Back In The Saddle
It has been nice away from the computers, markets and problems last week spent at the sea. I’ve visited 5 countries, 7 towns and I was most impressed by Spain and Barcelona.
I was pretty pissed when a saw my SPY put options position being sold on the Monday market opening on the back of a stop loss order I left when I was leaving for vacation. I hate leaving my positions unattended but hate even more earning + 15% instead of +50%. Never mind, it looks at the moment I could have an opportunity to enter into same position at the approximately same costs.
As a part of the reason of staring this blog was my discontent with the lack of intellectual challenge at my work, or if we rearrange the words disappointed by intellectually challenged superiors. So I am happy to announce that I have quit my job yesterday. I’m planning to take a few weeks(months) off and during the time I will look after my portfolio and set up all paper and legal work for starting my own advisory business. I will miss working with the real smart girls and boys from my team and hope one day we would have the opportunity to run the show together our way. Good news for my friends who are reading this blog I will step up my posting here with a minimum of two posts per day.
Looking at the week before, lots of economic figures. Some surprises also. Let’s start chronologically. S&P/Case-Shiller Composite 10 continued the 2 months rise with a 1.7% rise in July. We have got 7 millions homes of shadow inventory + 3.7 million in reported inventory (2+ years of supply), so would tend to view this as a temporary stabilization with significant downside risks.
Chinese PMI came at 55.o in September vs. 55.1 in August (readings above 50 signal manufacturing expansion).
Conference Board’s consumer confidence index fell to 53.1 in September vs. 57 consensus and 54.5 in August. Blow to the strong recovery story, but the real blow was coming a little bit later.
The big blow was non farm payrolls coming at -263k vs -175 consensus. Work week has hit 33 hours, near all time low. Unemployment has hit 9.8%. The broad U-6 measure has hit 17%. Real bad.
Strong reaction by the markets, but on the news of Goldman Sachs banks upgrade and Reserve bank of Australia rising rates and signaling further raises. I see no importance in this, but the market moves on its own paths. Bloomberg links: U.S. Stocks Rise on Goldman Bank Upgrade, ISM; Dollar Weakens ; Stocks, Commodities Climb as Australia Raises Interest Rates
Chart 1. S&P 500
Source: Bloomberg
Great piece by Meredith Whitney in the last Thursdays WSJ. WSJ link: The Credit Crunch Continues.
And we still have trailing S&P 500 P/E multiple of around 175 and forward of 17 on inflated earnings ex. one offs. No way mid cycle average valuation as consensus suggests.
I remain bullish for the US equities, searching for the turnaround point.
China PMI, Consumer Confidence, Nonfarm Payrols, S&P/Case-Shiller Home Price Indices