In short, it depends on what you think the Fed will do. Below the aforementioned chart is the adjusted US monetary base from the Federal Reserve Bank of St. Louis. One can observe the jump in correlation in mid 2008, as it moved to near perfect during the crisis. For when everything is crashing, assets will then probably correlate, but after the bottom and bounce the correlation continued. Maybe one can deduce from history that when the balance sheet of the Fed starts to shrink, assets will return their true, economically driven, prices.

The ‘tapering’ talk is probably what the market needs given the unsustainable nature of QE. This jawboning is perhaps preparing market participants for the end of QE. Introducing this talk earlier than later is arguably better and healthier for the market, because investors start mulling over the repercussions. 

The repercussions perhaps include a less than impressive economy. Given the economic and financial importance of oil, maybe it is appropriate for it to move first. Looking at other commodities however, it oil hasn’t been the first. Adding lumber and copper into the mix, the chart against the S&P 500 may give even the most bullish of investors pause, at least. Never the less, it is interesting.

salerno.mark.a@gmail.com

One of the main reasons behind ARCP’s surge in the past few months is its acquisition/merger with other real-estate investment trusts (REIT’s). In late February ARCP announced a merger with American Realty Capital Trust III, with the combination of the two marrying high quality net lease companies with complimentary strategies.The result of the merger is a company with a current market cap of nearly $2.5 billion. The increased size of ARCP has made it the 4^th largest publicly traded REIT in the industry and one of the largest in the United States. On May 28^th, the company announced its plan to purchase CapLease, another REIT with investment strategies that compliment ARCP. The total price of the buyout is estimated at $2.2 billion. Unfortunately, the announcement had a negative effect on ARCP’s share prices, which have fallen a full two points from $17.50 at the open on Tuesday down to a current level of $15.37. While prices have dropped over the past few days, ARCP is still performing admirably on the year and with its aggressive strategy to grow its asset base through the acquisitions of other REIT’s, the future looks bright.

I bought the ARCP July 17.5 Calls for $.15

Risk: $15 per 1 lot

Reward: Unlimited

Breakeven: $17.65

Greeks of this Trade: 

Delta: Long

Gamma: Long

Theta: Short

Vega: Long