF has said. Credit growth this year was 6.45 percent, the planning ministry said today. That compares with 14 percent last year and 32 percent in 2010, according to the IMF.
The real-estate market “stays stagnant” and shows no sign of recovery, while the number of insolvent businesses continues to rise, the government said on Dec. 10. About 58,000 companies, or about 71 percent, in Hanoi posted losses in 2012, Cong An Nhan Dan newspaper said, citing the Hanoi People’s committee.
Vietnam’s monetary authority this month cut benchmark interest rates for a sixth time even as the World Bank warned against easing too soon, to help companies “cope with difficulties in production and business.”
“We are not going to go back to 6 percent, 7 percent growth, until we fix some of the structural issues, banking being perhaps the most important of them,” Deepak Mishra, the Hanoi-based lead economist for the World Bank, said on Dec. 10. “The point is whether the banks are ready to cut, even if policy rates are coming down.”
Industry and construction, which made up 40.7 percent of the economy, grew 4.52 percent in 2012, while the sub-category consisting of construction alone expanded 2.09 percent, the statistics office said. Services, which accounted for 37.7 percent of GDP, grew 6.42 percent this year, while agriculture, forestry and fisheries, which made up 21.7 percent of the economy, expanded 2.72 percent, the data showed.
Pledged foreign direct investment fell to $12.7 billion this year from $14.7 billion in 2011, while disbursed FDI slipped 4.9 percent, according to the ministry of planning and investment. Still, stronger exports helped prevent an even sharper slowdown, as the country posted its first annual trade surplus in two decades. Overseas shipments of goods including electronics increased from companies such as Intel Corp., Samsung Electronics Co. and Jabil Circuit Inc.
The trade surplus for the year was $284 million, based on preliminary figures from the statistics office. The last time Vietnam recorded a positive balance was 1992, data on its website show. Exports gained 18.3 percent to $114.6 billion in 2012, while imports advanced 7.1 percent to $114.3 billion.
“Exports made up for what was probably sluggish domestic demand,” said Jonathan Pincus, a Ho Chi Minh City-based economist with the Harvard Kennedy School’s Vietnam program. “It’s not a bad outcome considering all the deleveraging that’s going on, though in the long run this is not the type of growth that Vietnam would hope to attain.”
The surplus helped the dong advance almost 1 percent versus the dollar this year. The benchmark VN Index of stocks has risen nearly 14 percent, poised for its first annual gain since 2009.
Asian stocks advanced, with the MSCI Asia Pacific Index (MXAP) gaining 0.3 percent as of 1:42 p.m. in Tokyo, snapping three days of losses. Most bourses in the region are closed today for Christmas, with Japan and China the only major markets open.
China will keep home-purchase restrictions and “strictly” curb speculative housing demand in 2013, the official Xinhua News Agency reported, citing the Ministry of Housing and Urban- Rural Development. The economy will continue to recover in December, and may grow 7.7 percent this year and 7.8 percent in 2013, Shenyin & Wanguo Securities said in a report today.
Vietnam’s growth this year “is good enough given that we made curbing inflation our top priority for the year,” said Do Thuc, general director of the General Statistics Office.
Inflation slowed for the first time in four months in December, with consumer prices rising 6.81 percent from a year earlier after climbing 7.08 percent in November, a report showed.
“The government is hoping that if inflation remains under control, they’ll be able to ease monetary policy and growth will accelerate back to the 6 percent range,” said Pincus. “But it’s entirely possible that if the banks don’t get fixed, that when they loosen monetary policy we’ll come right back to a period of inflation and then they’ll have to tighten up again.”
Vietnam may expand about 5.5 percent next year, the government said on Dec. 10. The IMF and World Bank expect to conclude next year their first analysis of Vietnam’s financial system, which may bolster government efforts to strengthen the banking sector and boost investor confidence.
“Next year will still be a very difficult year for the economy,” Le Xuan Nghia, a member of Vietnam’s National Financial and Monetary Policy Advisory Council, said today in Hanoi. “Economic growth will probably be at the same level as this year, or slightly higher.”
--Jason Folkmanis in Ho Chi Minh City. With assistance from Nguyen Dieu Tu Uyen in Hanoi, Minh Bui in Sydney and Sunil Jagtiani in New Delhi. Editors: Rina Chandran, Oanh Ha
To contact Bloomberg News staff for this story: Jason Folkmanis in Ho Chi Minh City at folkmanis@bloomberg.net
To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

Stock Market Gurus' Top Country ETF Bets for 2013

 

Where should ETF investors travel in 2013 for the biggest returns? Several investment strategists share their top country ETF investing ideas.
Mark DiOrio, portfolio manager at Parasol Investment Management in Westmont, Ill., with $125 million in assets under management: iShares Poland ETF (EPOL).
Poland is poised to be a standout equity market for 2013. A combination of an accommodative business environment, easing monetary policy and attractive valuation levels sets the stage for an emerging opportunity.
For 2013 (from the left), Parasol's Mark DiOrio prefers Poland, Zacks' Neena Mishra favors Mexico, Camarda's Don Vandenbord likes Japan and Beckerman...
For 2013 (from the left), Parasol's Mark DiOrio prefers Poland, Zacks' Neena Mishra favors Mexico, Camarda's Don Vandenbord likes Japan and Beckerman... View Enlarged Image
Supported by the Ministry of the Treasury, a plan for 2012-13 has been implemented to privatize 300 Polish companies.
One of the objectives is to execute the plan through stock exchange transactions in order to strengthen the domestic capital market. The other objective is to strengthen economic competitiveness.
To further strengthen the private sector, Poland has embarked on a three-step deregulation agenda. The first two steps significantly reduced administrative burdens. The third step, to be implemented in 2013, focuses on VAT (value-added tax) relief for companies.
The National Bank of Poland (NBP) maintains Poland's own currency, the zloty. That means Poland sets its own monetary policy, giving it flexibility to manage many challenges.
Currency fluctuations can be a risk to U.S. investors. The z loty is about 21% cheaper vs. the dollar than it was on Jan. 1, 2008.
The slowdown and recession in most of Europe is an ongoing risk. Those factors reduced Polish third-quarter gross domestic product growth to 1.4% from 2.3% in Q2. However, the NBP is responding to this slowdown in GDP growth. It has begun to lower interest rates to 4.25% from 4.5%. The NBP said it would lower rates more if the slowdown persists. Low rates are historically bullish for equities.
The Polish stocks in EPOL trade near 1.7 times book value compared to 3.0 P-B ratio for the broad MSCI Emerging Markets Index. Poland is not only trading at a discount to the rest of its peers, it is trading at a discount to itself.
The Polish equity market's cyclically adjusted price-to-years, using 10-year earnings, is 11.2. Its current one-year P-E is near 7.8. The P adjusts much quicker than the E, and in this case the P has plenty of room and reason to expand.
Neena Mishra, ETF research director at Zacks Investment Research in Chicago, Ill.: iShares MSCI Mexico Investable Market Index Fund (EWW).
Many U.S. manufacturers are shifting production to Mexico from China as China's average manufacturing wages, adjusted for productivity, now top Mexico's.
Further, Mexico's proximity to the U.S. means that companies can ship goods to U.S. customers much faster, at a much lower cost and duty-free because of the North American Free Trade Agreement.
The new administration (of Enrique Pena Nieto) has pledged more reforms in the energy sector, allowing more private investments and encouraging development of shale gas reserves, and tax reforms that could accelerate the GDP growth to 6%.
Apart from being positive on the Mexican economy, I also like the ETF due to its heavy exposure to consumer staples and telecom sectors. Growing consumer demand in the country will be beneficial for these sectors.
In recent years, Mexico adopted open market policies, fiscal discipline, labor reforms and prudent macroeconomic measures. As a result, the economy is currently growing at about 3.2%.
Its budget deficit is just 2.5% of GDP compared with 8.6% of GDP for the U.S. for 2011. Gross debt stands at about 43% of GDP, compared with more than 107% for the U.S., according to the International Monetary Fund.
Bank of Mexico has kept the key rate unchanged at 4.5% since 2009 as inflation has generally remained within its target range of 2% to 4%. The country's foreign reserves have risen to $165.4 billion, as of the end of August 2012.
Though the currency has been hit by U.S. fiscal-cliff concerns, it is still up about 9% year-to-date vs. the dollar. Additionally the longer-term outlook for the peso looks promising, given the country's macroeconomic position, rising exports and comfortable foreign exchange reserves position.
Risks: The economy is still very much dependent on the U.S. as a consumer of about 80% of its exports. Any contraction in the U.S. economy in case it goes over the fiscal cliff, will affect Mexico.
Don Vandenbord, portfolio manager at Camarda Wealth Advisory in Fleming Island, Fla., with $250 million in assets: IShares MSCI Japan Index Fund ETF (EWJ).
EWJ will benefit from the easy-money commitment of incoming Japanese Prime Minister Shinzo Abe. The recent landslide victory of Abe's Liberal Democratic party is seen as a mandate for Abe to champion pump-priming stimulus efforts, as Abe vowed to take all necessary action to rescue the Japanese economy from the woes of deflation.
The yen immediately weakened after the election results were announced, and EWJ broke above six-month resistance on strong volume, and the benchmark Nikkei index rose above 10,000 for the first time in nearly nine months. Continued weakness in the yen will serve as the catalyst to strengthen the competitiveness of Japanese exports and kick-start their languishing equity markets.
In December, the Japanese central bank enacted another round of monetary stimulus — its fifth move of 2012. Pressured by Abe, the Bank of Japan has also announced a review of their inflation target, which is expected to increase to 2% of GDP from the current 1%.
These policy moves and announcements, added to Abe's pledge for more stimulus, further support the weak-yen/strong-equity thesis. While Japan faces competing monetary-easing action from Europe and the U.S., the rewards for an upside move in EWJ appear to far outweigh the downside risks.
Daniel Beckerman, president of Beckerman Institutional in Oakhurst, N.J., with $35 million in assets: WisdomTree Emerging Markets Small-Cap Dividend (DGS).
India has been growing at over 5% per year. China's growth rate has been over 6% per year. The excessive rate of growth relative to the U.S. is expected to continue in the near future. Furthermore, the debt levels are relatively more favorable for the emerging market countries. Russia and South Korea, for example, hold less than a third of the level of U.S. debt relative to GDP.
Because of low input and labor costs in the emerging markets, there has been accelerating growth in manufacturing there over the years. This has led to a large accumulation of wealth there. They want access to consumer goods, housing, autos, communications, and technology. DGS trades at 12 times 2012 earnings, which puts it at a valuation discount relative to the U.S. market. Small-cap companies tend to be more insulated from large global concerns.


Read More At IBD: http://news.investors.com/investing-etfs/122412-638214-mexico-poland-among-2013-foreign-market-picks.htm#ixzz2GBcG1y64

Friday, December 21, 2012

Trading VIX Futures And The VXX: Forward Curve, Momentum, And Inter-Market Effects

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)
At NAS Trading, we believe that VIX futures and the VIX ETN (VXX) currently present some of the best profit opportunities for individual traders.
What exactly are VIX futures? It is always best to go straight to the source. The CBOE education site states:
"The CBOE Volatility Index is based on real-time prices of options on the S&P 500 Index, listed on the Chicago Board Options Exchange (Symbol: SPX), and is designed to reflect investors' consensus view of future (30-day) expected stock market volatility... The contract multiplier for each VIX futures contract is $1000."
If you have ever looked at a chart of the VIX ETN note or VIX futures, it has likely occurred to you that this seems to be a great market to sell short. A cursory glance suggests that this market has a tendency to experience significant and prolonged downtrends that seem inevitable after each period of volatility ends.
This article looks to flesh out this tendency and gain a better understanding of how to profit from it. We will also look for times when it pays to go long both VIX futures and VXX.
Three factors that can be particularly useful to VIX traders are :
  • Forward curve dynamics
  • momentum effects
  • price signals from the SP500 futures contract
If you are not familiar with the effect the forward curve has on futures market returns (Or don't know what the forward curve is), I suggest that you read my article on the topic (here).
The forward curve relationship is particularly important in the VIX futures market, which in turn makes it very important for understanding price dynamics in the VIX ETN. Lets look at today's forward curve in the VIX futures as displayed on my quote board:

It is a bit easier To visualize in graph form:

As you can see, the market is in steep contango (upward sloping), which means that if the spot price does not change, then the futures contract will lose the difference between the forward price and the spot price between now and expiration. For example, lets consider the December 2012 contract, trading at 23.2. The current spot price is 17.74. This means if the spot price does not move, the December 2012 contract will have to lose 5.46 Points ($5,460) between now and expiration (spot price equaling contract price).
Now it is true the market usually anticipates a pickup in volatility during the fall, and it is not at all realistic to assume that the spot price will not change. However, the huge slope demonstrated in the forward pricing curve creates a massive headwind for longs, and tail wind for shorts. This is relevant to VIX ETN because this securities market exposure is created using VIX futures. If the VIX futures market is in steep contango, this will have a real effect on the NAV of the ETN.
I hope the above demonstrates why understanding forward curve dynamics is critical to successfully trading VIX futures or the VXX ETN. All else equal, steep contango is the short seller's friend, and backwardation (downward sloping forward curve) is the long side's friend.
The second factor we are going to look at is the "trend" or "momentum" factor. We are going to do this in two different ways. (Note: For this part of the study uses a continuous chart of the most liquid VIX futures contract from Jan 3, 2007 to September 4, 2012). Lets get started:
All else equal, would you rather sell short The VIX Futures contract after the prior day has closed up or down (based on the prior open to close relationship)? Lets examine the historical results:
  • For all days, the close to close return is .-0313, for a cumulative return of -44.87 (-$44,870)
  • For days where the prior open to close relationship was up, the return was .0217 for a cumulative return of 13.45 ($13,450)
  • For days when the prior open to close relationship was down, the holding period return was -.0741, for a cumulative return of -57.15 (-$57.150).
While these results are not strong enough to trade on their own, it does seem to suggest that using just a one day period, price weakness tends to be followed by price weakness, and price strength tends to be followed by price strength. As a side note, the Nearest month VIX Futures contract lost value (open to close) about 53% of all days during the past five years.
Next, Lets next examine Trend/momentum in VIX futures using a very simple Trend following system:
  • Sell Short when the 10 period moving average crosses below the 20 period moving average, buy back (cover) when the 10 period moving average crosses above the 20 period moving average.

The results are really quite remarkable but not entirely surprising, as are aware that the market has historically had a tendency to have prolonged downtrends. Total profit is $91,370, percent win is over 70%, and average trade is $3,514. Total trades is low, however this suggests that even when measured using this very short term trend signal, there is a high degree of trend persistence on the downside.
Lest you think I tweaked the inputs to get the above results, know this: Every moving average combination I tested between 10 and 50 was profitable, with an average trade profit between $800 to over $6000.
On to our final factor. I have seen that many traders attempt to use the VIX index to create trading signals for the SP500 futures or some other stock index contract. Lets consider the opposite. Lets see if a long term trading signal in the SP500 futures contract can have an impact on VIX futures close-to-close profitability.
We know that volatility tends to explode during significant markets declines. If we want to profit by shorting the VIX futures or VIX ETN, it would be nice to avoid these periods. Will a trend signal in the SP500 effect close-to-close returns in VIX futures? Lets check it out:
  • To start, lets consider that the average close-to-close return (as mentioned above) for VIX futures during our test period is -.0311, with a total loss of -44.87 ($44,870)
What is the average return from today's close to tomorrow's close, if today the SP500 mini contract closes above yesterday's value of the 80 period moving average?
  • The average daily loss increases to -.169, and the total loss increases to -137.15.
I tested this with moving average values between 30 and 200, and the results are logically consistent - meaning that pretty much every moving average length tested increased the average daily loss. This suggests that it is better to look for opportunities to short VIX futures when the SP500 futures are in an uptrend, as defined by our very simple trend signal (Today's close is above the X period moving average).
What about buying opportunities? If we flip around the above logic and test "What is the average daily return in VIX futures when the SP500 futures closed below the 80 period moving average" we find:
  • The average daily return jumps to .14, and the cumulative return is 92.6 points.
Lets add one more feature. What if the SP500 futures have closed below the 80 period moving average, and today's close in the VIX futures are greater than today's open?
  • The average return (close to close) jumps to .21, and the cumulative return is 66 points. The cumulative return is lower than the prior example because their are fewer simulated trading events when we include an additional parameter.
Based on the above, it looks like selling short VIX futures while the SP500 is in a downtrend is not a good strategy. In fact, results indicate that this is a good time to consider long trades. I have not examined it yet, however it would be interesting to see if the Forward curve effect coincides with the SP500 downtrend effect. I have observed that the VIX curve moves into backwardation during panics as the volatility, as the nearby contract ramps up - so this is possible.
Take away:
My analogy for these markets is that VIX futures and the VXX ETN trade similar to low quality, volatile stocks that are at times heavily promoted, (When they need to raise new equity to fund money-losing operations) yet have tendency to bleed returns after the stock promotion ends.
In the same way, bouts of market fear and volatility "fund" VIX trading products. The incredible "ramp up" of a volatility bull market scares shorts, yet ultimately the decline will once again set in. Our studies suggest that it is counter-productive for shorts to attempt to fight the market and sell short VIX products when upside volatility and momentum is positive.
This article is intended as "food for thought." Studies should be updated regularly in order to be in tune with changing market patterns. We will be tracking VIX futures and VIX ETNs in the subscription service.
Further reading:
Simon, David P; Campasano, Jim: The VIX Futures Basis: Evidence and Trading Strategies (Bentley University - Department of Finance, University of Massachusetts at Amherst - Isenberg School of Management)
Alexander, Carol; Korovilas, Dimitris: Understanding ETNs on VIX Futures (University of Reading - ICMA Centre)