4 1/4% 32 Discussion Threads

[simon gordon] 31/3/2010 18:13

Dasv and myself have agreed to blend our two threads together, TR32 & MACR, into one new thread SHA, which is called Share Ideas: macro & micro.

The idea for the thread is to share ideas for trading & investing in both the macro (currencies, bonds, etc) and micro (equities).



I hope to see you at SHA = Shangri-La :-)

[hosede] 31/3/2010 14:56

Simon
But won't the corporate recovery be totally destroyed if we have a raft of sovreign defaults? Isn't that now the worry - that the bad debts have simply been transferred and will still go bad.

[dasv] 31/3/2010 14:39

Just posted the results of a scan for weekly ichimoku charts turning bullish.

plenty of stocks there which have not topped but rather many are going through the juiciest phase of their recovery.

Simon: PTR just showed up on that scan. I'm tempted.

[stuart14] 31/3/2010 14:20

FTSE100 double top? Problem is we've had a few that have been blown away now.

[essentialinvestor] 31/3/2010 14:15

There must come a point when either the Private sector can create jobs,
or we are in trouble.

There may be a month or so left where the Market continues to give
the US Economy the benefit of the doubt.

I cannot bring myself to buy anything at these levels, however
I'm using this time to investigate future prospects.

[simon gordon] 31/3/2010 14:08

Corporate recovery could take investors by surprise
By David Bowers

Published: March 2 2010

Three years ago we lived in a world that thought it had tamed macroeconomic volatility through independent central banks and inflation targeting. 'Black Swans' - low probability but high impact events – were thought to have been eliminated by sophisticated risk management and securitisation. Investors and companies were lulled into thinking that 'All Swans were White'. With the benefit of hindsight we now know that nothing was further from the truth. In retrospect, the biggest mistake during the Great Moderation was to imagine that the business cycle was dead – rather than simply in suspended animation.

Three years on and we find ourselves in a world where 'Black Swans' are everywhere. Investors and corporates alike live in constant fear of low-probability, high-impact events. They have hunkered down in defensive mode and now wait for their competitors to make mistakes. Global multinationals continue to cut costs as though there is no tomorrow. Welcome to the world of the 'New Normal', a world where structural change lords it over the business cycle.

However, with apologies to the philosopher Karl Popper, the sighting of just one White Swan should disprove the thesis that ALL Swans are now Black. And wouldn't it be ironic if that 'White Swan' turned out to be the rediscovery that the business cycle was not dead? Indeed, the biggest macro shock for many investors may not be another downturn - the 'double-dip' that dominates today's Conventional Wisdom - but rather a strong cyclical recovery spurred on by the massive fiscal and monetary stimulus.

Investors, who three years ago would not have given the time of day to a macro-strategist, are now convinced that a whole flock of macro "Black Swans" are set to undermine markets in 2010 and beyond. For many, the fears relate to private sector deleveraging, and are focused on anaemic consumer spending, persistent high unemployment and weak housing markets. For some, it is the lack of bank lending to small and medium sized companies that prevents a pick-up in investment and sustained economic recovery. Or that the counterpart to rising private sector surpluses is ballooning public sector deficits that will become increasingly difficult to finance. For others, it is the withdrawal of quantitative easing and the prospect of rising rates that are certain to undermine any recovery.

The reality, however, is that US household consumption is not in freefall. Indeed, personal consumption is currently two per cent above its December 2008 low, and as a share of GDP currently stands close to its all-time high. But what has been unprecedented is the corporate response: massive cutbacks in capital spending, inventories and employment. In short, last year's US recession was due much more to a rise in the corporate rather than the household saving rate.

The big question now is whether companies have cut back too much. Has corporate spending been pared back too aggressively for the current levels of household spending? Could the corporate sector be more surprised by the resilience of the current level of demand than by a 'double dip'?

If companies rehire workers that were fired last year, rebuild inventories that had been run down to their lowest operational level, and re-authorise capital spending abandoned at the height of the credit crunch this would come as a shock for the 'Black Swan' bevy. It would help lower unemployment and so underpin consumer confidence, bring down loan charge-off rates and help restore the credit multiplier of the banking system, as well as raise nominal GDP growth to a level that would have a major positive impact on the budget deficit.

The emergence of a corporate-led recovery could have some radical implications for investment strategy. For a start, it would shake fixed-income investors out of their complacency, particularly at the front end of the curve. It would also accelerate the transition already underway in equity markets away from last year's liquidity-driven regime towards a greater focus on equity fundamentals, such as earnings growth, together with the possibility of a major pickup in M&A as corporates restructure their businesses.

A fellow strategist recently remarked how the 'structural bears' tend to get taken more seriously than 'cyclical bulls'. The latter tend to be dismissed at best as naive optimists or at worst as cheerleaders for Wall Street. But in our view investors ignore a potential recovery in the business cycle at their peril. If the corporate sector stops running itself for cash and starts investing 'for tomorrow', then it is still possible that this 'Ugly Duckling' of a recovery could yet turn into a beautiful 'White Swan'. It is time that we reminded ourselves that not all Swans are Black.

David Bowers is joint managing director of Absolute Strategy Research

[contrarian2investor] 31/3/2010 14:05

EssentialInvestor,

WRT Bears, not yet. IMO it is Friday's figures that will decide the direction of the markets for the next month or so. If those numbers are poor then I and the rest of the bears will start to short once more.

c2i

[essentialinvestor] 31/3/2010 13:58

The Bears on this thread must be licking their lips with such a
shocking ADP number.

Where is the US Private jobs growth.

[essentialinvestor] 31/3/2010 11:41

hosede

That is Teun Draaisma's view - post 6391.

I am very cautious at the moment,
although I'm useless at calling future Market direction.

[hosede] 31/3/2010 11:23

EI you're right - all the problems Ireland, Dubai, Greece etc. are going to keep coming back time after time as they are not being dealt with - just a few sticking plasters applied. And new ones - Portugal Spain Italy and UK will also no doubt be added. In truth there probably is no way to deal with them except by defaulting

[badtime] 31/3/2010 09:38

Lol..predictions predictions predictions...waste of money

[essentialinvestor] 30/3/2010 22:53

And that is the good news! - its a far bleaker picture further out.

[abc125] 30/3/2010 22:19

Morgan Stanley equity analyst Teun Draaisma is pencilling in a 11% correction over the 'next 3-6 months':

[badtime] 30/3/2010 18:39

Bought YULC a few weeks bak at 165p

[essentialinvestor] 30/3/2010 17:19

I thought so, It looks a great Company Simon
and the cash generation is very strong.

[simon gordon] 30/3/2010 17:16

EI,

Yes, I bought some today and yesterday.

[dasv] 30/3/2010 17:08

looks like my buy for YULC triggered at 180p.

[essentialinvestor] 30/3/2010 16:24

Simon

Did you buy YULC today, if I may ask?.

[contrarian2investor] 30/3/2010 16:10

dasv,

Thanks for the reply wrt Nat Gas. So I will await a trading opportunity from August onwards.

---------------

hosede,

Thanks for your reply. I am hoping silver does not fall too much as I have many silver related tiddlers. I currently have a large tranche of SCOP which is down 5% following Copper's huge rise over the past 2 months. However just like my purchase of PHPD in late 2008, I will be holding on. I agree with you that the EUR & GBP have further headwinds to deal with.

c2i

[hosede] 30/3/2010 14:07

SKYSHIP
That's my view - the extra cash will reduce gearing which is good, but I think the dividend may have to be reduced a little if the values of the properties fall. Nevertheless I think the risk is much lower than with a lot of other shares

C2i
I am short silver but nothing else. EUR and GBP are recovering as DXY falls back a bit, but I think it will only be temporary

[dasv] 30/3/2010 13:22

c2i - nat gas: a huge abundance of shale gas has become available with new technology/extraction techniques. This current oversupply is a dead weight on the nat gas price in my view. Crude: inventories may be high but the market seems to like the fundamentals of growing demand.

-

BTW took a small short on CNE today. Target 398p (about 5% down).

[jaws6] 30/3/2010 13:02

CNT downgrade by broker. Got none.