FINANCIAL RISK MANAGEMENT

Dancing with the Diva (Derivatives, DWD) Projects Project Questions & Report – Guidelines Fall 2021

This exercise will offer huge learning dividends to you. I’m sure it will help you gain a deeper understanding of derivatives instruments and financial risk management strategies. Remember, “involve me and I’ll understand”. Therefore, I urge you to begin work/research on this project in earnest and apply yourself to maximize your takeaways.

DWD Exercise

Refer to News stories included in the “TermProject-DwD” Folder in
Report Guidelines

Start with a highlight of the key issues covered in the project and a brief review of the relevant financial concepts and tools from the Textbbok.
Answer All study questions (see the Study Questions). Focus your narrative on the KEY questions. Highlight key points of each spreadsheet you enclose.
Make judicious assumptions, justify them and check the sensitivity of your results to the underlying assumptions.
Send me an e-copy of your project report by NOV 16. This submission must be the FINAL version, not a preliminary draft. The length of the report, covering both text and spreadsheets, should not exceed 7 pages. Highlight your interpretation and inference of statistical analyses and tables. It should include References with complete citations of all sources you‘ve made use of.

The OBJECTIVE is to maximize your understanding of financial risk management. The sure way to maximize your NPV is to participate actively in this active learning exercise.

Project report (20%) and online class participation (15%) are worth up to 35% of your final grade (course grade).

Study Questions

The following list of suggested study questions, arranged by the project type and title, is intended to accelerate your preparation for project presentation and discussion. Assume Treasury bills and notes have a $100 par value, no taxes, trading costs and margins on derivatives positions. If you feel that additional assumptions are needed to prepare your project presentation, spell out and justify those assumptions and discuss the sensitivity of your analysis to those assumptions.

Risk Management at Barrick Gold (2020)

Refer to the 2020 annual report of Barrick Gold and Barrick Gold Corp. (GOLD on NYSE and ABX on TSE) News file (and update the references).

Which risks does Barrick Gold (GOLD/ABX) face? Focus your narrative on risks managed through derivatives contracts.
What is Barrick Gold doing to manage risk? Be sure to relate your narrative to the relevant material in the textbook.
How valuable (i.e., gains and losses) is risk management to Barrick Gold? Comment on the effectiveness of its risk management strategies. Do you endorse its risk management philosophy?

Risk Management at J.P. Morgan Chase (2020)

Refer to the 2020 annual report of J.P. Morgan Chase (JPMC) and JPM News file (and update the references).

What are the risk exposures of J.P. Morgan Chase? Focus your narrative on risks managed through derivatives contracts.
How is J.P. Morgan Chase managing risk? Be sure to relate your narrative to the relevant material in the textbook.
What are the gains and losses from risk management? Comment on the effectiveness of its risk management strategies. Do you endorse its risk management philosophy?

Hedging Interest Rate Risk

Refer to the articles “How to Invest as Interest Rates Rise, Pimco’s Gross Bets on Bonds in 2014, Preparing for Day When Rates Rise and If interest rates rise, bonds could suffer” (and other items in the file called Hedging Interest rate Risk) and update the references. Suppose you are a portfolio manager of a mutual fund that invests in long-term corporate bonds and you wish to hedge against a potential increase in interest rates by using the DEC 2021 (or later) delivery futures contracts on long-term Treasury bonds.

Develop a rationale for the above hedging strategy. Be sure to relate your narrative to the relevant material in the textbook. Discuss the alternatives to the hedging strategy that
uses futures contracts.
Identify One mutual fund investing in long-term corporate bonds (see PIMCO, Fidelity, Vanguard, etc.). Collect daily price data on this bond fund, on the DEC 2021 (or later) delivery Treasury bond futures contract (US T-Bonds Comp – CBOT), on the S&P 500 stock index, and on the constant maturity 3-month T-Bill, from Sept 27 to Nov 5. Compute the (a) mean of daily returns (percent price changes) and (b) standard deviation of returns for the four positions and the bond mutual fund-Treasury bond futures hedge. Ignore trading costs, taxes and futures margins for simplicity.
Compute the buy-and-hold returns for the four securities and the bond mutual fund- Treasury bond futures hedge assuming you buy on Sept 27 and close out on Nov 5.
Compare and contrast the risk (including correlation with the S&P 500 index percentage returns) and returns of the five positions.

Investing in Commodities
Refer to news items in the document ‘Investing in Commodities’ (see the file called Investing in Commodities) and update the references.

“Commodities: To Buy or Not to Buy?”,
http://online.wsj.com/news/articles/SB10001424052702304788404579522210334421836

Research and describe the iShares S&P GSCI Commodity-Indexed (ETF) (https://www.ishares.com/us/products/239757/ishares-sp-gsci-commodityindexed-trust- fund; NYSEARCA:GSG). (click on Download and Historical for daily data)
Why would a trader buy or sell GSG? What are the main alternative GSG products traded in the market? Be sure to relate your narrative to the relevant material in the textbook.

Collect daily closing prices on GSG as well as on the S&P 500 stock index and the constant maturity 3-month T-Bill, from Sept 27 to Nov 5. Compute the (a) mean daily returns (percent price changes) and (b) standard deviation of returns for the three securities. Ignore trading costs, taxes and futures margins for simplicity.
Compute buy-and-hold returns (%) for each of the three securities assuming you buy on
Sept 27 and close out on Nov 5.
Compare and cotrast the risk (including correlation with the S&P 500 index percentage returns) and returns of the above investments.

Trading on Volatility

Refer to news stories such as ‘Fearful for Longer: Market’s Fear Gauge Signals Investors Expect Volatility to Last, Beware Those VIX Plays, and Tough Times For Hedge Funds That Bet on Market Tumult’ (and other items in the file called Trading on Volatility) and update the references.

Research and describe the iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX). https://www.ipathetn.com/US/16/en/details.app?instrumentId=341408. Click on

Why would a trader buy or sell VXX? What are the main alternative VIX products traded in the market? Be sure to relate your narrative to the relevant material in the textbook.

Collect daily closing prices on VXX as well as on the S&P 500 stock index and the constant maturity 3-month T-Bill, from Sept 27 to Nov 5. Compute the (a) mean daily returns (percent price changes) and (b) standard deviation of returns for the three securities. Ignore trading costs, taxes and futures margins for simplicity.
Compute buy-and-hold returns (%) for each of the three securities assuming you buy on
Sept 27 and close out on Nov 5.
Compare and contrast the risk (including correlation with the S&P 500 index percentage returns) and returns of the above investments.

High Anxiety on GameStop and Tesla

Refer to the news stories on “GameStop Posts Decline in Revenue, Profit, and Elon Musk Sets Ambitious Goals at Tesla—and Often Falls Short” (and other items in the file called High Anxiety on GameStop and Tesla). Suppose you are an investor (10,000 shares each) in both GameStop (GME) and Tesla (TSLA) stocks, and you would like to hedge against potential price drops by a) shorting Dec 2021 (or later) S&P 500 index futures contracts and b) buying Dec 2020 (or later) at-the-money (closest available strikes) put options on GME and TSLA.

Research and motivate the above short futures and protective put strategies. Be sure to relate your narrative to the relevant material in the textbook.
Collect daily closing prices on the two stocks, the S&P 500 futures contracts (SP 500 Comp. – CME) and put options on the two stocks, and price quotes on the S&P 500 stock index and the constant maturity 3-month T-Bill, from Sept 27 to Nov 5. Compute the (a) mean daily returns (percent price changes) and (b) standard deviation of returns for the seven securities and the short futures and protective put strategies. Also compute the hedge ratio for the short futures hedging strategy (see the textbook for details). Ignore taxes, commissions and bid-ask spreads for simplicity.
Compute buy-and-hold returns (%) for each of the positions assuming you buy on Sept 27 and close out on Nov 5.
Compare and contrast the risk (including correlation with the S&P 500 index percentage returns) and returns of the above investments.

Useful Online Data Sources

BLOOMBERG TERMINAL (BT) is a popular data source used by many financial services firms. It is available in Room 411, School of Business. IF YOU HAVE ACCESS to BT, it is the preferred data source for the “Dancing with Derivatives” projects.

IF YOU DO NOT HAVE ACCESS to BT, here are other sources:
https://www.optionseducation.org/toolsoptionquotes/optionsquotes — Today’s option quotes.
Yesterday’s and historical option quotes are NOT available at this site.

https://bigcharts.marketwatch.com/quickchart/options.asp?symb=MSFT — Today’s option quotes.

Check for historical data on options: https://finance.yahoo.com/quote/GME/options; another example: https://finance.yahoo.com/quote/TSLA/options https://www.marketwatch.com/investing/stock/aapl/options https://www.nasdaq.com/market-activity/stocks/goog/option-chain https://www.nasdaq.com/market-activity/stocks/goog/historical

https://finance.yahoo.com/ Move cursor to “Markets’. Click on ‘Futures’. https://finance.yahoo.com/commodities
Example – CRUDE OIL FUTURES OCT 20, 2020 delivery
Crude Oil Oct 20 (CL=F)
NY Mercantile – NY Mercantile Delayed Price. Currency in USD
42.25-0.57 (-1.33%)
At close: August 21 4:59PM EDT

• Summary
• Chart
• Historical Data <-Click
• Futures

https://finance.yahoo.com/quote/CL%3DF/history?p=CL%3DF

Historical Data on Options have to be hand-picked from “Chart”. Here is an example:

https://finance.yahoo.com/calendar

Move the cursor to “Markets”:

Click on “Options: Highest Open Interest”

https://finance.yahoo.com/quote/SPY210319P00290000/chart?p=SPY210319P00290000&gucco unter=1&guce_referrer_us=aHR0cHM6Ly9sb2dpbi55YWhvby5jb20v&guce_referrer_cs=fqvt9 R08FthOe- AbLVjg5A#eyJpbnRlcnZhbCI6ImRheSIsInBlcmlvZGljaXR5IjoxLCJ0aW1lVW5pdCI6bnVsbC wiY2FuZGxlV2lkdGgiOjExMy41LCJmbGlwcGVkIjpmYWxzZSwidm9sdW1lVW5kZXJsYXki OnRydWUsImFkaiI6dHJ1ZSwiY3Jvc3NoYWlyIjp0cnVlLCJjaGFydFR5cGUiOiJsaW5lIiwiZX h0ZW5kZWQiOmZhbHNlLCJtYXJrZXRTZXNzaW9ucyI6e30sImFnZ3JlZ2F0aW9uVHlwZSI 6Im9obGMiLCJjaGFydFNjYWxlIjoibGluZWFyIiwicGFuZWxzIjp7ImNoYXJ0Ijp7InBlcmNlbn QiOjEsImRpc3BsYXkiOiJTUFkyMTAzMTlQMDAyOTAwMDAiLCJjaGFydE5hbWUiOiJjaG FydCIsImluZGV4IjowLCJ5QXhpcyI6eyJuYW1lIjoiY2hhcnQiLCJwb3NpdGlvbiI6bnVsbH0sInl heGlzTEhTIjpbXSwieWF4aXNSSFMiOlsiY2hhcnQiLCLigIx2b2wgdW5kcuKAjCJdfX0sInNld FNwYW4iOm51bGwsImxpbmVXaWR0aCI6Miwic3RyaXBlZEJhY2tncm91bmQiOnRydWUsI mV2ZW50cyI6dHJ1ZSwiY29sb3IiOiIjMDA4MWYyIiwic3RyaXBlZEJhY2tncm91ZCI6dHJ1Z SwiZXZlbnRNYXAiOnsiY29ycG9yYXRlIjp7ImRpdnMiOnRydWUsInNwbGl0cyI6dHJ1ZX0sI nNpZ0RldiI6e319LCJjdXN0b21SYW5nZSI6bnVsbCwic3ltYm9scyI6W3sic3ltYm9sIjoiU1BZ MjEwMzE5UDAwMjkwMDAwIiwic3ltYm9sT2JqZWN0Ijp7InN5bWJvbCI6IlNQWTIxMDMx OVAwMDI5MDAwMCIsInF1b3RlVHlwZSI6Ik9QVElPTiIsImV4Y2hhbmdlVGltZVpvbmUiOi JBbWVyaWNhL05ld19Zb3JrIn0sInBlcmlvZGljaXR5IjoxLCJpbnRlcnZhbCI6ImRheSIsInRpbW VVbml0IjpudWxsLCJzZXRTcGFuIjpudWxsfV0sInN0dWRpZXMiOnsi4oCMdm9sIHVuZHLi gIwiOnsidHlwZSI6InZvbCB1bmRyIiwiaW5wdXRzIjp7ImlkIjoi4oCMdm9sIHVuZHLigIwiLCJ kaXNwbGF5Ijoi4oCMdm9sIHVuZHLigIwifSwib3V0cHV0cyI6eyJVcCBWb2x1bWUiOiIjMD BiMDYxIiwiRG93biBWb2x1bWUiOiIjZmYzMzNhIn0sInBhbmVsIjoiY2hhcnQiLCJwYXJhb WV0ZXJzIjp7IndpZHRoRmFjdG9yIjowLjQ1LCJjaGFydE5hbWUiOiJjaGFydCIsInBhbmVsTm FtZSI6ImNoYXJ0In19fSwicmFuZ2UiOm51bGx9

Click on

SPY Mar 2021 put option with a strike = 290 has a price = 11.13 on 8/21/20. The chart shows its price = 11.47 on 8/11/20. Move the cursor on the Chart horizontally to gather data for other historical days.

Current (Daily, Not historical) data on Options on Commodities:
https://www.barchart.com/futures/quotes/ZCZ20/options

Without access to Bloomberg Terminal, it is difficult to get daily historical data (open source – ‘free online data’) on put options on futures for these two commodities from Sept 28 to Nov 6. You have to collect this data EVERYDAY. But IF you have access to Bloomberg Terminal at GBLC, you may try that – that is OPTIONAL.
Therefore, you do NOT have to study the long commodity & long put options on futures hedging strategy.
Just focus on the long commodity & short commodity futures hedging strategy.
Corn Futures: https://www.barchart.com/futures/quotes/ZCZ20/price-history/historical

https://www.barchart.com/futures/cash/grain/corn

PRECIOUS METALS – SPOT PRICES- Historical

https://sdbullion.com/silver-prices
Silver Spot Price
Price of Silver Today & Historical Silver Price Charts
In the website, Move the cursor on the chart below to see daily prices.

Do as above for Gold, Platinum, etc.
Repeat the above process for Commodities, see the web sources below:
Coín Píices – 59 Yeaí Histoíical Chaít
Inteíactive chaít of histoíical daily coín píices back to 1959. ľhe píice shown is in U.S. Dollaís peí bushel. ľhe cuííent píice of coín as of Novembeí 10, 2020 is $4.2300 peí bushel.
https://www.macrotrends.net/2532/corn-prices-historical-chart-data

Soybeans, wheat, copper, etc. https://www.macrotrends.net/charts/commodities

Supplementary online data links:

http://finra-markets.morningstar.com/BondCenter/Default.jsp
Market Data: Company Information, Equities and Options, Bonds, and Mutual Funds
Options http://base2.optionsdatamine.com/
Options Data Mine provides access to EOD Historical Stock Options for individual stocks to registered members – no fee required.

Collar Calculator/Position Simulator http://www.optionseducation.org/tools/position_simulator.html http://www.cboe.com/LearnCenter/RCTools.aspx
The Options Toolbox – for simulating option trading strategies (free download from http://www.swing-trading-options.com/software.html

Recent data on options: http://finance.yahoo.com/q/op?s=SPY+Options
http://www.cboe.com/micro/SPDR/ http://www.nasdaq.com/options/ https://www.google.com/finance/option_chain?
https://www.quandl.com/sign-up

Key Interest Rates
http://wsj.com/mdc/public/page/2_3020-keyinrates.html

TREASURY NOTES & BONDS, TREASURY BILLS
http://wsj.com/mdc/public/page/2_3020-treasury.html The Bond Market: Ryan Indexes
http://wsj.com/mdc/public/page/2_3022-bondmkt.html?mod=mdc_bnd_pglnk Daily rates on the constant maturity 3-month T-Bill are available at https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield:

Futures
http://online.wsj.com/mdc/public/page/2_3023- cashprices.html?mod=topnav_2_3000 http://online.wsj.com/mdc/public/page/mdc_commodities.html?mg=inert-wsj

Futures Quotes- Treasury bonds and notes http://www.wsj.com/mdc/public/page/2_3028.html?category=Interest%2520Rate&s
ubcategory=Americas&contract=US%2520T-Bonds%2520Comp%2520-
%2520cbot&catandsubcat=Interest%2520Rate%7CAmericas&contractset=US%2520T- Bonds%2520Comp%2520-%2520cbot

For futures quotation practices, see http://www.cmegroup.com/education/files/understanding-treasury-futures.pdf

Eurodollar Futures Quotes http://www.wsj.com/mdc/public/page/2_3028.html?category=Interest%2520Rate&s
ubcategory=EuroDollar%2FYen&mod=topnav_2_3028

Short Interest in Stocks
http://wsj.com/mdc/public/page/2_3062-nyseshort-highlites.html

Spot stock indices http://online.wsj.com/mdc/public/page/2_3022-
usclosingstk.html?mod=topnav_2_3028

xxxxxxxxxxxxxxxxxxxx

Additional online data sites – courtesy Christopher Buckridge, University of Connecticut School of Business, Business Information Technology Services

Services with live data feeds:
• TC2000.com – Local App for Windows, Mac, mobile and web platform
Explanation of features – https://www.tc2000.com/features/overview
o Chart from templates
Plot from a library of indicators Access to chart library
Place limit orders on the chart Draw your own charts
Including a proprietary “trade multi-leg strategies from the chart” tool
o Free Practice Trading (Paper Trading)
o Market Index Watchlists
o Positions
o Orders and Trades
Narrow down chains by calls, puts, number of strikes and time to expiration
o Favorites
o Notes / Journal
o Option Chains

The Academic Program includes Silver Level Membership and live feeds
https://www.tc2000.com/academic

With TC2000 Academic Program Students and Faculty can:
o Engage in guided market research and make simulated trades
o Track the performance of your “portfolio” based on the actual stock market movement
o View streaming market data
o Discover, use and learn with hundreds of technical indicators
o Plot option charts with the underlying stock to see the relationship between the two
o TC2000 offers unlimited paper (virtual) trading so you can experiment freely and learn from your experiences. It enables interaction with in- depth historical data and current information on real securities, generating dynamic examples that convey the realities of trading.
o TC2000 software is compatible with Windows, Mac, Web and Mobile. Anyone with a validated .edu email address will receive $9.99 off monthly TC2000 service (this is equivalent to getting the TC2000 Silver service for free)

https://webplatform.tc2000.com/ – Free paper trading Opening Option Strategy window

https://www.tradingview.com – Exceptional Free Charting
• Most comprehensive free chart analyzers / stock screeners
o Trend lines, info lines, anchored VWAP, rays, channels, regressions
o Pitchforks, fans, gann, retracements, time zones,
Fibonaccis
o Annotate with common shapes, curves, lines, text, icons
o Analysis tools including: patterns, waves, lines and cycles
o Short & long positions, forecast, ranges, projections, ghost feeds
o Weak & strong magnets
o Pine editor scripting with save and import and publish options
o Comprehensive information on over 8,500 North American stocks
o Coverage of 4000 ETFs and 40,000 mutual funds
o Portfolio management

o Portfolio Brokerage integration for automated syncing of portfolios
o Portfolio dashboard with detailed portfolio performance information
o Powerful and flexible charting capabilities
o What’s happening pages covering markets, stocks, ETFs, bonds and commodities
o Daily analyst ratings with analyst rankings
o In depth market news and news for individual stocks
o Informative market dashboard with detailed display of markets and key stocks
o Comprehensive and flexible earnings calendar
o Ideas panel with screeners of the week and additional investment ideas and articles
o Quick context aware links to other key data sources

https://www.tradingview.com/chart/?symbol=NASDAQ%3AQQQ – no account, this is a standard view

• StockRovr.com
o Comprehensive information on over 8,500 North American stocks
o Coverage of 4000 ETFs and 40,000 mutual funds
o Portfolio management

https://www.stockrover.com/research/all/quotes/AAPL – 14 Day Premium Trial

https://finviz.com/ – free, displays previous day’s values
• Excellent source for news
• Penny stock runners and large gap stocks
• Right side of the home page shows market sectors by industry
• Left side shows top gainers and losers for the day

• Click on a stock to get very detailed summary Information about its floats, volume, Market gap, daily average volume and short percentage, and much more
• Below the stock summary is a list of all news and press releases for that company/stock in chronological order
• There is also a stock screener were a trader can set specific criteria, and analyze stocks in alphabetical order looking for stocks closing above the daily desired resistance.

finvis.com – Candlestick charts of daily averages with ticker and leader board by industry sector

https://www.webull.com
• Free, live market data
• Premarket scanners
• Paper trading

webull.com – Top Gainers and losers of the day

webull.com – New IPO-Offerings and Filings

https://stockcharts.com/ – Very Limited free charting
• Has daily and weekly charts
• Ability add a large variety of custom indicators to charts to customize them
• Three Indicators per Chart
• Three Overlays per Chart
• 900px Max Chart Width
• Market Commentary

Candle Stick Chart from stockcharts.com

Sources to research new SEC Filings
NASDAQ’s New SEC Filings page
https://www.nasdaq.com/market-activity/quotes/new-sec-filings

SEC’s Edgar Database
https://www.sec.gov/edgar/searchedgar/companysearch.html

Additional Resources:
Stock trader.com recommends the following free tools
o TradingView – Best Overall
o FINVIZ – Best Fundamental Screening
o TD Ameritrade (no free option) – Best Real-time Stock Scanner
o Yahoo Finance – Basic and Simple
o MarketSmith (no free option)– Best for CANSLIM investors

Matrix of free tools’ features from liberatedstocktrader.com
o Top 10 Best Free Stock Charting Software Tools Review 2020
• Liberatorstocktrader.com – Matricies of features Top 10 Free Stock Charting Tools

Market Simulations not using live feeds:
• Market Watch – https://www.marketwatch.com/
o Full list of features – http://bigcharts- qa.marketwatch.com/about/features.asp
• Ninja Trader – https://ninjatrader.com/
o Advanced free charting, strategy backtesting and trade simulation of historical data

DwD Team Projects – Data Sources-2020

DwD-Project Questions. Read Useful Online Data Sources on p.5.

Some Examples

Let us look into the following project:

“High Anxiety on GameStop and Tesla

Refer to the news stories on “GameStop Posts Decline in Revenue, Profit, and Elon Musk Sets Ambitious Goals at Tesla—and Often Falls Short” (and other items in the file called High Anxiety on GameStop and Tesla). Suppose you are an investor (10,000 shares each) in both GameStop (GME) and Tesla (TSLA) stocks, and you would like to hedge against potential price drops by a) shorting Dec 2020 (or later) S&P 500 index futures contracts and b) buying Dec 2020 (or later) at-the-money (closest available strikes) put options on GME and TSLA.

Research and motivate the above short futures and protective put strategies. Be sure to relate your narrative to the relevant material in the textbook.
Collect daily closing prices on the two stocks, the S&P 500 futures contracts (SP 500 Comp. – CME) and put options on the two stocks, and price quotes on the S&P 500 stock index and the constant maturity 3-month T-Bill, from Sept 28 to Nov 6. Compute the (a) mean daily returns (percent price changes) and (b) standard deviation of returns for the seven securities and the short futures and protective put strategies. Also compute the hedge ratio for the short futures hedging strategy (see the textbook for details). Ignore taxes, commissions and bid-ask spreads for simplicity.
Compute buy-and-hold returns (%) for each of the positions assuming you buy on Sept 28 and close out on Nov 6.
Compare and contrast the risk (including correlation with the S&P 500 index percentage returns) and returns of the above investments.”

Data on 3 month treasury bills
Go to HusktCT web page for FNCE 4304. Click on DWD-Dance folder. Click on DwD-Project Questions. Read Useful Online Data Sources on p.7. See
maturity 3-month T-Bill are available at https://www.treasury.gov/resource-center/data-chart- center/interest-rates/Pages/TextView.aspx?data=yield:

S&P 500 FUTURES
Click on https://finance.yahoo.com/ Move cursor to “Markets’. Click on ‘Futures’ https://finance.yahoo.com/quote/%5EGSPC/history?p=%5EGSPC

CALL & PUT OPTIONS.
GME put options
https://finance.yahoo.com/quote/GME/options

TSLA put options
https://finance.yahoo.com/quote/TSLA/options

Your DwD Team Project may require price data on different stocks, futures contracts and options than the ones illustrated above. Search https://finance.yahoo.com/ for the data on those securities. For more details, turn to

Current (Daily, Not historical) data on Options on Commodities:
https://www.barchart.com/futures/quotes/ZCZ20/options

https://www.barchart.com/futures/cash/grain/corn

PRECIOUS METALS – SPOT PRICES- Historical

https://sdbullion.com/silver-prices
Silver Spot Price
Price of Silver Today & Historical Silver Price Charts
In the website, Move the cursor on the chart below to see daily prices.

Soybeans, wheat, copper, etc. https://www.macrotrends.net/charts/commodities

https://www.nytimes.com/2019/12/23/business/retirement/index-fund-investing.html?te=1&nl=your- money&emc=edit_my_20191230?campaign_id=12&instance_id=14861&segment_id=19947&user_id=d0 b557e21f8e7adc7ca67a2a0de24adf&regi_id=6072416120191230

STRATEGIES

Forget Stock Market Forecasts. They’re Less Than Worthless.

Wall Street strategists are issuing predictions for 2020. Ignore them, our columnist says, and invest with cheap, diversified index funds.

Credit…Rose Wong

By Jeff Sommer

Dec. 23, 2019
It is the time of year for predictions and I’ll make one: You will be better off ignoring the Wall Street stock-market predictions for 2020.
Strategists, some of whom are very smart, are issuing precise predictions for where the market will be in 12 months and they look authoritative.

The record shows that they are not as rock-solid as they appear.

In fact, many Wall Street strategists are flagrantly inaccurate. They are about as reliable as a weather forecaster who always calls for balmy sunshine in a city where it rains or snows a lot. It is true that they are right about the market’s direction more often than they are wrong. But that’s only because most of them say the market will rise in the next year, which happens about 70 percent of the time.
The more specific forecasts — like how high or low the market will go in a given year, and whether it will lose half of its value or rise 30 percent — should be treated as fiction.
I’m not exaggerating.

Paul Hickey, a co-founder of Bespoke Investment Group, crunched the numbers for me, updating calculations that I cited four years ago. Sadly, the forecasters are no more impressive now than they were then.
For every calendar year since 2000, Mr. Hickey compared the annual Wall Street consensus forecast in late December with the actual level of the S&P 500 one year later. He found that, on average: The median forecast was that the stock index would rise 9.8 percent in the next calendar year. The S&P 500 actually rose 5.5 percent.
The gap between the median forecast and the market return was 4.31 percentage points, an error of almost 45 percent.
The median forecast was that stocks would rise every year for the last 20 years, but they fell in six years. The consensus was wrong about the basic direction of the market 30 percent of the time.

Mr. Hickey found that the forecasts were often off by staggering amounts, especially when an accurate forecast would have mattered most. In 2008, for

example, when stocks fell 38.5 percent, the median forecast was typically cheery, calling for an 11.1 percent stock market rise. That Wall Street consensus forecast was wrong by 49.6 percentage points, and it had disastrous consequences for anyone who relied on it.

But there is a more reliable and a simpler way to make investing decisions, one that doesn’t rely on putative forecasts. It is based instead on long-term historical data on the broad returns of the stock and the bond markets.

They show that stocks outperform bonds over extended periods, but that stocks are far more volatile than bonds. Holding both stocks and bonds makes sense because they tend to buffer one another.

Investing over the long run through low-cost index funds in a broadly diversified portfolio is a reasonable approach for most people. This is standard wisdom among many experienced hands in investing, and Jack Bogle, the founder of Vanguard, made it a viable strategy for great masses of people by starting the first commercially available index fund. Of course, Warren Buffett recommends this approach. And so does David Booth, the co- founder of the firm Dimensional Fund Advisors and the benefactor for whom the University of Chicago Booth School of Business is named.
Mr. Booth doesn’t make market forecasts, nor does his company, which was built on the research of economists like Eugene Fama, a Nobel laureate in economics at the University of Chicago.

“We don’t try to forecast the future,” Mr. Booth told me in a recent conversation. “We have no ability to do it. Nor does anyone else.”

Instead, Mr. Booth says, forget the forecasts — and, for the purpose of investing, forget about the current news, too. He doesn’t recommend picking individual stocks or bonds.

Keep it simple, he said, and don’t try to outsmart the market. Take on only as much risk you can handle.

“When you have some money to invest, put it into low-cost, diversified index funds,” he said. “Find a stock-bond mix that you are comfortable with. And if you realize you’re not comfortable, change it until you are — and then stick with it for years, and do better things with your life than worrying about where the market is going.”

One way of thinking about risk is to imagine that a terrible downturn is about to occur, he said. “It will happen, if you live long enough. You can count on that.”

If you are a conservative, older investor, as he is, he said, you might consider a portfolio with 25 percent stocks and 75 percent bonds.
Consider the worst stock downturn in our lifetimes, from October 2007 through February 2009, he said.

In that horrendous period, when global markets fell 55 percent, this hypothetical conservative portfolio would have lost about 13.5 percent — and recovered all of the lost ground within 7 months. “When you look at the numbers,” he said, “you may think, ‘I can deal with that and sleep at night.’”

If you are younger or more aggressive in your investing, though, you might want to try a portfolio with more stock in it — say, 60 percent stock, with the remainder in bonds. But be aware that in the 2007-2009 market catastrophe, that portfolio would have lost about 35.6 percent and have required two years to recover entirely.

Because the bond market has been unusually strong, the conservative portfolio gained about 5.2 percent, annualized, over the 20 years through September; the more aggressive one gained slightly more, about 5.3 percent.

There are, of course, no guarantees that these returns will be duplicated in the future, Mr. Booth said.

“What this is, I think, is a reasonable approach to the future, based on the record of the past,” he said.

One thing it is not is a forecast.
Follow Jeff Sommer on Twitter @jeffsommer.

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A scene from ‘Acis and Galatea,’ directed by Mark Morris. Richard Termine/Lincoln Center, New York

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