Good morning,
Gosh, the press is all over the show. I want to get excited about Obama meeting Mitt. The budget is huge issue for the US and despite Obama winning a second term, a joint effort is needed to pass a number of bills, helping America reduce its deficit.
The the next story I read is BP, which is now banned from new US contracts. I know they are British, so my view many will question as slightly bias, however, BP is one of the leaders in its field. Yes, they have made some mistakes, but the development in drilling and exploration techniques would not be were it is today without this industry leader.
My fear is, that the US see growth through protectionism. Looking after your own is all well and good, but going back over history, it tends to make a samll number wealth, reduces R&D and stops much needed foreign investment. As mentioned yesterday, France is going down that route, and it is not advised.
Argentinian debt has also come up recently. What they dont realise is, although defaulting would solve a number of problems, as an investor, I would not touch their debt from here on. Even if yields were 20%, it doesnt matter if I dont see my principle back. Therefore, it makes it terribly difficult to raise funds in the overseas market, setting their growth back at least 10 years. I suggest playing by the rules.
Markets overnight saw Europe weaker throughout the session barr the last hour, where a short rally pushed many of the indices back into positive territory. The Euro sold off sharply but has since bounced making up those loses, now trading at 1.2950. Sectors in Europe look like this:
FTSE +0.1% avg volume; O/P: tech, telco U/P: basic materials, utilities
CAC +0.4% low volume; O/P: utilities, Oil&gas U/P: telco, tech
DAX +0.2% low volume; O/P: basic materials, cons.goods U/P: utilities, financial
IBEX -0.3% v.good volume; O/P: cons.services, tech U/P: utilities, telco
Sectors tell us very little. I like the volume pick up in Spain, where defensive names underperform leading to the idea that inflows are finally coming. Albeit at hugely discounted rates.
In the UK, VOD LN just paid its dividend and yet the telco sector remains strong.
In the US, markets opened on the lows and trended firmer, and on good volume.
S&P +0.8% avg volume; O/P: cons.services, oil & gas U/P: utilities, basic mats
Oil and Gas is finally outperforming over financials and tech, partly due to the Aplle rally running out of steam. In the tech space, I like innovative companies and for me, Apple has lost that. Short it at your peril, but at these levels, Microsoft looks more interesting. The next to fall from grace is Samsung, where the good times are over... whats next for them, they make a 20 inch phone?
Markets.
Asia is rallying on the back of indices closing at day lows and the rebound in currencies such as US$EUR. Expect markets to see some rotation today and over the next fortnight as investors cover shorts and optimism that the US budget will get passed first time, which I think it will.
We should see basic materials and oil&gas run on US$ hedge and growth sentiment improving.
Time to buy Petrochina(857), where I plan to put the Stoddart retirement fund, should I find an odd lot broker that doesnt have a 5% spread.
Data.
15:00 UK nationwide house prices
16:00 Spain housing permits
16:55 German unemployment - major number!
18:00 EU confidence... big number but, nothing says confidence like increasing inventories
21:30 US consumption, jobless claims and GDP, expected 2.8%
Events.
16:00 EU votes on bank oversight
17:00 EU pact with Japan, Canada and Singpaore... island dispute and deals with Japan...risky
18:30 UK BoE financial stability report
20:30 OECD's Gurria speaks, 1st question, why lowering growth tgts?
23:0 US hearing on Basel pt 3
Bonds.
11:35 Japan 3 month auction
18:00 Italy 5 and 10 year auction, yields already sub 5%
02:00 US 7 year auction
Earnings.
Tiffany(US), Dixons(UK), Natl Bk of Greece(GR), Fraser Prop(SP), Choi Tai Fook(HK)
Stoddart
Showing posts with label NPL. Show all posts
Showing posts with label NPL. Show all posts
Wednesday, 28 November 2012
Sunday, 16 September 2012
Morning note, events and data 17th September 2012
Morning,
After a strong performance in Europe on Friday and US markets adding to the recent gains, I expected a bit more optimism in the press over the week.
With Europe and the Euro clearly dominating the headlines, along side the US QE3 program, I was expecting a more upbeat sentiment, like talks of improving growth targets, increased liquidity supporting lower rates and talks of "now we can concentrate on jobs". We didnt get it.
Headlines in the FT and Economist, highlight, Spain's reluctance to apply for the bailout. Rajoy's stalling, they blame, is due to the Spanish elections due on 21st October. This has part to play, but the main reason comes from the lack of clarity regarding the terms attached to the bailout. Current procedure is, you ask for support, then you get the cash and terms.
Rajoy's fears are justified. With his Government desperately trying to cut is deficit, currently 8.9% of GDP, conditions under the bailout could put additional austerity measures, further hurting employment. A major concern, when Spanish unemployment is at 24.7%, and protests for independence are increasing in size.
This is sounding more and more like Greece's predicament. Once again, fears are creeping in that delays could hamper job creation and in turn, the growth outlook.
Now moving to the US. Headlines in the FT highlight mortgage processing delays slowing US growth. In reality, regards of QE3, real interest rates across the globe have not reflected central bank rates. For example, with FED rates at 0.25%, mortgages rates are still at 3.50%. Now that is for a 30 year fixed rate, however, it has not changed over the last 6 months, despite 30 year treasuries getting as low as 2.5%.
Banks are still extremely nervous of NPL's. Given the pressure they face from new regulation, capital adequacy requirements and constraints on selling packaged debt products, it is not surprising that they reluctant to lend.
In addition to this, mortgage brokers and alternative lending sources have been squeezed out of the space, reducing competition. Prices have been impacted and with barriers to entry, now higher than ever, I suspect its a long time before we see this environment changing. A more relaxed stance on capital requirement and lighter regulation, would certainly support the market. But with the presidential election due, and lack of regulation being blamed for the recession, a policy of less regulation could be political suicide.
Its a good job people quick to forget the bad.
Markets.Given the recent rally in everything from basic materials to industrials, I expect to see some outflows today. Ok, we have QE3, but QE1 and QE2 outcomes have been shorted lived. Investors now want to see the data improving.
This should encourage profit taking, especially in gold miners, which looking at the junior gold miner ETF, GDXJ US, has rallied over 30% since July.
I agree with many, that the Euro squeeze has more to go, given how heavily underweight the market is, but the sudden movement will soon run out of steam as the data is slow to react. For example, Spanish unemployment is highly unlikely to come in below 18% before 1Q 2013.
With the weakness in the US$ supporting basic materials, coal, iron and copper should continue to run, but with inventories so high, physical prices have a very heavy ceiling as firms look to maintain revenue through increased sales. Oversupply will continue for some time to come.
China banks.
Have seen some strength, mostly on the back of short covering. Time to look at shorting again. With Reserve Rate Requirements(RRR) and interest rate cuts due, margins will decline whilst NPL's increase. Not a pleasant position to be in.
HK Property.
Very strong performance last week as the US signal low rates til 2Q 2015. With the HK$ peg, HK property is seen as a strong US$ hedge and investors are looking for a strong pick up in demand. My issue here, HK property prices have hardly corrected. Property developers for years have controlled supply, supporting prices and the mark to market of its inventory. My fear is, the HK government have already shown concerns of a property bubble, which will need to be addressed. Looking to short the sector into strength.
China utilities and telecoms. Looking to buy on weakness. Recent strength has seen yields fall, but with a strong pull back as investors increase risk, should leave these names look attractive. Not a buyer at these levels, but are on the radar.
China railway.
Huge short covering on the back of the rail minister pushing of increased roll out of projects. Near term earnings look dramatically improved, however, the outlook passed 2015/16 is limited. Increasing competition for maintenance contracts has reduced margins, and unless exporting products and services increase, new projects will once again start to slow. Short into strength
China oils.
Very strong rally helped by pump price increases, weaker US$ pushing crude higher and to a less degree, improving growth outlook. Time to take profits in the sector. PTR(857) up HK$1 in a week, now trading at $10. We can look at buying again on the pull back.
Markets today, open at the highs and trade sideways early session, then in the afternoon as Europe come in, we should see them trend easier.
Events.Merkel Q&A with Journalists in Berlin, Romney speaks in LA
Data.13:30 Indian repo rate
15:00 Turkey unemployment rate
16:00 Eurozone current account
16:00 Italian trade balance
17:00 EU labour costs and trade balance
20:30 US empire manufacturing
Also due is China FDI, Russian industrial production
Stoddart
After a strong performance in Europe on Friday and US markets adding to the recent gains, I expected a bit more optimism in the press over the week.
With Europe and the Euro clearly dominating the headlines, along side the US QE3 program, I was expecting a more upbeat sentiment, like talks of improving growth targets, increased liquidity supporting lower rates and talks of "now we can concentrate on jobs". We didnt get it.
Headlines in the FT and Economist, highlight, Spain's reluctance to apply for the bailout. Rajoy's stalling, they blame, is due to the Spanish elections due on 21st October. This has part to play, but the main reason comes from the lack of clarity regarding the terms attached to the bailout. Current procedure is, you ask for support, then you get the cash and terms.
Rajoy's fears are justified. With his Government desperately trying to cut is deficit, currently 8.9% of GDP, conditions under the bailout could put additional austerity measures, further hurting employment. A major concern, when Spanish unemployment is at 24.7%, and protests for independence are increasing in size.
This is sounding more and more like Greece's predicament. Once again, fears are creeping in that delays could hamper job creation and in turn, the growth outlook.
Now moving to the US. Headlines in the FT highlight mortgage processing delays slowing US growth. In reality, regards of QE3, real interest rates across the globe have not reflected central bank rates. For example, with FED rates at 0.25%, mortgages rates are still at 3.50%. Now that is for a 30 year fixed rate, however, it has not changed over the last 6 months, despite 30 year treasuries getting as low as 2.5%.
Banks are still extremely nervous of NPL's. Given the pressure they face from new regulation, capital adequacy requirements and constraints on selling packaged debt products, it is not surprising that they reluctant to lend.
In addition to this, mortgage brokers and alternative lending sources have been squeezed out of the space, reducing competition. Prices have been impacted and with barriers to entry, now higher than ever, I suspect its a long time before we see this environment changing. A more relaxed stance on capital requirement and lighter regulation, would certainly support the market. But with the presidential election due, and lack of regulation being blamed for the recession, a policy of less regulation could be political suicide.
Its a good job people quick to forget the bad.
Markets.Given the recent rally in everything from basic materials to industrials, I expect to see some outflows today. Ok, we have QE3, but QE1 and QE2 outcomes have been shorted lived. Investors now want to see the data improving.
This should encourage profit taking, especially in gold miners, which looking at the junior gold miner ETF, GDXJ US, has rallied over 30% since July.
I agree with many, that the Euro squeeze has more to go, given how heavily underweight the market is, but the sudden movement will soon run out of steam as the data is slow to react. For example, Spanish unemployment is highly unlikely to come in below 18% before 1Q 2013.
With the weakness in the US$ supporting basic materials, coal, iron and copper should continue to run, but with inventories so high, physical prices have a very heavy ceiling as firms look to maintain revenue through increased sales. Oversupply will continue for some time to come.
China banks.
Have seen some strength, mostly on the back of short covering. Time to look at shorting again. With Reserve Rate Requirements(RRR) and interest rate cuts due, margins will decline whilst NPL's increase. Not a pleasant position to be in.
HK Property.
Very strong performance last week as the US signal low rates til 2Q 2015. With the HK$ peg, HK property is seen as a strong US$ hedge and investors are looking for a strong pick up in demand. My issue here, HK property prices have hardly corrected. Property developers for years have controlled supply, supporting prices and the mark to market of its inventory. My fear is, the HK government have already shown concerns of a property bubble, which will need to be addressed. Looking to short the sector into strength.
China utilities and telecoms. Looking to buy on weakness. Recent strength has seen yields fall, but with a strong pull back as investors increase risk, should leave these names look attractive. Not a buyer at these levels, but are on the radar.
China railway.
Huge short covering on the back of the rail minister pushing of increased roll out of projects. Near term earnings look dramatically improved, however, the outlook passed 2015/16 is limited. Increasing competition for maintenance contracts has reduced margins, and unless exporting products and services increase, new projects will once again start to slow. Short into strength
China oils.
Very strong rally helped by pump price increases, weaker US$ pushing crude higher and to a less degree, improving growth outlook. Time to take profits in the sector. PTR(857) up HK$1 in a week, now trading at $10. We can look at buying again on the pull back.
Markets today, open at the highs and trade sideways early session, then in the afternoon as Europe come in, we should see them trend easier.
Events.Merkel Q&A with Journalists in Berlin, Romney speaks in LA
Data.13:30 Indian repo rate
15:00 Turkey unemployment rate
16:00 Eurozone current account
16:00 Italian trade balance
17:00 EU labour costs and trade balance
20:30 US empire manufacturing
Also due is China FDI, Russian industrial production
Stoddart
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