Thursday, October 7, 2010

Thursday Market Review 10-7-2010

Okay, first things first:  Haven't done the review in a couple days.  Been working like a dog trying to put together a value proposition for a sell-side firm.  Getting a job takes priority over blog!

Interesting day today (aren't they all?).  Jobless claims (or lack thereof) got us going this AM (yes, despite #s looking lower due to higher revisions to last week).  Dollar was getting slapped around (again or still) and the risk free was smoking again (10s below 2.40%).  Are you a believer yet?  Jobless recovery?  I am begrudgingly beginning to think the employment situation is getting better (less bad might be a better way to put it) and perhaps the end isn't so near.  Some numbers:

Equity:

The safety dance was the dance today as risk became the forbidden dance in front of the employment number.  Some indicators are pointing to a disappointing number tomorrow, but watch the spin machine (said only mostly seriously).


Am I crazy or is the beta trade alive and well?  Yep, small caps out in front.  While I think it is too early for them to take the lead, its better to be right than smart.  As the saying goes, the market can remain irrational longer than you can remain solvent.


And globally:


Bottom line:  global is where you wanna be.  I'll take 200bps year to date outperformance vs S&P any day.  Think outside the bubble, the world is small but its returns are better.  Always increase your opportunity set when you can.  The safety dance on the floor globally too.


Fixed Income:


Lots of salesman going to RayJay conference in FL, lucky bas*%$ds.


Secondary volume today was decent and advancers lead decliners by about 1.25x in IG and HY.  Wells cut some ratings today on REIT bonds - or at least those that have outperformed, saying take some $$ off the table as performance will be found in some of the higher spread names.  Personally, I think this can be extrapolated to the broader market.  Get out of the names that have cranked in and redeploy to higher beta names (if they are fundamentally sound - some of us still do the credit work).  This might lead some to the CDX X-over rather than HY or IG - hmmmm, maybe not a bad thought.


Its Nancy Drew's Case of the disappearing risk free rate:


Steepen it!  Who else is long 10s, short 20+?  2yr at 35bps, 5s at 112bps and 10s at 238bps?  What is this telling us?  Slow growth, low inflation?  Maybe.  QE2?  Definitely.  Who's the dumbest money on the planet?  Hah, state funds can now say it ain't them!


Germany got das boot!


Howz about a little currency:


Love AdvFn.com!  Notice anything about dollar pairs?  Me too > the numbers are in red (like blood).  Who's yer daddy?  Still like the commodity currencies, is it time to get a little loonie?

 Ugh, might as well throw in some NFP stuff as the market holds its breath for some jammed data:

And a picture:




Private nonfarm payrolls climbed by 75,000 in September after an increase of 67,000 in the previous month, according to the median forecast of 59 economists in a Bloomberg News survey before tomorrow’s report from the Labor Department. The jobless rate is expected to increase to 9.7 percent from 9.6 percent.

Best of luck, lets be careful out there.

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About Me

A student of the markets that has held portfolio management, analysis and trading positions for over 15 years.