Posté le juil 29, 2013 Par Dans Chronique matinale, English Avec 420 Vues

What do we do now ?


If there’s one thing we can be sure of, it’s that we’re in a consolidation phase. Currently we are witnessing stratospheric heights. If someone had told us in 2009, while we were closing in on 666 points on the S&P, that we would be hesitating to pass 1700, we wouldn’t have believed it. And we didn’t.

And yet here we are, for the past week, hesitating to cross over the boarder as if it were a new unexplored territory. And it is if you think about it. The quarterly numbers didn’t give us much direction to go on, because even the good numbers, although celebrated as good numbers should be, were almost all a result of lowered expectations. And as for bad numbers, they were punished as usual with big strokes from a blunt object.

The economic numbers didn’t give us much information, but with a bit of effort we can figure out the « broad strokes » of the current market, we have the USA in the middle of rebuilding their economy, a booming real estate market, aside from Detroit, and job creations keep going up while at the same time unemployment isn’t going down. Europe is showing some signs of life, last week’s PMI numbers gave us hope the patient could still survive after all. For the first time in a while, we felt glimmers of hope over Europe. As for Asia, we are still questioning the strategy to resuscitate the Japanese economy. Although Abe’s plan seems like it’s working in theory, but will this hold in the long term is another matter altogether. In addition to this, China is in the middle of a nervous breakdown. Ok yes, we know the government will eventually save the world, but the question is how? And how quickly? The most frightening aspect in all of this, is knowing the Chinese engine that fuelled the world economy’s growth went from an unstoppable V8 to a tired old two-stoke.

This is where we are this Monday morning. The US markets at an all-time high, just waiting for a signal, any signal from I-don’t-know-what, Europe in the starting blocks ready to start running and catch up if the US decide to go even higher, and China and Japan full of doubts lumbering along behind everyone.

The quarterly results are pretty much over. The “big names” earnings are all out, there’s a bit of everything and statisticians are happy because 63% of earnings announcements were better than expected. Between you and I, compared to previous years this number is lousy, and let’s not forget many of the “better than expected” results are due to analysts lowering their forecasts (for example Apple) and not actual better results. To sum up, we’re keeping the patient barely alive for now, but sometimes we wonder if he’s still breathing…

But no matter, as the average investing timeframe is currently more or less 24 hours, we all live day by day and have no reason to question the markets or ourselves.

At the beginning of this MAJOR week that could still change everything, Gold is at 1328$, Oil is at 104.27$ and everybody is wondering what will happen between this rainy Monday and Friday evening.

One thing I can guarantee you, this week will have its fair share of “showtime performances” !!! First of all, as this week is between July and August, we’ll have the Non-Farm Payrolls. These numbers will be all important once again this week, because they give us the false impression they can answer all of our questions. Once again we’ll try our best to contain ourselves. We’ll be all excited, believing “this time we know for sure what will happen to the world economy”. And once again, about 22 minutes after the publication of these non-farm payrolls, we’ll understand we still don’t know anything…At least this should give the FED something to think about, and they could possibly even input these numbers into their monetary policy.

confusing_signs6While we’re talking about the FED, it will be a major week for central banks. Not only because Bernanke will organise a sitting at the FED so everyone can enjoy his well-crafted and subtle speech –speech that will be made official Wednesday evening- but also because Goldman Sachs will hold meetings at both of their Central Banks, we call them the BCE and the Bank of England, on Thursday. One year after Draghi’s statement “everything would be done to save the Euro-Europe”, it’s time to draw some conclusions. The Eurostoxx are up 16% in this time period. Let’s hope Draghi bought stocks and call options right before his last speech.

So between the jobs numbers, speeches by all three most important central banks, the real estate and the GDP numbers from the USA, I think we’ll have plenty to talk about this week. And let’s not forget about the volatility, currently in hibernation, it’s only waiting for a reason to wake back up. This week we’ll also have quarterly earnings from  Exxon, Procter, Pfizer and Berkshire, but I don’t think any of them will make much difference on the markets.

This morning started with a bad news in Asia. Tokyo is still suffering from a strong yen. I won’t tell you again how a strong yen can impact Japanese exports, all I need to say is the Nikkei is currently down 2.2%. China is also down (-1.6%), people are afraid the local economy won’t recover quickly enough despite what the government is saying. Traders are dubious and would like to see some real actions in China.

The media world witnessed an earthquake, Publicis will merge with Omnicom, the number 2 and number 3 in advertisement will become number one in the world, in front of WPP. The market capitalization of this new advertising giant will be 35 billion $, for annual sales of 23 billion. All that is left to do is the integration of both companies and explaining to clients of this new company, due to their massive size they could ALSO be working for competitors.

After last week’s profit warning, Siemens’ CEO resigned. The current CFO should take his position. Economists from Barclays are working on an outcome nobody want to think about, a Chinese growth of only 3%, Copper down 60%, zinc down 50% and Oil at 70$. Some people really need to find a hobby for the weekends.

Brussels doesn’t agree with Monte Paschi’s restructuration plan, and they want more. The crisis is everywhere and 85% of Hedge Funds are losing to the market –in terms of performance- compared to the S&P500. That’s not a big issue, as the main focus of Hedge Funds is to reduce portfolio volatility and not “create” performance.

Today’s economic numbers will be the Pending Home Sales and the Dallas Fed Manufacturing Survey. We’ll also have some quarterly results but today isn’t THE big day…Currently futures are down 0.2%.

As you may have noticed the « important news » harvest for this morning is quite weak. Everyone is in “I’ll sit around and wait for something to happen” mode, and the coming speeches from the central banks will make things even more tense and uncertain this week.

In summary, a start of the week in « waiting » mode. Have a great day and I’ll see you here tomorrow same time same place!

Have a nice day


« If you want to make God laugh, tell him about your plans. »

Woody Allen

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(Adapted from French by V. Agueev)

A propos

La trentaine, Loic est ce que l’on peut appeler un «vétéran tout-terrain» des marchés. Passionné par la finance, il a été trader-nostro et gérant de plusieurs fonds long only, trader principal d’un fonds global macro ainsi qu’ «asset-allocator» à ses heures perdues. Générateur hors pair d’idées et gérant de portefeuille pointu il décide de créer Genua-Advisors qui est devenu Investir Advisory. Son approche Global Macro allie aux analyses fondamentales des analyses quantitatives propriétaires, basées sur la finance comportementale. Il affecte particulièrement la mise en place de stratégie de couverture (hedging) lors de risque de baisse imminent ou d’exagération de marché.