We’re back from San Diego with another NIRI National Conference under the belt. Also under the belt went fine dining and a wide variety of adult beverages in that city’s lovely Gas Lamp district (where you may sample succulent and authentic Spanish tapas or have a meal of Shepherd’s Pie and Guinness served up by a blue-eyed barmaid with a real Belfast accent).
NIRI attendance topped any of the past five years, their folks tell me. However, the exhibit floor came with unexpectedly wide boulevards and distant neighbors (we bivouacked ModernIR’s booth 222 at a rakish angle to take in the full southwestern sweep of the hall), with booth count down, it seemed to me, by 25% or better from Orlando last year. It’s no doubt a measure of consolidation in our industry over the past year. Perhaps too, promotional budgets are now being redirected to pay for gasoline and carbon credits (a little humor there).
Speaking of risks, June 16-20 is festooned every single day with expiring options (but no triple or quad witching, because expirations web the week). So last week, we saw the markets turn much shorter-term once again as traders and institutions jockeyed to lock down risks and squeeze a buck or two from every little divergence from norms. If you think we’re full of crap, look at Goldman Sachs’s Q1 2008 results. Though its trading results lagged last year’s, they still tendered $5.6 billion in principal trading and investing revenues (investment banking was a distant third place in Goldman’s revenue pancake stack).
Back to options expirations to wrap up, the S&P 500 long-dated options expired today, June 17th. “Long-dated” literally means “dated a long time from now, like 15 or 20 years.” Before your eyes cross and you hit the Guinness for defensive reasons, it’s pretty simple: say a big institutional investor like Fidelity thinks inflation remains a risk and dividend growth is likely to be lousy. They might sell to a Morgan Stanley some global index put options (say, for the FTSE 100). This generates present cash value in premiums to use in the near term. Morgan Stanley might in turn offset that risk by shorting the S&P 500 in the form of today’s expiring SPL/SPX derivatives, or by any number of other means that turns any actual dividend growth into upside for them. Plus the Morgan Stanleys out there help manage federal money and treasury supplies. That’s got to help mitigate risk.
Still, no wonder bank stocks go down when these options expire (check your bank stocks).
And that’s what happens in the middle of the month in equity markets today. You might as well know what’s going on!
Margaret E. Wyrwas - Knight Capital Group, Inc. (Nasdaq: NITE)
Senior Managing Director, Corporate Communications & Investor Relations
Equity Analysis™ subscriber since March 2007
"In global markets driven by automation, changing market structure regulation and dynamic investment objectives, today's investor relations professionals require new data points in order to remain relevant and add value in their company's quest to reduce its cost of capital."
