Surging Market Spurred by Politics and Tax Reform

About a dozen listed stocks started the DOW Jones Industrial Average (DJIA) in 1896, with only one original company, General Electric remaining of the 30 American conglomerates that make up the DJIA today.  In 2015, Apple was added to the Dow, showing that it is no longer just made up of industrial companies.  

The DOW passed its first 1,000 mark after 77 years, and during 2017 passed that five times over, ending 2017 close to 25,000.  It only took one month for the Dow to increase from 24,000 to 25,000.  If you think that’s impressive, how about the mid-Jan rally increasing 1,000 in only seven days?  The stock market is setting new records right off the bat in 2018, continuing with the rally throughout 2017, market watchers are curious if any slowdown is in sight?

The Effect of Politics on Economic Growth

The DOW has risen 7,000 points since the election of Trump, along with Nasdaq which has climbed about 38%, and the S&P has not declined even 3% since the election in November of 2016.  

Individual companies have shown significant growth such as Amazon (AMZN) which has jumped 65%, Nvidia (NVDA) which is a tech company based in CA that has soared 213%, Netflix (NFLX) is up 80%, Best Buy (BBY) is up 90% and Bank of America (BAC) is up 85%.

Corporate Tax Rate Cut Spurs Market Rally

As promised, the Tax Cuts and Jobs Act was passed before the Christmas Holidays, taking the corporate tax rate of 35% down to 21% with no date for expiring.  In addition to the C-Corporate tax deduction, other pass through companies such as S-Corps, LLCs and Partnerships will also get a 20% tax deduction.  

The reduction of 35% down to 21% equates to a 40% tax deduction for large corporations, which has seemed to set the market soaring.  This has been the longest period of calm in Wall St. history, reflecting the excitement of investors.  Strong economic growth at home and abroad will be boosted even further by the GOP tax reform, especially the reduction in corporate tax rate.

Corporate America is making it clear how they feel about tax cuts.  

Check out our post on How Long Can the Market Sustain its Low Volatility, and contact Great Point Capital for all your trading needs.  

Great Point Capital specializes in equities and equity options, serving the trading community since 2001.  We have a strong network of experienced and knowledgeable traders actively trading the firm’s capital on the most advanced software platform available.  We are one of the few firms offering access to the Takion platform, enhancing your trading performance.  Contact us today to learn how you can earn your maximum potential in times of high or low volatility from experienced traders with proven strategies.

How to Trade Bitcoin and Blockchain Suppliers

Bitcoin is now available to trade on many exchanges globally, although GDAX and Coinbase are the most commonly used in the U.S.  Bitstamp, Kraken and Gemeni, along with Coinbase and GDAX are among the few that allow direct conversion from Bitcoin into U.S. Dollars.  

Several other exchanges allow you to convert only into other cryptocurrencies or local currencies.  While it is fairly simple to trade on an exchange although it is also very expensive.  Trading fees are typically around .25% of the value which is approximately $45 for one Bitcoin.  Larger volumes would reduce the fee somewhat, and if you are adding liquidity to GDAX it is free.  

There are other issued to be aware of, such as significant arbitrage, and hacking which is a real threat.  

Futures

The two largest derivatives exchanges in Chicago, the CME and the CBOE recently both opened Bitcoin futures.  While this makes it easier to trade on the price of Bitcoin it is still quite costly.  With margin requirements of 40%, you must have more than 40% of your position value on deposit at all times.  

Leverage

The new futures contracts grant 2+:1 leverage while some exchanges will afford 3:1.   Then there are also the CFD or contracts for difference which is similar to futures and are available at 10:1.  With the swings we’ve seen in Bitcoin, the odds are pretty good that a 10% change in price could wipe out an entire account at that leverage.  In fact, there have been many price drops of 10% or more in 2017, and the 20x runup this year would have taken out any short sellers many times over.  

Blockchain Suppliers

Just like in the days of the 1800’s gold rush, companies of value were the ones selling Levi jeans and pickaxes.  Finding companies that are jumping into the cryptocurrency and blockchain space is an option to consider.  

Bioptix is a biotech company that made diagnostic equipment for the biotech industry, they just announced in October of this year that they are changing their name to Riot Blockchain and delving into the crypto/blockchain space.  Since that announcement, their price has run up over 300%.  Reminds us of the dot-com days when companies would double their stock by adding .com to the end of their company name.

While it is getting easier to trade Bitcoin and cryptocurrency, it still is the Wild West when compared to stocks, options and futures.  

To learn more information on trading Bitcoin such as what Blockchain really is, the real situation on arbitrage, the very real threat of hacking, check out our post What You Really Need to Know About Trading Bitcoin.  Contact Great Point Capital to learn more about successful and proven trading strategies.  

Great Point Capital has been serving the trading community since 2001, specializing in equities and equity options.  We and are one of the very few firms able to offer access to Takion Software Platform, enhancing the trading performance of our 100+ prop traders.  Contact us today to learn more about our proven strategies to help you earn to your maximum potential.  

How to Trade Bitcoin on the Exchanges

Bitcoin is available to trade on many exchanges worldwide.  Coinbase and GDAX are affiliated and are the most widely used in the U.S.  GDAX, Coinbase, Gemeni, Kraken and Bitstamp are just a few exchanges that allow conversion of Bitcoin into US dollars directly.  

Some exchanges will only convert into local currencies or other cryptocurrencies.  It is fairly simple to trade on a single exchange, although quite expensive.  Typically, trading fees are running around .25% of the value which for one Bitcoin would equal approximately $45.  Larger volume brings the fee down slightly, while GDAX is no charge if adding liquidity.  

Arbitrage

Different exchanges can have vastly different prices for extended periods, as you might see prices for trading Bitcoin at $17,000 on one exchange and $16,000 on a different exchange.  This seems like easy arbitrage, but it is not easy in practice.  There are only a few select exchanges that allow Bitcoin to be shorted, if the higher price isn’t on one of them, you would have to move Bitcoin there to sell it.  During this time, which can take anywhere from thirty minutes to several hours depending on how overwhelmed the Bitcoin network is, you would be exposed to all of the swings in price of Bitcoin.

You also must have cash to buy Bitcoin at the lower priced exchange, which is not very easy when the exchange will not accept cash deposits but only take cryptocurrency such as Binance, take days to verify bank deposits, charge an outrageous fee for transfers or maybe they just do not allow any customers from the U.S. such as Bitifinex.  

Hacking is a Real Risk with Bitcoin

The Blockchain technology provides an anonymity that makes it virtually impossible to trace any coins that may be stolen.  Your coins and cash are out of your control when they are in the hands of the exchange, this is not a worry when trading stock with your balance with a trusted broker.  

Crypto exchanges are open to the real threat of hacking, however, and you may lose your coins.  This has already happened, with sever exchanges having been hacked since 2012:

• 2012 at BitFloor
• 2014 at Mt. Gox
• 2015 at BitStamp
• 2016 in Bitfinex

These exchanges are new to this business, and may not have a real transparent business structure, so buyer beware when depositing money with them.   Crytocurrencies are not backed by SIPC insurance for the Bitcoin brokers, so it is up to the exchanges to make customer whole in the event of a loss due to foul play.  

To learn more about trading Bitcoin, Blockchain, and a list of the exchanges currently trading Bitcoin, check out our post What You Really Need to Know About Trading Bitcoin.  

Great Point Capital has been serving the trading community since 2001 with expertise in equities and equity options.  We provide Takion software and a network of experienced traders with proven trading strategies to enhance your performance.  Contact us today to learn more and to earn your maximum potential.  

What Traders Need to Know About Bitcoin and Blockchain

We have been seeing Bitcoin as a featured topic of discussion in the trading community quite a lot over the last few months, with astounding price runups in alt-Coins and particularly Bitcoin.  We could produce another story on how much money you would have if only you had invested five or six years ago, but what we really want to talk about is the trading related information.  

Here is what you really need to know about Bitcoin and how to trade on exchanges. First, let’s review what it is and how it works.

Bitcoin, Bitcoin Mining and Blockchain

Bitcoin is just a way to keep track of transactional records without the middleman such as a central authority like a bank or federally regulated office.  Each transaction that has ever been done in Bitcoin is available to anyone that downloads the Blockchain.

The blockchain is a way of keeping track of transactions, sort of a public ledger that is continuously growing with each and every transaction building off of the other.  The chain is segmented into approximately 1 MB blocks of information with protocol for validating new blocks.  Since all the blocks are linked together with secure communication, links to past blocks and time stamps, it is quite resistant to tampering.  By design, the Blockchain cannot be retroactively altered without joint collusion of a wide network.

Bitcoin mining is how bitcoins are created and verified.  People that solve extremely difficult calculations that take about 10 minutes to verify each transaction in a block are Bitcoin miners.  The first miner to solve the problem correctly is rewarded with a new Bitcoin.  Over time, the rewards decrease and eventually no new Bitcoins will be created.  

There are currently approximately 16.8 million Bitcoins in circulation with the supply limited to about 21 million.  

Runup in Price

We don’t want to spread the fever of FOMO (fear of missing out), as no one likes to hear about what they missed, so we will give a brief explanation for the recent hype over the cryptocurrency.  

One of the early developers of Bitcoin wanted to order some pizza with his Bitcoins in May of 2010.  He offered 10,000 Bitcoins to anyone that was willing to bring him a pizza.  Someone decided to accept the payment and delivered those pizzas.  That was the first transaction in the real world of someone accepting Bitcoins.  Some retailers are now taking the coins as form of payment, but this is rare and was unheard of in 2010.  

Early in 2011, Bitcoin was valued at $1, by July of 2011 it had run up to $31 but crashed back down to $2 by December.  It passed the $1,000 mark in November of 2013, dropped back down to $200 by March of 2015, and then set off on the recent historic run to almost $20,000.  There has been several corrections of 30%+ along the way,

So, all these articles that like to tell you how much your $100 investment in Bitcoin from 2011 would be worth today, they neglect to tell you that it felt like you would lose it several times over.

Find out which exchanges trade Bitcoin, learn about the real risks of hacking, and more in our post What You Really Need to Know About Trading Bitcoin.

Contact the trading experts at Great Point Capital to learn more.  We have been serving the trading community since 2001, with more than 100+ prop traders trading the firm’s capital.  We offer access to Takion Software and a network of experienced traders with proven strategies to enhance your trading performance.  

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.   

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.

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.

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.