Heavy Machinery Maker Charged with Wrongdoing

Caterpillar Inc. (NYSE: CAT)

Federal authorities raided Caterpillar’s headquarters in Illinois In March of 2017, accusing them of tax and accounting fraud.  In a rare accusation of a multi-national company of tax fraud, the report issued by the Government could result in quite significant penalties.  Federal authorities had been looking at CAT for years, with a whistleblower leak in 2009 leading to a serious investigation which culminated to the raid in March.  

The report focuses on their overseas business and tax transactions involving appropriations of billions of dollars.  US Corporations owe income tax at the 35% corporate tax rate on profits earned worldwide.  They are permitted to defer those taxes, however, until bringing those earnings back into the United States when they will be assessed US corporate income tax with a credit for taxes paid overseas.  Exceptions to the rule exist, with money reported in the form of loans at the center of this investigation.

The report accuses Caterpillar of bringing billions of dollars back from offshore affiliates without paying the proper amount of tax.  The investigation led by the Inspector General of the FDIC, which investigates possible criminal activities from financial institutions, and the United States attorney’s office for the Central District of Illinois, involves a Swiss subsidiary of Caterpillar.  The report outlines that billions of dollars in profits from CSARL in Switzerland from 2007 – 2012 should have been taxed at much higher US income tax rates.  The IRS could potentially impose up to $2 billion in taxes and penalties on profit earned by CSARL.  

Caterpillar claims that the profits were determined to have been reinvested outside the US, and they are contesting the accusations stating that they complied with all tax laws and did not violate any judicial doctrines.  

There is no ruling yet, however many professionals close to the case feel that Caterpillar’s noncompliance with US financial tax laws and reporting rules was deliberate in order to maintain a higher share price.  

Caterpillar is one of the 30 companies in the Dow, and shortly after the raid in March, shares of Caterpillar fell 2%.  In spite of the ongoing investigation, their latest earnings report in October of 2017 was up 27.5% year to date, while trading at a rich 25 times earnings estimates.  

For current information on corporations, trading or investment services you can trust, contact Great Point Capital today.  

Great Point Capital is a member of FINRA offering professional service, wealth management and execution to retail customers.  We are a leader in the equity day trading community with more than 100 prop traders currently trading the firm’s capital with stock leverage. We provide the latest in technology including Takion trading software and our proprietary intra communication platform.  Contact us today to learn how we can take your successful trading strategy to the next level.   

Equifax Breach One of the Largest in History

Equifax Inc. (NYSE: EFX)

We all heard about the massive data breach in September of 2017, when Equifax exposed personal information of nearly half of the US population, up to 143 million customers.  Information exposed included credit card numbers, social security numbers, birthdays, driver’s license numbers and addresses in what is known as one of the largest data breaches in history.  

Making matters worse, Equifax accidentally directed customers to a fake phishing site, when trying to calm the nerves of the public.  A secure website was set up for customers, which was www.equifaxsecurity2017.com, to aid in determining whether people had been affected by the breach.  On several occasions over the weeks following the incident, Equifax responded to customer inquiries with their official Twitter account by accidentally directing them to a fake phishing site at www.securityequifax2017.com.  

This was a huge mistake at a time when they were trying to earn back the public’s trust, at the precise moment when the public was looking for reassurances about the safety of their personal information, bank accounts and investments.  Additionally, Equifax tweeted the fake phishing site address at least three times before it was noticed.  

They then issued a warning to the public stating that consumers should beware of fake websites appearing to be operated by Equifax, stating again that consumers can sign up for free monitoring and learn more at https://www.equifaxsecurity2017.com, adding that their homepage is Equifax.com.  Equifax was criticized for creating a completely different domain for customers rather than having a response page within their own domain of Equifax.com.   This made it very confusing for customers to recognize whether or not the site was real.   

Luckily, it turned out that the fake site was created by pranksters with no malicious intent, and was for the purpose of exposing the mass potential for errors.  This was evident in the first heading on the fake website which included the words: “Why Did Equifax Use a Domain That's So Easily Impersonated by Phishing Sites?"  

Of all the companies to have a massive data breach, and then to mistakenly direct consumers to a fake phishing site, one of the three major credit reporting agencies that contains private and personal information on half of the US population was one of the worst possible scenarios.

Many feel they should have then made a smarter choice about the domain they created to resolve this massive problem.   That is the exact reason why many companies will purchase the domains of common misspellings of their business, to keep customers from landing on a fake site instead of their real company website.  

Great Point Capital is a member of FINRA offering professional service, wealth management and execution to retail customers.  We are a leader in the equity day trading community with more than 100 prop traders currently trading the firm’s capital with stock leverage. We provide the latest in technology including Takion trading software and our proprietary intra communication platform.  Contact us today to learn how we can take your successful trading strategy to the next level.   

The Year for Investigations into Drug Makers

As we near the close of 2017, we are not at a loss for corporate scandal, wrongdoings on the part of corporate CEOs and employees.  The pharmaceutical industry has long been at the center of investigations, and lawmakers in 45 states are now taking action.   

Perrigo Co. (NYSE: PRGO), Mylan (MYL) & Many Other Generic Drug Makers

The largest maker of over-the-counter drugs in the world, Perrigo Co., was the focus of a corporate scandal in May when the Department of Justice raided their offices during an investigation into price collusion.  The government was looking mainly at the price of drugs that Perrigo manufactures for skin conditions.

Price collusion happens when companies conspire with each other to generate an unfair market advantage.  Mylan NV (MYL) is one of the companies accused, and you might remember their involvement with the notorious price fixing scandal in 2016 involving the EpiPen.  

On October 31, 2017, investigations into price gouging of big pharma culminated into a large group of US states accusing key generic drug makers of participating in a far-reaching price fixing scheme.  The investigation widened an existing lawsuit by adding many more drug makers and medicines, sending some drug maker company shares falling.  

Attorney Generals from 45 states and the District of Columbia are accusing 18 companies while naming 15 medicines in the lawsuit, which includes the president of Mylan NV and CEO of India’s Emcure Pharmaceuticals. The charges allege the company executives agreed in advance upon prices, price increases and the percentage of market share that each company would have.  

One Attorney General states in the suit that it is their belief that price fixing is pervasive, systematic and exists in a culture of collusion.  

For the most recent company information, trading or investment services you can trust, contact Great Point Capital today.  

Great Point Capital is a member of FINRA offering professional service, wealth management and execution to retail customers.  We are a leader in the equity day trading community with more than 100 prop traders currently trading the firm’s capital with stock leverage. We provide the latest in technology including Takion trading software and our proprietary intra communication platform.  Contact us today to learn how we can take your successful trading strategy to the next level.   

IPOs Increase for 2017 Slow and Steady

The IPO market appears to be improving this year, although factors still exist that will keep it from growing too rapidly.  Company managers and owners must be ready to give up some control to shareholders when going public.  This can deter some companies from transitioning to a publicly traded company until they require the capital for growth.

For that choose to prolong the jump to an IPO, private equity markets and venture capital have matured to fill the gap. Companies choosing to stay private longer can finance debt with relatively low interest rates providing an attractive option for growth.   The private equity business sector also received additional boosts with the Reg A and crowdfunding rules that went into effect over the past couple years, which made it easier to raise capital without taking the step of a public IPO.  The regulations of the Sarbanes-Oxley Act of 2002 is another factor that makes staying private even more attractive as public companies must invest time and accounting expertise to comply.  

Opportunities Exist with Special Purpose Acquisition Company (SPAC)

Another opportunity exists for experienced traders willing to do research, which is a Special Purpose Acquisition Company, (SPAC).  This is an interesting hybrid of public and private funding that is growing in the markets today.  An SPAC IPO is essentially a blank check for the managers to go out and acquire private companies.  

An SPAC is usually formed by people with in-depth knowledge typically in a specific industry, who are confident that they can identify profitable acquisition opportunities.  100% of the money raised through the IPO is deposited into a trust account to fund the SPAC, giving reassurances to investors.  

Great Point Capital offers professional services for active including Proprietary Trading, Index Options and Quantitative Trading services.   Our team has experience trading in stocks, futures, IPOs and SPAC’s.  We are one of the few firms with the ability to offer access to Takion trading software, enhancing your trading performance.

Great Point Capital has been serving the trading community since 2001, with 100+ prop traders actively trading the firm’s capital.  Our mission is to lead the equity day trading community and give traders the support and tools necessary to make the most of their trading careers.  Contact us today in either our Chicago Office, or our Austin Office, to learn more about how we can successfully trade together with high performance results

IPOs Present Opportunity to Stock Traders

IPOs have been slowly increasing since the lowest number in 2008 of only 35 newly introduced company stock during the Great Recession.  2014 saw the largest capital raised with 291 completed IPOs raising a record 96 billion, but only 112 in 2016 with just $21b raised.  Although the IPO market has been slow the last couple of years, the first half of 2017 is seeing a slight increase with 91 completed deals. The upswing in 2017 of the number of IPOs creates opportunities for traders, although it can still be tricky to earn decent returns in the current environment.  IPOs can be risky business for an individual investor as it can be difficult to predict how new stock will perform when introduced and trading begins.   Most IPOs are experiencing a transition period which makes their future value a bit uncertain and there is no historical data to compare to.  

Even though the number has been increasing, the return are not necessarily following suit.  2017 has seen returns on IPOs averaging only 10.6%, which is the 2nd worst performance for a 6-month period since 1995.  To explain this decrease in performance we must evaluate the change in the structure of today’s typical IPO, which has had a profound effect on returns.    

Today’s IPO is Larger and More Stable

The profile of today’s IPOs has changed dramatically in the last few years, as companies wait until they are much larger to go public than they would have in the past.  The median deal size has increased from $82 million in Q1 2016 to $190 million in Q2 2017.   IPOs are raising more money than they ever have in the past, and are more stable when deciding to go public.  

When these companies choose to go public they are stable with defined revenue streams and completely functioning management teams.   The stability of the IPOs today allows them to command a higher market cap than companies without that proven track record.   There is less volatility and less chance for bigger returns for traders with more visibility on valuation.

It takes traders with experience and willingness to do the research to earn the returns on IPOs that we saw in the past.  Great Point Capital is a team of experienced traders with in-depth knowledge of all market opportunities.  

Great Point Capital is a member of FINRA, serving the trading community since 2001.   Our mission is to be the leader in the equity day trading community by giving the best traders the tools and support to make the most of their trading careers.  Contact Great Point Capital, LLC today, in either our Chicago Office, or our Austin Office, to learn more about how we can successfully trade together with high performance results.

IPOs Offer Opportunities to Stock Traders

Trading stocks versus futures has many advantages, with newly created IPOs presenting some of the best trading opportunities.  The sheer number of products available is a big advantage of trading stocks as there are thousands of individual stocks to choose from, compared to only a handful of indexes on futures markets.  Many individual stocks have an actionable trading range due to industry or company news, even on days when the overall market is quiet.

There are fewer stocks in the market since the dot-com busts and M&A boom that occurred between 1995 and 2003.  During that time period,  the number of listed stocks decreased by close to 50%.   The market has stabilized since 2003 with about 4100 – 4400 listed stocks on the market.  Check out our post “How Long Can the Market Sustain its Low Volatility?” for more information on this and other factors that affect the current low volatility of the market.  

The most notable change in listed companies has been the average market cap, which has doubled since 2008.  According to a study out of Harvard from earlier in 2017, the average market cap of a US listed company is $7.3 billion, with a median of $832 million.  About 140 companies now make up 50% of the total market capitalization.  These larger and more stable companies are generally not the domain of traders.  

IPOs are Increasing in 2017

Following a similar trend as stocks, IPOs in the US are down from their peak in the 90’s of 677 in 1996 when large numbers of companies went public only to be bought out later or succumb to the bust.  During the Great Recession in 2008, IPOs hit an all-time low of just 35, but rebounded to 291 in 2014 with record capital raised of $96 billion.  

The last couple of years, however, IPOs have been down with only 112 completed deals in 2016 raising only $21b, although 2017 began to show improvement with 91 completed IPOs in the first half of the year.  For a market that has been in rally mode since early 2016, however, even this upswing is not very robust.  This leaves stock traders with fewer choices on the exchanges of NYSE and Nasdaq.

Newly created stocks from Initial Public Offerings (IPOs) still present some of the best trading opportunities, especially for traders willing to do some homework.  

Great Point Capital is a member of FINRA, serving the trading community since 2001.  We offer professional services to traders, including access to Takion trading software.  Contact us in our Chicago or Austin office to learn more about how we can successfully trade together with maximum trading performance.

Why Propose HR3555 The Exchange Regulatory Improvement Act?

A new bill was just introduced by Representative Loudermilk (R-GA), that appears to amend the Securities and Exchange Act of 1934 to basically reduce or eliminate regulation overreach into business models of exchanges that do not involve either reporting or effecting a transaction on the exchange.  As Representative Loudermilk stated when introducing the bill, “Regulatory agencies have a tendency to expand their reach into areas they should not be regulating and engage in mission creep, which can stifle innovation”.

What Could Drive the Proposal of HR3555?

Since the publication of Flash Boys in 2014, there has been a flurry of lawsuits against dark pools and exchanges, amid accusations of market rigging with aiding HFT activity, in essence aiding and enabling unfair trading.  One particular lawsuit alleged that dark pool Barclays, in addition to 7 US stock exchanges, including The NYSE and Nasdaq, manipulated pools to give HFTs market advantages.  Day Traders everywhere were watching the outcome as this has been a frustrating development in the market for quite a long time.  

This groundbreaking lawsuit brought under U.S. District Judge Jesse Furman was a consolidation of one suit from the State of California with four suits from the District of New York, and was eventually thrown out in August of 2015.  Counsel for the defendants claimed that the Plaintiffs rushed into a lawsuit without taking the time to properly plead their case, partially brought on by the allegations in the book Flash Boys.  

The Judge threw out the lawsuit stating that stock exchanges had immunity because their actions fell within “quasi government” powers.

While the exchanges and dark pools may have won the battle, the war is far from over.  

We’ll be watching the outcome of Bill HR3555, and what the Committee has to say.

Great Point Capital has been serving the trading community since 2001, with 100+ prop traders actively trading the firm’s capital.  Headquartered in Chicago with offices in Austin, TX, we specialize in equities and equity options.  Contact us today to learn how we can successfully trade together with high performance results.  We are one of the few firms able to offer access to Takion Software Platform, enhancing your online equity trading experience.  

Exchanges Seeking Immunity with Bill HR3555

Representative Loudermilk (R-GA) just introduced a new bill which would amend the Securities and Exchange Act of 1934 to eliminate or reduce regulation overreach into business practices of exchanges that do not involve either effecting or reporting a transaction on the exchange.  As Representative Loudermilk put it in the following statement when introducing the bill, “Regulatory agencies have a tendency to expand their reach into areas they should not be regulating and engage in mission creep, which can stifle innovation”.

If the innovation referred to is the exchanges seizing the opportunity to create new revenue flows by selling speed, rather than effecting and recording transactions, then perhaps we need regulation overreach.

The current unprecedented structure of exchanges and dark pools is drastically different than a decade ago.  It seems that HR3555 would put safeguards in place to prevent agency over-regulation, or in other words would allow regulators to turn a blind eye to the new market structure by not addressing these issues.  This is an issue that Day Traders everywhere have been dealing with for at least the last decade.

HR3555, titled The Exchange Regulatory Improvement Act, aims to further define the term “facility” regarding regulatory purposes of an exchange, adding that the term does not refer to business activities with a purpose that is not intended to either report or effect a transaction on the exchange.   

What this means in simple terms is that this bill attempts to provide an exempt status, or altogether immunity, for an exchange’s business activities outside the core functions of effecting and reporting trades.  

Exchange Activities Receiving Immunity

We need to understand the activities in question To understand the effect that passing HR3555 would have.  Exchanges today make money in ways other than facilitating trades. The most recognized activities include colocation of servers, enhanced proprietary data feeds, and complex order types all designed to give an unfair advantage to high frequency traders (HFT).  HFT firms currently make up at least 50% of all trading activity in US Markets.   For more information on how stock exchanges earn revenue with business activities other than recording or effecting trades, check out this post on How Rising Costs of Stock Exchange Data Fees Affect Online Equity Trading.

Great Point Capital has been serving the trading community since 2001, with 100+ prop traders actively trading the firm’s capital.  Headquartered in Chicago with offices in Austin, TX, we specialize in equities and equity options.  Contact us today to learn how we can successfully trade together with high performance results.  We are one of the few firms able to offer access to Takion Software Platform, enhancing your online equity trading experience.

Does Bill HR3555 Present a Potential Conflict?

A new bill was just introduced by Representative Loudermilk (R-GA), which would amend the Securities and Exchange Act of 1934 to reduce or eliminate regulation overreach into business models of exchanges that do not involve either reporting or effecting a transaction on the exchange.  This may have been prompted by the flurry of lawsuits following the publication of Michael Lewis’ Flash Boys.  One such lawsuit was thrown out when the judge claimed the exchanges had immunity under quasi-government powers.  

Since the filing of the combined lawsuits, the Securities and Exchange Committee (SEC) commented by saying that they had no authority to adjudicate the lawsuit, and that “immunity only applied when stock exchanges acted as a regulator, and not as an operator of a market”.  This means that the SEC is stating that exchanges are NOT entitled to absolute immunity arising from commercial activities such as enriched data feeds or selling collocation.

This could be weighing on the minds of the executives of the exchanges, prompting the proposal of HR3555.   The bill must pass the House and Senate before becoming law and will most likely be reviewed by committee before it’s sent to the House.  

If passed, Loudermilk’s bill appears to give protection from investor lawsuits stemming from unfair advantages granted to HFT firms.  The implied intent is to skirt the SEC’s role of protecting investors by finding a way around them in Congress.  Just by adding one paragraph to the original Securities Exchange Act of 1934, the SEC could be prevented from acting as a regulator of stock exchanges for any issue surrounding the selling of speed.  

Potential Conflict?

If HR3555 removes the non-execution portions of their business from regulation, wouldn’t that also remove those from their immunity? That would take it out from under SEC regulation, but it seems that it would also take it out from under the immunity umbrella afforded to “quasi-government” stock exchange activities.

If they carve out those activities from those regulated under the SEC Act of 1934, how could they then claim immunity for the removed activities? They would have it both ways – not included under the Exchange umbrella for regulatory purposes, but included when courts look at immunity granted to Exchanges.

We will be watching the progress on HR3555 as it moves through the legislative process.

Great Point Capital has been serving the trading community since 2001, with 100+ prop traders actively trading the firm’s capital.  Headquartered in Chicago with offices in Austin, TX, we specialize in equities and equity options.  Contact us today to learn how we can successfully trade together with high performance results.  We are one of the few firms able to offer access to Takion Software Platform, enhancing your online equity trading experience.

How Long Will the Calmness on Wall Street Last?

With the level of uncertainty in the air it is a wonder we are experiencing such near record low volatility on Wall Street.  Is complacency to blame for the calmness on Wall Street?  Have we become so used to unsettling news and political turmoil that it’s now the new normal?  How do we explain the high performance we’re seeing with the unprecedented news we see regularly?  We can’t turn on the news without hearing about Russia, North Korea, Climate Control, Healthcare and many other globally important issues.  

This type of news typically affects the market in some way, although investors reactions to current events are also unprecedented.   Have we become so desensitized to political turmoil that we are complacently enjoying the high returns we’re seeing today?  If that is the case, there are some concerns that investors will be ill-prepared for an inevitable shock to the market.  

Historically, low volatility is good for markets, but sooner or later something’s got to give.  Usually, when the VIX is high, the S&P 500 is low, which could be a good time to buy.  When the VIX increases, the S&P 500 typically decreases.  If the VIX increases too quickly, however, investors show concern that the market will continue to decline and people begin to react irrationally.  This fear factor makes it difficult to trade during market volatility.  

Trade with Confidence During Low or High Volatility

Great Point Capital is a selected team of professional, experienced traders. An experienced trader will know how to react, or not react at all to events that could rattle a new up and coming trader.  Hone your strategies and work with an experienced team on our unique intra communication software platform.  Experience the sophistication of Takion  trading platform for superior performance catered to your trading style.  .  

Having a stable trading platform is always important, but having the right software to handle increasing quote traffic when volatility returns will determine whether you can take advantage of the trading environment or get swallowed by it.  Experience the sophisticated trading platform of Takion for superior performance based on your unique trading style.  Great Point Capital is a member of FINRA.  

Great Point Capital has been serving the trading community since 2001.  Our 100+ prop traders actively trade the firm’s capital, specializing in equities and equity options.  We are one of the very few firms able to offer access to Takion Software Platform, enhancing your trading performance.  To earn to your maximum potential in times of low or high volatility, contact us today to speak with one of our knowledgeable staff.  

Wall Street Fear Gauge Near Record Lows

Historically, when the market is in a positive upswing, volatility will decrease, and conversely when volatility increases market performance usually decreases as investors experience greater risk.  The volatility, or fear gauge, has a direct impact on wall street returns and performance.

With the current fear gauge near record lows, we continue to wonder how long the market will remain this calm.

HFT on the Rise

High Frequency Trading (HFT) has increased to the volume of approximately half of all wall street trades.  With this rise in HFT and fewer market participants, when the market swings the other way we could see the impact with a large correction.  

With the level of HFT at record high levels it seems that HFT activity along with fewer participants will contribute to future wall street performance, and possibly direct rather than react to the volatility.  

Passive Investing

Passive Investing occurs when investors place their money in ETFs or index mutual funds instead of actively managed funds, and has been increasing over the last decade.  A recent report from Moody’s Investors Service states that over 28% of assets under management are in passive investments at the current time, and expects that by 2024 that number will increase to over 50%.

Passive Investing can soften volatility as new funds are continuously deployed into the same stocks, rather than moved between sectors, or out of stocks entirely into bonds or cash or commodities.

The new Fiduciary rules, in place since June 9, will make passive investments even more attractive, given the risk of higher fees and underperformance by actively managed funds.

More Frequent Option Expiration

Options on U.S. Stocks used to expire once a month or once per quarter, but now SPX, the index that tracks the S&P 500 stocks, has options that expire three times per week with some days having morning and afternoon expirations on the same day.  These all give investors new methods to offload risk in any time frame, lessening the need to buy and sell in the open market to adjust their positions.  Moreover, investors fine-tune their bets to the point that they don’t need to overreact to market moves, which can create volatility.

Great Point Capital has been serving the trading community since 2001.  Our 100+ prop traders actively trade the firm’s capital, specializing in equities and equity options.  We are one of the very few firms able to offer access to Takion Software Platform, enhancing your trading performance.  To earn to your maximum potential in times of low or high volatility, contact us today to speak with one of our experienced traders.