lundi, 01 novembre 2010
Summary of October 2010
October 2010
Months are flying, already November. And basically, nothing has changed since June... I hate to say that, but we’re asking ourselves the same questions again and again, and at the end what ? Ok, I’ve to admit that the market is going up, not “raging” going up, no, just up. We’re almost up 6 or 7% on the equity market and we’ve gone all the way across those two terrible months that are September and October, also known as “crash months”. But we managed somewhat to survive, and even with style.
Where are we now ?
Starting with the psychology of the market, we’re in the middle of the therapy, and have not been able to make much progress. We’re still very anxious at any publication of economic numbers or quarterly results of the companies, but so far so good, the analyst’s expectations have been so low and so careful, it was easy to beat them. On the economic side, the investors are sitll looking at the glass half-full, more than the half empty side... The economy is getting better if you look at the US GDP (who gave us recently some signs of life, and even some a slight pressure on the gas pedal). It’s also ok, if you look at the ISM Manufacutring and the Philly Fed. But there is some doubts if you look at the real estate market. Numbers are not good. Short Future doesn’t look bright, there is even some black birds who are coming with some charts who shows that we’re heading right in the wall of a double dip - in the real estate market - there will be no double dip for the economy, it’s certain, well..almost.. The confidence of the consumer is not that good as well, and the job market is not improving at all, so far.
It could raise a question; “how the economy is growing if nobody spends any money that they don’t have anyway ?” - But it’s better to keep this question for a period more gloomy in the market. Now, investors are happy, they’re even expecting a year end rally to make everything right. So far, the rally started, but really slowly and quietly. Nothing to compare with the rallyes we used to see in 2000...
If we browse to the rest of the world, economy is getting better everywhere, but is getting really better in China, it seems that they are looking everything better than us, in Europe or in US, better than us, quicker than us, cheaper than us, smarter than us. Basically they’re us, but with much efficiency. According the last economic numbers from China, the “machine” is back on track, full power...
In the meantime, the old economy (US) are complaining about the china’s currency which is too cheap and that makes us looks like very expensive. Make no mistake, we are. Currency problem or not. if complaining is the only way we found to replicate, China has the open road for victory.
Should we browse around all the different asset class ?
First, no matter what you do, no matter what you say, the dollar is getting lower. Goldman Sachs even said recently that the greenback has to go much much lower. Soon it’s gonna be really cheap to make your Xmas shopping in New York. Since the dollar is weak, it’s supposed to help the commodities. It’s the case. Soft commodities are strong, precious metals are strong, oil is relatively strong.
Lots of people are expecting to watch a (huge) correction on Gold. But no. Everyone who does not know what to do with their cash just buy gold, that’s it. So Gold showed some weakness this month, it was just a very short window to buy the metal. Silver is really strong as well. But the US authorities are investigating a possible price’s manipulation. They will never find any proof probably, but there is some questions raised around that price increase...
Oil is at 82.15$, still stuck in a 10$ range. The agony of the dollar, the slight increase of demand for oil, according to the numbers (if you believe them), should help him to go higher. But no. There is slight problem, that wouldn’t look good if the barrel would cross the 90$ level, which could slow the “anemic” recovery of the US Economy. I didn’t say that the US Government is stopping him to go higher, but who knows... So far, I don’t think that we gonna see the oil higher than 88$ during the next moths, unless the jobless rates is decreasing rapidly...
The Bond market is doing great. As usual. The Sovereign Debt problems we’ve seen in the first part of the year are almost forgotten. Ok, the Spanish Government is advertising on TV to beg people who still have money to buy their bonds, but the market seems to be confident that we’ll get rid of those problems in the months / years to come. Altough, there is a slight negative tone who was on the news this week-end, Bill Gross, the biggest fund manager of the world from PIMCO, biggest bonds fund on earth, said that the bond market is close to a top... ouch, be careful, he might be right.
Hedge Funds are healthy again people a throwing them again a lot of money, performance are not bad. Not as good as the stock market, but for absolut returns funds, it ‘s not bad. Most of the clients forgot the last two years when money was stuck in those funds, when not steeled by the money manager. They’re back in the game, and the bonus for those guys will be the same as before.
Equity market is ok. Quarterly numbers are ok, we’re expecting a bull market for the two last months of the year... That would be good if it would come before the investors a leaving the financial world for the Christmas vacations who are starting earlier and earlier every year. I personally expect to see people hitting beaches and mountain very early December. But anyway, there is a lot of Bulls out there. Nobody is really buying, but they’re all convinced that the market will go up. Maybe it’s Bull Market Light or a Invisible Bull Market, who knows, we’ll get the answer when the big guy in red will hit our chimneys.
We should not close these resume with three important facts, that have been taken very lightly in October :
1) The aftershock of the subprime crisis is hitting hard in US, basically nobody knows really how is working foreclosure and who owns what. But, no reason to be scared the Government will be there to bailout anyone in trouble...
2) November is the month of the mid-term elections in US. Obama is not so popular he used to be. Not hated as much as Sarkozy is, but the atfes election day could lead to some changes in the political picture in US, and indirectly to the economy.
3) The Fed will start a new wave of Quantitative Easing this month. This is not welcome by everyone. The market is happy, but more and more Economist are warning that’s not going to help that munch, but it’s gonna raise the inflation risk... That word - inflation - should bot be used too much for the next weeks, we don’t want see that otherwise, that’s gonna be a very short bull market...
In conclusion, we’re a little bit higher than six months ago, we’re still asking ourselves a lot of questions, most of them have no real answer so far, we need to have some confirmations, that we won’t have. Equity market is in good shape, the old saying says “don’t fight the trend”...but watch carefully when the trend is changing direction, it could be very fast... Bond Market might be a the top finally, don’t expect to much from the oil, gold seems to be indestructible. Be very careful with the commodities, this is the next bubble who’s going to explode or implode, whatever.. And if you have to invest in a Hedge Fund, be very skeptical, ask the right questions and don’t think that they invented the formula to made gold out of thin air...
Have a nice November, be fit for the celebrations of December, it’s coming fast.
Thomas Veillet aka Morningbull
Months are flying, already November. And basically, nothing has changed since June... I hate to say that, but we’re asking ourselves the same questions again and again, and at the end what ? Ok, I’ve to admit that the market is going up, not “raging” going up, no, just up. We’re almost up 6 or 7% on the equity market and we’ve gone all the way across those two terrible months that are September and October, also known as “crash months”. But we managed somewhat to survive, and even with style.
Where are we now ?
Starting with the psychology of the market, we’re in the middle of the therapy, and have not been able to make much progress. We’re still very anxious at any publication of economic numbers or quarterly results of the companies, but so far so good, the analyst’s expectations have been so low and so careful, it was easy to beat them. On the economic side, the investors are sitll looking at the glass half-full, more than the half empty side... The economy is getting better if you look at the US GDP (who gave us recently some signs of life, and even some a slight pressure on the gas pedal). It’s also ok, if you look at the ISM Manufacutring and the Philly Fed. But there is some doubts if you look at the real estate market. Numbers are not good. Short Future doesn’t look bright, there is even some black birds who are coming with some charts who shows that we’re heading right in the wall of a double dip - in the real estate market - there will be no double dip for the economy, it’s certain, well..almost.. The confidence of the consumer is not that good as well, and the job market is not improving at all, so far.
It could raise a question; “how the economy is growing if nobody spends any money that they don’t have anyway ?” - But it’s better to keep this question for a period more gloomy in the market. Now, investors are happy, they’re even expecting a year end rally to make everything right. So far, the rally started, but really slowly and quietly. Nothing to compare with the rallyes we used to see in 2000...
If we browse to the rest of the world, economy is getting better everywhere, but is getting really better in China, it seems that they are looking everything better than us, in Europe or in US, better than us, quicker than us, cheaper than us, smarter than us. Basically they’re us, but with much efficiency. According the last economic numbers from China, the “machine” is back on track, full power...
In the meantime, the old economy (US) are complaining about the china’s currency which is too cheap and that makes us looks like very expensive. Make no mistake, we are. Currency problem or not. if complaining is the only way we found to replicate, China has the open road for victory.
Should we browse around all the different asset class ?
First, no matter what you do, no matter what you say, the dollar is getting lower. Goldman Sachs even said recently that the greenback has to go much much lower. Soon it’s gonna be really cheap to make your Xmas shopping in New York. Since the dollar is weak, it’s supposed to help the commodities. It’s the case. Soft commodities are strong, precious metals are strong, oil is relatively strong.
Lots of people are expecting to watch a (huge) correction on Gold. But no. Everyone who does not know what to do with their cash just buy gold, that’s it. So Gold showed some weakness this month, it was just a very short window to buy the metal. Silver is really strong as well. But the US authorities are investigating a possible price’s manipulation. They will never find any proof probably, but there is some questions raised around that price increase...
Oil is at 82.15$, still stuck in a 10$ range. The agony of the dollar, the slight increase of demand for oil, according to the numbers (if you believe them), should help him to go higher. But no. There is slight problem, that wouldn’t look good if the barrel would cross the 90$ level, which could slow the “anemic” recovery of the US Economy. I didn’t say that the US Government is stopping him to go higher, but who knows... So far, I don’t think that we gonna see the oil higher than 88$ during the next moths, unless the jobless rates is decreasing rapidly...
The Bond market is doing great. As usual. The Sovereign Debt problems we’ve seen in the first part of the year are almost forgotten. Ok, the Spanish Government is advertising on TV to beg people who still have money to buy their bonds, but the market seems to be confident that we’ll get rid of those problems in the months / years to come. Altough, there is a slight negative tone who was on the news this week-end, Bill Gross, the biggest fund manager of the world from PIMCO, biggest bonds fund on earth, said that the bond market is close to a top... ouch, be careful, he might be right.
Hedge Funds are healthy again people a throwing them again a lot of money, performance are not bad. Not as good as the stock market, but for absolut returns funds, it ‘s not bad. Most of the clients forgot the last two years when money was stuck in those funds, when not steeled by the money manager. They’re back in the game, and the bonus for those guys will be the same as before.
Equity market is ok. Quarterly numbers are ok, we’re expecting a bull market for the two last months of the year... That would be good if it would come before the investors a leaving the financial world for the Christmas vacations who are starting earlier and earlier every year. I personally expect to see people hitting beaches and mountain very early December. But anyway, there is a lot of Bulls out there. Nobody is really buying, but they’re all convinced that the market will go up. Maybe it’s Bull Market Light or a Invisible Bull Market, who knows, we’ll get the answer when the big guy in red will hit our chimneys.
We should not close these resume with three important facts, that have been taken very lightly in October :
1) The aftershock of the subprime crisis is hitting hard in US, basically nobody knows really how is working foreclosure and who owns what. But, no reason to be scared the Government will be there to bailout anyone in trouble...
2) November is the month of the mid-term elections in US. Obama is not so popular he used to be. Not hated as much as Sarkozy is, but the atfes election day could lead to some changes in the political picture in US, and indirectly to the economy.
3) The Fed will start a new wave of Quantitative Easing this month. This is not welcome by everyone. The market is happy, but more and more Economist are warning that’s not going to help that munch, but it’s gonna raise the inflation risk... That word - inflation - should bot be used too much for the next weeks, we don’t want see that otherwise, that’s gonna be a very short bull market...
In conclusion, we’re a little bit higher than six months ago, we’re still asking ourselves a lot of questions, most of them have no real answer so far, we need to have some confirmations, that we won’t have. Equity market is in good shape, the old saying says “don’t fight the trend”...but watch carefully when the trend is changing direction, it could be very fast... Bond Market might be a the top finally, don’t expect to much from the oil, gold seems to be indestructible. Be very careful with the commodities, this is the next bubble who’s going to explode or implode, whatever.. And if you have to invest in a Hedge Fund, be very skeptical, ask the right questions and don’t think that they invented the formula to made gold out of thin air...
Have a nice November, be fit for the celebrations of December, it’s coming fast.
Thomas Veillet aka Morningbull
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