Institute of Trading and Portfolio Management

HI William. Shorted S&P500 at 1455 against a bunch of defensive names. Made a few percent on it on the way. At time inflation adjusted S&P hit major resistance and the divergence due to QE between leading Indicators and S&P annual performance just got too wide. One of them had to give. in hte end it was S&P500. As to whether I am short generally now. I am not. Had a good year and if you watch the vids of lats trader meeting you will see that the message was loud and clear. Fiscal Cliff a big bad situation, but very overbroked and expectations are in the market. So too dangerous to call a direction into it. trade after it. So i pretty much closed down for the year 3 weeks ago. 

AK I am interested in your post about divergence between leading indicators and market performance you seem to be negative on stocks and the market generally

are you staying out or have you positioned yourself net short?

thanks

Some interesting themes popping up lately.

Check out Visa/Du Pont as a spread.

A little late to the party? I still think there is more upside here.

Thanks Martin. Useful stuff as always! and really is my answer to Laurance's question. ISM still anaemic in U.S. although slightly above 50, the divergence between leading indicators and market performance has been vast this year and one of them has to give. Also with U.S. election there could be a situation unfolding here in which Obama wins but Republicans dominate congress. So Obama gets the popularity vote but not the policy vote. If this ends up being the case the risk of the cliff becomes marginally greater and will sink GDP growth for 2013. I'm slowly but surely positioning for this, trying to pick levels and not rush into the trade.  

Ive attached a timeline/key dates between now and March for the Fiscal Cliff.

sorry if this is in the wrong section but I tried to create a new thread in chemicals and the website just crashed, anton i see from the trader meeting that you are short chemicals, can i ask why?

the economic data is good and the ism is expanding, i am long chemicals in the states.

im not questioning your trade just wanted your view as to why you are short in a rising market.

thanks laurence schongar, switzerland.

Macro Update 

*China’s official PMI rose to 50.2 in October from 49.8 in September in line with consensus, and confirms that economic momentum has indeed picked up. The new order index rose above 50 the first time since April.

*The Greek budget continued to be debated after the government outlined the new austerity measures and revised draft budget for 2013 prompting a 48 hour general strike next week. Parliamentary approval of the measures is essential with Venizelos telling law makers to support the austerity. Lipsky says Greece is still uncompetitive and the rescue is ‘botched’.

*UK comes into focus again after reluctance by law makers to support the banking union – Bean says greater integration needed in Europe to survive. Miles says stimulus has not been enough to fully offset the impact of the banking crisis while Bean says economic doubts are stemming the effectiveness of the easing. However, the CBI raised the its U.K. economic forecasts.

*Moodys have warned Japan that impasse on deficit bill is credit negative

For more headlines and details, please see below:-

Greece’s Botched Rescue Is Frustrating to Behold, Lipsky Says

Efforts to rescue Greece have failed to provide the basic structural reforms needed to help bring competitiveness to its economy, said John Lipsky, the International Monetary Fund’s former first deputy managing director.

Pasok Leader Tells Lawmakers to Support Austerity, Thema Says

Greek Pasok party leader Evangelos Venizelos spoke to Pasok lawmakers in Athens today after 9 withheld support for bill on state-asset sales, Athens-based Proto Thema reports, without saying how it got the information. * NOTE: Pasok, with 33 lawmakers, supports coalition govt of PM Antonis Samaras and provides Samaras with majority in Parliament

Global Stimulus Hasn’t Offset Crisis Impact, BOE’s Miles Says

Global central bank stimulus has not been enough to fully offset the impact of the banking crisis and a downturn led by deleveraging, according to a research paper co-written by Bank of England policy maker David Miles. “Even if quantitative easing has been effective in terms of boosting the economy, recovery still remains fragile,” Miles and authors including the U.K. central bank’s Michael Joyce said in the report published by the Economic Journal today. “This raises the possibility of increasing the scale of QE so that it can have a larger macroeconomic effect.”

U.K. Economic Outlook Raised by CBI After Rebound From Recession

Britain’s biggest business lobby raised its U.K. economic forecasts for this year and next after a surge in third-quarter growth and said the Bank of England will probably refrain from expanding stimulus next week. The economy will stagnate this year and expand 1.4 percent in 2013, the Confederation of British Industry said in a report published in London today. In August, it predicted a 0.3 percent contraction and a 1.3 percent expansion respectively. Growth may accelerate to about 2 percent in 2014.

BOE’s Bean Says Economic Doubts May Undermine Impact of Stimulus

Bank of England Deputy Governor Charles Bean said consumers’ and businesses’ concerns about the outlook may undermine the impact of quantitative easing, in remarks one week before officials’ next decision on stimulus.  “Looser monetary policy works in large part by encouraging households and businesses to bring forward future spending to the present,” Bean said late yesterday. “It is plausible, however, that such intertemporal substitution will be weaker when uncertainty is elevated and when banks and some households are concentrating on repairing their balance sheets.”

 Japan Impasse on Deficit Bill Is Credit Negative, Moody’s Says

 The risk that a political impasse over budget legislation in Japan may force the cancelation of a bond auction is credit negative, Moody’s Investors Service said. Ministry of Finance and primary dealers met last week to discuss how failure to pass the deficit financing bill would affect the JGB market. “Smooth operation of the JGB bond market is crucial to maintaining confidence in the Japanese government’s capacity to manage stable JGB issuance and service its outstanding debt": Moody’s

HSBC China Oct. Manufacturing PMI 49.5 Vs 47.9 in Sept.

China’s manufacturing expanded for the first time in three months as output and new orders climbed, adding to signs growth in the world’s second-biggest economy is rebounding after a seven-quarter slowdown. The Purchasing Managers’ Index climbed to 50.2 in October from 49.8 in September, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today in Beijing.

India’s Manufacturing Growth Accelerated in October, PMI Shows

 India’s manufacturing growth accelerated in October for the first time in four months, a private survey showed, adding to signs that the worst of Asia’s economic slowdown may have passed. The purchasing managers’ index rose to 52.9 from 52.8 in September, HSBC Holdings Plc and Markit Economics said in a statement today.

Overnight News:

-CME index futures will trade as usual Weds; NYSE & Nasdaq confirm stock mkts will open Weds; SIFMA recommend bond mkts open Weds

-Hurricane Sandy: has caused at least 45 deaths & left 8m homes without power

-Spain: Sept YTD Central Govt Deficit 4.4% (3.9% ex transfers); lower vs 4.7% in Aug

-Spain Dep Budget Min: Central govt will beat deficit tgt; will be less than 4%; studying bailout for toll-roads

-Spain Spokesperson: Expect first tranche of EU aid for banks by early Dec

-Source: majority of Greek Pasok party will vote in favour of austerity package & labor reforms

-ekathimerini: draft 2013budget provides measures of €9.2 B, GDP -4.5% & primary surplus of 0.5%

-EU’s Wieser: Greek Troika negotiations not finished but close to an end; could receive a “flatter adjustment process"; debt writedown not discussed

-ECB’s Praet: non-standard measures in place as long as necessary; can pull back if inflation risks emerge; signs of Eurozone recovery

-ECB’s Coeure: No shortage of collateral; do not think ECB will further extend collateral moves – done a lot already

-ECB’s Coeure: price risks balanced; v vigilant to any risks to price stability; ECB not negotiating w/ any govt on bond buys; have tools needed to reduce liquidity but not needed now

-Rtrs: Portugal expected to pass budget today; focus on whether it is challenged by constitutional court

-FT: notes concerns over Merkel’s majority; coalition anxious about voting for further Greek aid & a program for Spain

Merkel meeting with IMF / OECD / World Bank leaders

-Joint Statement: world economy is fragile with uncertain prospects; debt levels in major economies unsustainable

-Merkel: global growth prospects weaker than hoped; sees obvious risks

-Merkel: Greece not a major topic at talks; waiting for Troika rpt

-IMF’s Lagarde: govts must consolidate; accommodative mon policy may be needed

-UK: GfK Consumer Conf small miss at -30 vs -28 cons

-Fed’s Kocherlakota: disagree Fed policy too easy; low inflation & high unemp suggests policy too tight

-NY Fed: Bank facility safe, unharmed & open

-Japan: Oct PMI falls to 49.9 from 48.0 in Sep; 18m low

-China: Yuan opened strong; one pip away from daily 1% limit before moderating

 Spain Banking Bailout May Be Cut to EU30b: Cinco Dias 

[BKIA SM  1.153, +0.05 4.82%]

  Amount would be E10b lower than estimates from Spanish government, Cinco Dias reports.

-          The sale of lenders’ assets to investors and to the so-called bad bank, along with application of losses to junior bondholders of nationalized banks would reduce the use of taxpayer funds: Cinco Dias.

-          Cinco Dias says information for article came from unidentified executives in the financial sector briefed by officials at Economy Ministry

-          Press official at economy ministry contacted by the newspaper reiterates EU40b estimate for use of public funds: Cinco Dias

 SPAIN: Spain’s central government budget deficit narrowed in September as sales tax revenue jumped 11.9% following an increase the VAT rate, the Budget Ministry said late yesterday. The central government’s deficit was 4.39% of gross domestic product in the nine months through September, compared with 4.77% in the eight months through August.

 SPAIN: The Bank of Spain will publish current account, capital account and foreign portfolio investment data at around 10am (CET).

 SPAIN: Public employees may be fired with 20 days per year paid.

 SPAIN: Spain’s economic malaise was responsible for Imperial Tobacco slashing the value of its business there by £1.2 billion as it warned that economic conditions remained difficult in Europe’s fourth-biggest economy, The Times reports.

SOVEREIGN CRISIS: Greek austerity reforms look more likely to be passed after most PASOK members in the country's parliament said they backed the measures proposed by prime minister Antonis Samaras (Financial Times).

BANCO SABADELL: Doesn´t plan to invest in Sareb, yet, Sabadell Chairman said.

Analysts…

 UBS PT Raised 9% to Chf16 at Exane; Kept at Outperform

 UBS Raised to Buy from Neutral at BofAML

 UBS PT Raised to Sf17 VS Sf13 at Berenberg, Stays Buy

 Erste Bank PT Raised to Eu21 From Eu19 at Morgan Stanley

 CS RESEARCH - DOWNGRADE Swiss Life (SLHN VX) to Underperform following strong performance.

 UBS Raised to Accumulate from Neutral at Helvea

Considers group’s further plans as welcome acceleration, extension of original plans.

-          Says risk decreasing

-          PT increased to CHF16 vs CHF12.5

ECON RELEASES: UK TIMES

10:00 - Eurozone CPI Estimate

10:00 - Eurozone Unemployment Rate

10:00 - Italian CPI

11:00 - Italian PPI

11:00 - US MBA Mortgage Applications

12:30 - US Employment Cost Index

12:30 - Canadian GDP

BOJ expanded its asset purchase fund by Y10trln on Sept 19th - So the QE programme was expected as was no move in rates. There was also an addittional Y25trln Credit Loan Programme announced (expected). This is why its had no impact on JPY - It was totally expected and is now totally expected that they have to do more. Maehara (finance minister) and Shirikawa (govener) also said today that they will do more. Expected, given awful export data and deflation (missing 1% inflation target).   

does anyone know if the 11 trln asset buying was more qe, if so why it hasnt affected the jpy currency pairs