Global Macro Perspectives
Markets on the on the edge of the cliff. I’m unsettled because I managed only to re-initiate my long USO 39 January puts position, didn’t re-initiate the similar SPY position. Risk control, sometimes you miss on lice profits. I’ll wait with that, I don’t like to rush into position after such run.
I felt yesterday like someone jumped out of the boy and shouted: ” you’re punk’d.!”. Some thing like in this video (fast forward to 1.38):
U.S. GDP growth for the third quarter came out at 3.5% vs. 3% consensus. Surprise to the upside. Bloomberg story: Economy in U.S. Expands for First Time in More Than a Year . Interesting day ahead, we will see how the (U.S.) markets react
One of my favorite investment themes is shorting the long end of the treasury curve. Something similar (just a institutional version) are playing prominent investors (ex. and current hedge fund managers) like Julian Robertson, Jim Rogers, David Einhorn and others.
Big move down on all risky assets. Possibly a serious testing phase for equity markets ahead. U.S. dollar trying to escape recent down trend, treasuries up. Same story as in recent months but on the opposite side.
I bought USO and SPY ATM January puts today. Feels like we have some weakness coming. Most of the better-than-expected results are out; economic data coming is sluggish (except maybe U.S. Q3 GDP reading tomorrow, but here I view the expectations high, so I’ll take the risk); and it feels extending stimulus (read: budget deficit widening) would be negatively viewed by the FX and fixed income markets so U.S. government would likely be cautious with the measures it is undertaking. So new stimulus fueled move is unlikely.
Consumer confidence unexpectedly drops to 47.7 vs. 53.1 last month and 54 consensus. The streak of negative signs (just signs for the time being) continues.
ome prices rose in August for a third consecutive month. Case-Shiller composite-10 index rose 1.3% in August to 157.93 with the composite-20 index up 1.2% to 146.00. Bloomberg story: Home Prices in 20 U.S. Cities Rise for Third Month.
I don’t like the hype that follows Nouriel Roubini; ha had a strike of luck (mostly because he was sticking to his same forecasts for years) and now the media grants him excess attention. Never mind, the point I am getting to, is that his thoughts on commodities and economy are almost identical to concepts I am writing about on my blog. Indexuniverse.com interview: Nouriel Roubini: Big Crash Coming.
Markets ended lower despite existing home sales data (thanks to tax credit and seasonal adjustment looking exceptionally good) which came at 5.57 million at annual rate vs. 5.35 consensus and 5.1 in August. Blomberg story: U.S. Economy: Existing Home Sales Surge on Rush for Tax Credit. Median home price fell 1.4% on monthly level despite reduced share of distressed sale of 29% versus 50% levels earlier this year. The question here is weather we will see cash-for-clunkers winding down effect here or extension of the program. My guess is extension of some kind.
hina GDP grew 8.9% in third quarter vs. 9% consensus. All risky assets headed lower on the news, U.S. dollar higher. Puzzled, makes no sense. Bloomberg explanation: China’s Economy Grows 8.9%, Fastest Pace in a Year.
The media focus is on stimulus, monetary expansion. Chinese officials have already addressed those issues, at least verbal. In my view the depressed exports; over capacity; real estate bubble; credit boom are big issues and I am little bit skeptic on can China ride out of this recession smoothly. Correction today in Asia on concern of stimulus withdrawal.
As I wrote before Wells Fargo earnings came better than expected. I gave gone through the material and I have to say the the way management presents the data gave me a sort of the confidence that they know their job, but when I reviewed the details the seen has only scared me.
Housing starts rose 0.5% in September to 590k units vs. 615k consensus representing 2.8% growth. August data was revised down from 598k units reported last month to 587k units. If we take this into account the consensus was projecting 4.7 increase; and the reported figure was 0.5%. Bloomberg link: Housing Starts in U.S. Increased Less Than Forecast.
With 85% reporting companies beating consensus, skeptical as I am it , I think that relates more to low expectations more than companies outperforming. It’s my impression that we have bubbles forming in many market segment, but no catalyst to reverse the process. Given the many times stated will by major central bankers to extend low interest rate environment the price disruptions could continue for some time and even higher levels.