Posts tagged 'Equities'

This too shall pass

Charts. Do stop us if you’ve heard this one before.

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That was nuts, what’s next? Goldman edition

Unless we’re mistaken, Goldman has come up with its own “This is nuts” top ten. Decent effort:

1. Since the low in the global equity market on March 9, 2009, the MSCI The World index has risen roughly 180% in total return terms, generating an annualised return of a remarkable 20%.

2. 2013 was one of the strongest years on record for the equity markets. The US managed a price return of 30% and the Sharpe Ratio of the S&P 500 ranked in the 98th percentile since 1962.

3. Perhaps even more striking is that bond markets have continued to perform strongly. Since the 2009 low in equities, the JP Morgan GBI global bond index has risen 24%.

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A fresh session low for the S&P 500…

1,823.06 -54.64 (-2.91%)

- at pixel. DJIA off by a similar margin. What to say? Let’s fall back on charts…

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Had to share. It’s doing the rounds by email…

The original title of this post read: What do you call a stock market crash that only lasts half an hour? Read more

Red October

Looking at the sea of red in the markets over the past two days, it is easy to be disheartened. The Dow Jones Industrial Average fell 334 points and the broader S&P 500 was down 2.066 per cent, matching the fall in Germany’s Dax 30 at pixel time.

It is worth putting the fall into context, even if valuation, complacency and the scale of crowded trades all suggest good reasons for concern. Over the past 50 years, the market’s been down this far in a day 289 times, or almost six times a year. It is nasty, but on this basis it looks normal. Read more

Following the activists wherever that might lead

In which Citi look for the next Apple, our emphasis:

Apple’s valuation has been through a spectacular round-trip over the past couple of years (Figure 2). Its total market cap first broke through $600bn in August 2012, but then collapsed to $341bn in April 2013. Since then, the recovery has been equally remarkable, moving back above $600bn in the past month. In the process, it has regained the title of the world’s most valuable company ($187bn ahead of Exxon at number 2). To put this in context, Apple has lost and then regained the value of the Russian stock market in just two years.

The narrative associated with this spectacular journey often focuses on the never- ending pressure for Apple management to maintain the company’s product pipeline. A lower share price reflected concerns that Steve Jobs’ midas touch had been lost. The subsequent rebound was associated with increasing conviction that it had not.

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The leverage clock tolls for thee

If you buy this…

… keep reading. Read more


Your recent flight to safety and the pain of carry trades in the face of Ukraine and the FOMC, charted and worded by Hartnett and BofAML:

Looking at total returns, stocks and bonds are up around 4% year-to-date while commodities are down 1.4%. But since July 16th, the day prior to the downing of flight MH17, the US dollar has outperformed all major currencies, cash has outperformed all major asset classes (see Table 1) and the only equity markets showing gains are China, Kazakhstan, Saudi Arabia & Egypt. Of particular note, the combination of a geopolitical flight to quality and concerns about the end of the era of excess liquidity appears to have caused the three big “carry trades” of 2014, high yield bonds, European peripheral bonds and EM debt, to be “carried out”

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Here, take your cash. We don’t want it

From Goldman on the state of European corporate investment… or what happens when a yield hunt meets corporates who are running out of investment ideas:

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Temporisation watch

That uneasy feeling when everything is going well. Is it deserved? Can it last? Should you cash in and go paint watercolours in that studio on the Pembrokeshire coast?

Strategists are not immune, with a summer bout of the temporaries upon us. Goldman is the latest, downgrading its view of stocks over the weekend but without really committing to it:

We also downgrade equities to neutral over 3 months. We are concerned that a sell-off in government bonds will lead to a temporary sell-off in equities in line with what we saw last summer, though the magnitude is likely to be smaller as the need for bond yields to correct is lower than it was back then.

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What if Modi’s a tease?

When your bet is on policy certainty in India, maybe it’s time to reevaluate that bet…. From BofAML:

Ignoring the risk-love silliness, we think this means a whole load of policy certainty has been priced into Indian markets ahead of the Modi-led BJP’s presumed victory in the just finished elections. From BofAML again: Read more

The Relentless Josh Brown

We’re fans of The Reformed Broker. Reluctantly, sometimes. But fans nevertheless.

So we should just note that a Josh Brown post from Wednesday, looking at the relentless growth of passive asset management and its effect on equity markets has, quite simply, gone viral.

In fact, if you are a market professional and it’s not in your inbox already this morning, you are a failure.

To save your blushes, here’s the link to the original, here’s Josh’s follow up, and here are some choice quotes to memorise quickly… Read more

Retail has rotated

A new year is a new country, so far as the investment prognostication world is concerned. What will people do with their clean slates, we wonder?

Buy equities is a strong contender. It appears to be what retail investors finally did last year after years of revealing their preference for bonds, and they aren’t done yet. If you don’t believe us, well, we have charts… Read more

Dear Dromeus Capital investor…

One-year total return of the Athens stock index, to the end of October 2013: +50%

One-year return of the Bloomberg Greece Sovereign Bond Index, same period: +134%

One-year net return of Dromeus Capital’s Greek Advantage Fund: +107%

Yep — FT Alphaville hears that the first-year performance of Dromeus Capital’s Greece-focused fund would make it one of 2013′s best-performing, having already made a strong start at the beginning of the year.

It’s another indicator of how much both Greek equities, and the sovereign’s restructured debt, have recovered this year… Read more

Sticky Fingerprints (updated)


That would be the release announcing a $650m acquisition of Fingerprint Cards by Samsung, which – regrettably – has turned out to be completely made-up, and possibly a matter for the Swedish authorities. Read more

An elegant solution to a conspiracy problem

OK, hands up. We did not pay attention in March when Canadian securities regulators proposed to tighten rules for when investors must disclose their activities to the rest of the market.

The CSA is still considering, and the Globe and Mail reported on Monday that it’s not just activists who are wary. However, what has belatedly caught our notice are some excellent ideas from ISDA about derivatives disclosure, which could also be relevant south of the border. Read more

Playing profit with the stock market

This is is a guest post from Philip Pilkington, a writer and research assistant at Kingston University.

Gavyn Davies recently had an interesting take on stock prices in the US. Davies made the point that the profit share in the US had risen substantially against the wage share in recent years, and then argued that this rise in the profit share is what currently underpins equity prices. Read more

Tin hat time, illustrated

Time for a rush into Gold? Nope. Read more

Quick, sell now George! (Updated)

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A female director purchases shares in her company: what happens next?

Does the Stock Market Gender Stereotype Corporate Boards? Evidence from the Market’s Reaction to Directors’ Trades.”

Does this title of a recently published study by a group of researchers at the University of Exeter make you think:

A. Hmm, “gender stereotype”. That’s wordy.

B. Oh boy, what’s the media going to do with this one… Read more

S&P 2,100, by Goldman Sachs

Here it is Goldman’s big call: the S&P 500 will reach 1,750 by the end of this year; 1,900 in 2014; and 2,100 in 2015.

H/T Josh Brown, who points out this isn’t about earnings but a re-rating of equities (and dividends). Read more

That equities/commodities disconnect

Yes, we know it’s not new, but the divergence between stock markets and commodity prices is now looking extreme. Consider this chart from Julian Jessop at Capital Economics…

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“Phish and dips,” or, How to write the AP tweet hacking story when you don’t really care

1.) Steal headline from Lorcan. On Twitter.

2.) Multiple choice test to decide your condescending lede!

Question: When a fake (hacked!) Associated Press tweet about a White House attack moves the stock market down, then it recovers really fast — but maybe not making anyone much money — this is a referendum on the credibility of:

a) Twitter

b) Associated Press

c) The stock market

d) How FT Alphaville makes a living

e) All of the above

f) None of the above, shut up and get off Twitter

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So, who was KPMG’s LA guy allegedly leaking to?

Isn’t that the big question here?

Given that this story — about the auditor firing a partner over “providing non-public client information to a third party, who then used that information in stock trades involving several West Coast companies” — has now slammed straight into the Herbalife story. Read more

Productivity, “reindustrialisation” and the US profit share

US industrial production has grown at least twice as fast as GDP since the start of the recovery.

Onshoring” work because wage differentials are narrowing plus falling electricity prices because of shale gas = more growth, so… great! Maybe? Read more

Love is a many splendoured thing…

… but regally proportioned, unemployed gents with untreated gonorrhoea and mother issues generally find it tough going.

Not so with Aim-traded online dating specialist Cupid according to Bronte Capital’s John Hempton who threw up a rather extreme fake profile — Fat, lazy, poor sick guy wants support – to see if he got many bites. Read more

Kaffeeklatsch der Bären

From Albert Edwards’ latest:

I was on gardening leave when the Dow reached its previous peak in October 2007. One echo from those days is that I was beginning to feel lonely. Pessimism (realism) is very rare on the sell-side so I took a coffee with my fellow bear, Bob Janjuah and cheered up tremendously, reinforced in my belief that this is all going to end very, very badly indeed. Read more

The age of infinite equity?

Financial pundits, academics, fund managers and analysts all have an amazing tendency to over-complicate matters.

Sometimes, however, it takes just one person spelling out the obvious to really get to the root of the problem. Read more

Let’s wait for a fall in stocks before declaring a great rotation

With all the excitement about ‘the great rotation’, it often feels that the debate focuses too much on analysing the recent flows, and less about the greed/fear dynamics driving them.

It’s been well documented that bond holders are increasingly frustrated by the miserable yields on offer in the fixed income markets, and are apparently flocking into the ‘cheap’ equity markets. We’ve already voiced our scepticism about the scale of this flocking. Yet what’s potentially also underestimated is the degree of skittishness by bond holders when the stock markets show signs of a wobble. After all, a lot of capital in fixed income got there after investors were burnt in the early 2000s. This loss aversion shouldn’t be underestimated. Read more

The great rotation: Not so great, and not even really a rotation

The ‘great rotation’ from bonds into equities: a few weeks ago it was looking like it might be seriously on. Even Albert Edwards sort of kind of said equities were cheap. And Ray Dalio said it is happening, too.

But there are a bunch of reasons why it doesn’t seem to be quite such a sure thing, at least for now. Read more