Cruising In The Mediterranean
Will be back on October 6th. Didn’t have time to write a post about oil, will do that first when I come back.
Archive for September, 2009
No Real Catalyst
Despite some mayor bearishness coming through the media, blogosphere and market moving downwards, I see no strong enough catalyst to move markets significantly lower. As I’m writing this post European equities are trading flat after opening lower and US equity index futures marginally higher. Asia closed mostly negative. Looks like no action day today.
FED Meeting Aftermath
Returning to my screens after few days of vacation and couple of days of useless erins. Let me recap economic announcements in the last few days. Housing starts at consensus of 598k, building permits at 579k versus consensus of 583k. We have a 20% rise from the lows a few months ago. House prices rose 0.3% vs. consensus of 0.5%. Important indicator to watch, as seasonal effects ad government stimulus could fade into the winter. Mortgage applications up 12.8%.
Flash Trading Banned
Asian markets closed marginally lower on indications that credit crunch is returning. Nothing major jet, but worth of giving some thought on that, especially having in mind recent decrease in US bank lending and falling monetary aggregates. Indication how excess liquidity isn’t finding its way to real economy. Doubts on the strength of recovery still remain. Bloomberg story: Aiful to Seek Debt Reprieve as Refunds Roil Consumer Lender.
Correlations
The market just keeps on going on, you could think that it could go on even further. I would not be particularity surprised to see S&P 500 at 1200. We have equities rallying and at the same time declining US dollar and gold hitting nominally highest level ever.
Falling Volatility
A lot of economic data coming from the US today. Producer price index coming at 1.7% vs. 0.8% consensus on the monthly level and -4.3% vs. -5.3% consensus on year level. Surprise to the positive side. Retail sales were up 2.7% vs. 1.9% consensus in August, taking out Autos and Gas +0.6%. Also, positive, but definitely not breath taking.
Revisit To The US Natural Gas
Excess gas coming to the spot markets due to light demand and curbs imposed by pipeline industry continue to cause wild swings in the spot markets. If we look at the futures markets those swings are not so strong probably due to size of futures markets in comparison to physical markets.
New Highs
New highs everywhere, but the feeling, at least for me is unsettling. Setting aside my skeptical mind, looks we could fly even higher. Still waiting for the right point to initiate short SPY position.
Today’s news from China was taken by the media as a positive surprise. China’s industrial production rose 12.3% yoy. New lending was at 60.1 billion USD up 15.3% mom and 51.1% yoy. M2 rose 28.5% in August. Everything is blooming. On the other side. Exports on the other side fell 23.4% in August yoy. I wonder who is buying the stuff they are producing and how long can this last?
No Fireworks
The S&P 500 hit the new high for the year yesterday, but it didn’t sparked interest from the mainstream media. The market looks as it is looking for clues in which direction to move. Its similar like in June/July, everything was pointing to move lower but all went in the other direction on “better than expected” earnings. Earnings season is months away and I’m feeling tempted to start a short position.
All Chips In For The Barrick Gold
All chips in for the Barrick Gold. The largest gold producer in the world plans to issue new equity to terminate hedging contracts. Brave. We will see if it pays off. Reuters story: Barrick to sell $3 billion in stock to buy back hedges
Major news yesterday was consumer credit decline. Reuters story: July consumer credit falls a record $21.6 billion It’s obvious that consumer credit/spending fueled recovery is not at the moment on the table.
Optimism, Optimism…
Optimism is a flavor of the day. Nice article by Bloomberg showing disparity between analysts and economists. Bloomberg link: Stocks Show Why Analysts Dismiss Economists on Growth. Not that I think that either of them will be right at the end of the day, but it’s interesting to look at the dilemmas the market is in. Its pretty obvious, given the run we had, no analyst wants to look like an idiot having bearish reports so they are chasing the market. On the other side you have economists who are analytical guys; who don’t want to believe that anything beside predicted by their models will happen and those prospects don’t look good. And we have also corporate insiders who are selling and companies that are issuing shares. Bloomberg link: Mobius Spurns Brazil Share Offers as Gol Seeks Sale. (disregard Mr. Mobius statements as he probably trades opposite his statements). Being skeptical and contrarian by nature the market looks overly optimistic to me, but given the sentiment it could go further higher.
Camp At 1000
The short term top I wrote about in earlier posts evolved to nothing more than just a dip buying opportunity and it looks like we are going to stay range bound unless we have some surprise news. The economic data from the last week was boring, nothing interesting even a bit, and nothing that would change my views. Only piece of data that occupied my mind (for few second at least) was unemployment report. Non farm payrolls for August came at -216k vs -230k consensus and -276k in July (as usual revised downwards from -247k). Unemployment rate hit 9.7% vs. 9.5% consensus. Obviously the pace of job losses has slowed down, but with such high unemployment the recovery is not just around the corner. Off course, media can find optimism in the worst piece of data. According to Bloomberg this is positive for company earnings. Yeah, sure…. Bloomberg link: U.S. Recovery Leaving Workers Jobless May Spur Company Profits
Where Have All The Arbitrageurs Gone?
Natural Gas in the worst performing commodity this year. It has come down 66.2% this year and 77.6% from the top. Reduced industrial demand combined with absence of hot weather which has reduced electricity demand and consequently natural gas demand has weighted heavily on the natural gas price.
No Inspiration
The market has come down slightly in last few days. Again, major theme was health of world banking sector.