marketing-measurement

Some surprising results shown here:

  • 20% of businesses do not measure marketing results
  • 45% of businesses only measure a single attribute

Digital Spark Marketing believes that if it is not worth measuring, it is most likely not worth doing in the first place.

Experiment with your measurement process … measurement is a difficult task, but certainly not impossible and very valuable as a feedback mechanism.

Source of infographic: Marketo.com

Investor Complacency Is Smashing Records


Near-term volatility expectations are currently on a stretch of unprecedentedly low levels.


About a month ago, we began to take note of investor complacency creeping into the stock market. At the time, the major averages had recently broken out to all-time highs amidst strong breadth readings and favorable seasonality. Thus, such complacency, or optimism, was arguably warranted. As such, our take was that the positive price action and participation was certainly enough to override the budding excessive bullishness. We have seen that, in such circumstances, sentiment extremes can persist for an extended period of time before any negative consequences unfold. Indeed, the markets have continued to creep higher ever since, along with investors’ optimism. At this point, however, sentiment is getting to the point where it is a legitimate red flag, in our view. In fact, by one measure, the market has never witnessed a stretch of such investor complacency.

The measure to which we are referring is the same as that noted in the late July post above, and pertains to investors’ volatility expectations. As we wrote:

One way of using volatility to measure the extent of investor nervousness is by comparing near-term volatility expectations versus those farther out. For example, the VIX is actually the 1-month S&P 500 volatility index. Meanwhile, the VXV is the 3-month volatility index. Typically, the VIX will be lower than the VXV as there is less time in the near-term for volatility rises to occur. When investors get especially nervous (usually during a selloff), near-term volatility expectations can actually rise above those farther out, i.e., the VIX/VXV ratio rises above 1.00. Conversely, during times of complacency, the VIX will drop to relatively low levels versus the VXV; historically, under 0.80 may be considered complacent.

At the time, the VIX/VXV ratio had actually dropped below 0.78, a level it had only reached on 14 prior days since the inception of the VXV in late 2007. As we noted, such complacency can persist for a short while, especially amidst positive developments elsewhere in the equity markets. However, at this point complacency has extended beyond any historical precedent. Specifically, while just 14 days in the past 9 years (prior to July) had ever seen VIX/VXV readings below 0.78, this week saw the 21-day average (approximately 1-month) drop below that level.



Obviously, the market can almost literally do anything – there are no rules. Thus, it may continue to accommodate investors’ lack of volatility expectations for a while longer. However, we are already in uncharted waters. The only time the 1-month average VIX/VXV dropped even below 0.80 was in March 2012. FWIW, the ratio remained below 0.80 for the next 11 days. Meanwhile, the S&P 500 gained a maximum of just 1% as it meandered sideways for the next 5 weeks before getting clipped for nearly 10% over the subsequent month.

Again, we don’t have a script for what will play out here (there is no script for a VIX/VXV ratio this low). The 2012 outcome is just one potential template. There are still enough positives in the equity market in the near-term that could certainly keep the stock market propped up for the time being. And we do not have any major signals at this point to suggest bailing out of stocks en masse.

However, we do consider this data point to be one that warrants our attention. Therefore, we would perhaps raise the proverbial “DefCon” from 1 to 2. While that may not mean taking much defensive action yet, it should at least up one’s readiness, whether that means tightening stops, looking for hedges or just plain being more prepared.

At the very least, we would recommend investors not get lulled to sleep by the present calm in the markets.

_________

More from Dana Lyons, JLFMI and My401kPro.

The commentary included in this blog is provided for informational purposes only. It does not constitute a recommendation to invest in any specific investment product or service. Proper due diligence should be performed before investing in any investment vehicle. There is a risk of loss involved in all investments.

The market is about to get a serious 'shock'

(Magician David Blaine channels electricity from various tesla coils charged with 1 million volts.Reuters/Andrew Burton)
Markets are quiet — really quiet.

For 31 straight days, the S&P 500 has not moved 1% or more in either direction, and volatility in the market, as measured by the VIX, has declined sharply since spiking after the UK’s vote in late June to leave the European Union.

The quiet summer is keeping investors complacent, according to Athanasios Vamvakidis, Adarsh Sinha, and Yang Chen at Bank of America Merrill Lynch. The complacency is leaving investors seriously exposed, the foreign exchange and rates strategists said.

Here’s their breakdown of the situation (emphasis added):

“The recent chase for yield has potentially reached an important inflection point. Selling vol to enhance yield is now at an extreme level, with net speculative VIX exposure at all time shorts. Furthermore, this reach for yield is apparent across FX, equity, and fixed-income markets.

"In our view, complacency combined with short vol exposure could set up the market for a highly volatile and correlated sell off on the next shock. Carry trades that look attractive due to severely depressed volatility levels could unwind on even a modest increase in volatility.”

Essentially, the strategists argue, in order to generate expected returns, investors have increasingly reached for riskier assets. Thus, they are more exposed to losses if the market were to suddenly drop.

Exacerbating this problem is the recent trend in trades of selling volatility. Put (extremely) simply, investors are selling “insurance” on movements in the VIX through a series of options. So if there were a sudden uptick in the VIX, this “insurance” would be called in by the buyers, losing the sellers of the options money. (If you want to dive into the nitty gritty of this trade, here’s a deeper dive.)

According to Vamvakidis, Sinha, and Chen, the number of people selling volatility in this way has reached an all-time record.

Commodities Futures Trading Commission “positioning data reveals the shortest speculative positioning in VIX futures of all time, both confirming this trend and raising a red flag,” their note said.

(Bank of America Merrill Lynch)

Combine these two circumstances, said the strategists, and the adjustment to any coming shock in the market would be violent and painful. A number of upcoming events could trigger this shock, the note said.

“While it is uncertain where the next shock will come from, we believe there are several possibilities,” the strategists wrote. “To name a few: a faster Fed hiking cycle than the market is expecting, US election uncertainty, and turmoil in Italian banks.”

No matter how it happens, it will happen eventually, they say. So, they suggest, “be fearful when others are greedy.”

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What you need to know on Wall Street right now

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Markets are quiet — really quiet.

For 31 straight days, the S&P 500 has not moved 1% or more in either direction, and volatility in the market, as measured by the VIX, has declined sharply since spiking after the UK’s vote in late June to leave the European Union.

That “could set up the market for a highly volatile and correlated sell off on the next shock," according to Bank of America Merrill Lynch.

Direct Match, a Wall Street trading startup focused on the US Treasurys market, is exploring strategic options that could include a sale. Jim Greco, the CEO and cofounder, explained why in an article for Business Insider

Lyft President John Zimmer blasted reports that the ride-hailing company is shopping itself around, disputing a series of recent news stories saying that Lyft had failed to find a buyer after talking to six different companies.

"Lyft is not seeking a buyer,” Zimmer told Business Insider.

Bed Bath & Beyond paid less than $30 million for One Kings Lane, a startup that was once worth $900 million. Best Buy popped after earnings beat expectations. And ad tech company The Trade Desk has filed to go public.

Real business investment has declined in the US for the third straight quarter, and there’s reason to believe that something might be going on here beyond just record-low prices for commodities and oil.

Lastly, this $850,000 Aston Martin convertible is a work of art.

Here are the top Wall Street headlines at midday:

One of the most popular trades in the world is no longer profitable — We’re living in a world of negative interest rates.

Tesla will announce a new product today - CEO Elon Musk tweeted that the product announcement would come at noon PT (3 p.m. ET). We don’t know for certain, but it could be an announcement relating to when Tesla will roll out Autopilot 2.0 and the new features that will come with the upgrade.

Deloitte is being sued after failing to flag up more than $200 million of money laundering - A Dubai-based investment group is suing the Middle Eastern arm of Deloitte and Touche after the accounting firm failed to flag up money laundering at a now-defunct Lebanese bank.

Meet the matchmaker who sets up dates for Goldman Sachs bankers for a £9,000 annual fee - Long hours and heavy workloads mean that bankers, brokers, lawyers, and accountants rarely meet anyone outside of the corporate jungle.

The US has a $1.4 trillion hole that needs to be filled - We’re not going to stop talking about it: everybody wants more government spending. 

What it’s like to have your world turned upside down by an insider trading conviction - William D. Cohan wrote a fascinating profile for Fortune about Todd Newman, the hedge fund manager at now defunct Diamondback Capital, whose case has raised questions about the definition of insider trading.

All of the US economy’s problems come back to one thing — It’s all about jobs.

Bentley’s ultra-luxurious Bentayga SUV has a year-long backorder— here’s what makes it so coveted - The Bentley Bentayga is a hot commodity right now.



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