CME is an Inflation Hedge
CME declared a first-quarter dividend of $0.66 per share, a 10% increase from the prior rate of $0.60 per share
Lesson 1: When a headline uses superlatives like ONLY, be skeptical. That said, for us there is only 1 stock. And that is because we understand the business.
One of the stocks that will do very well in a rising rate environment is CME. Why? Because the majority of their revenues comes from interest rate products. Look it up yourself, Google is your friend.
In a rising rate environment more businesses will be hedging. That's just a fact. Add to this a mandate by the Government to put the OTC markets out of business opined on here previously and you have a recipe for growth at CME. In short, buying CME is an inflationary hedge. Today they raised their dividend. Can't short bonds? Then buy CME stock. .
Here is an excerpt from an interview MarketSlant contributor Vince Lanci gave for his 2016 trading picks. My Comments in [brackets]- Soren K.
How would you invest $100,000 in 2016?
“I don't recommend these without a full analysis of risks to anyone. Execution and selection are key,” warned Vince Lanci, adding that the following breakdown is how he’d broadly allocate his 1-year speculative portfolio in 2016.
10% BUY CME STOCK
“If rates rise, CME earnings will benefit as businesses return to hedging interest rate risk,” he said. [ Grade A+ CME opened 2016 at $87.53 per share and ended at $115.39.- S.K.]
25% BUY VOLATILITY
“It will increase this year as a function of policy confusion. Buy options not VIX baskets. Bonds, stocks, precious metals, oil, grains,” he said. “Yellen's recent statements said as much: QE is done but easy money isn't.” [Grade: D+ the VIX is on serious lows, so being more specific would have helped here Vince- SK]
15% BUY SILVER
“If you are bullish gold, buy silver,” he said. Lanci added that precious metals financing has dried up and as base metals mining slows, silver as a byproduct will shrink.
[Grade B+ You were right, and it's especially laudable that Silver retained its better performance considering the end of year swoon in both markets. Historically, Silver swings wider in both directions. So you were right. Why only B+? Because you missed Palladium!- SK] Full interview HERE
FWIW- Handicapping the Handicappers
Take note of Vince's metals opinions even if you disagree, ignore his long-term volatility projections, flip a coin on energy, take note if he has an opinion on Exchanges or REITs
- Vince knows commodities and metals specifically pretty well.
- His thesis on Silver is valid and based on different forces on the metal. He's written many times on Silver as an investment and a manipulated product here and in Zerohedge.
- We know he knows volatility, and perhaps his bias blocks his own objectivity there.
- Historically he is very good at energy as an arbitrageur. But it should be noted, his 2016 energy call was not a good one. He's not a directional genius
- He rarely opines on stocks unless he has good research behind it. And his CME call was in no small result of his relationship with the principals at ER Desk whose real research we are not privy to, but Vince is. He is also tight with a REIT fund manager and 2 macro commodity funds. Finally he runs family money out of Echobay after "retiring" in 2008.
Overall: His metals acumen is good even directionally, especially when he gives both sides of the story. His volatility stuff is useless to the lay person even if he is right.
- If you want us to look at other pundits and predictors for their biases, strengths, and weaknesses email all of us at SorenK@marketslant.com
- If you want their track record assessed, then you are a lazy idiot. We deal in decision analysis, subjective probability, and patterns behind the data. ROR is just math.
Commodity 2016 Performance Grid
BATS 4Q16 adjusted EPS rose 33% y/y to $0.40. Adjusted EPS excludes tax-adjusted amortization and other costs. Revenues increased 7% y/y to 105.4m while normalized EBITDA rose 9% y/y to $68.2m.