From a U.S. source but not verified, FYI
In light if today’s massive move higher in risk markets we thought that we might share with you a few pertinent dates. Swap lines were initiated between the Federal Reserve - ECB and Swiss Central Bank on 12/12/07. Remember TAF?? The market closed at 13473 on 12/12/07 only to find itself at 12000 within a month’s time.
Lehman Collapsed on 9/15/08. Swap Lines were initiated with the Bank of Japan, Bank of Canada and the Bank of England on 9/18/08. Those lines were expanded to include Australia, Norway and Denmark on 9/24/08. The market was at 10600 on 9/17/08 and would rally 700 points in the next 2 trading days. It would reverse course and close at 8450 in 3 weeks on 10/10/08.
On October 13, 2008 the Fed took off the limits on Swap Lines and the market rose 930 points the next day from 8451 to close at 9387. The market would reverse course again and close at 8175 within two weeks.
Swap lines were extended with the Central Banks of New Zealand, Brazil, Mexico, Korea and Singapore on 10/28-29/08. The market rallied 1400 points in 5 trading days from 8200-9600 only to find itself at 7550 within the next month.
The difference in 2011 is that we haven’t had a large systemically importance institution fail – yet. Was this response to the crisis done with the knowledge of an impending failure? This was the response that worked to settle markets – eventually- last time. The Fed is trying to stay out in front of this crisis. Did they get out in front of a looming large systemic failure which would have been brought on by a lack of liquidity??
Arthur Cashin would always say that history doesn’t repeat but it does tend to rhyme. I have been getting the feeling that we have been whistling past the Graveyard of 2008. Feels like things are starting to rhyme. Stay patient. Stay nimble.
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Thursday, December 1, 2011
Friday, June 17, 2011
Beware of Divergences!
Recent market behavior would suggest that analysts may be clinging to overly optimisitc expectations. Weakness in energy, metals, semiconductors, machinery, and economically sensitive Aussi and Cdn dollars is telegraphing a belief that risks are rising. Complacency is the enemy of investment success. We have to understand the message that the market is sending and pay attention.
When consensus says one thing and the market says the other, the market generally gets it right.
Wednesday, June 1, 2011
Barometer Readings - June 1, 2011
We continue to experience broad based rotation across asset classes into stable yield generating securities which include high dividend paying common stocks, REIT's, High Yield Bonds and virtually all fixed income including government debt. The Barometer team believes that our investors are best compensated with the generous spreads in the Canadian high yield bond market and common equity that has a record of raising dividends and stable cash flow yield.
Barometer Capital Management's broad cross section of equity risk indicators continue to point toward consolidation. When coupled with a steady stream of weakening economic indicators, our process dictates we remain focused in market leading themes which include defensive sectors, dividend paying equities and an elevated cash position.
Please find enclosed this week's Private Pool Holdings, as of May 30, 2011.
We continue to experience broad based rotation across asset classes into stable yield generating securities which include high dividend paying common stocks, REIT's, High Yield Bonds and virtually all fixed income including government debt. The Barometer team believes that our investors are best compensated with the generous spreads in the Canadian high yield bond market and common equity that has a record of raising dividends and stable cash flow yield.
Barometer Capital Management's broad cross section of equity risk indicators continue to point toward consolidation. When coupled with a steady stream of weakening economic indicators, our process dictates we remain focused in market leading themes which include defensive sectors, dividend paying equities and an elevated cash position.
Please find enclosed this week's Private Pool Holdings, as of May 30, 2011.
http://bit.ly/kMUVdP
Barometer Capital Management's broad cross section of equity risk indicators continue to point toward consolidation. When coupled with a steady stream of weakening economic indicators, our process dictates we remain focused in market leading themes which include defensive sectors, dividend paying equities and an elevated cash position.
Please find enclosed this week's Private Pool Holdings, as of May 30, 2011.
We continue to experience broad based rotation across asset classes into stable yield generating securities which include high dividend paying common stocks, REIT's, High Yield Bonds and virtually all fixed income including government debt. The Barometer team believes that our investors are best compensated with the generous spreads in the Canadian high yield bond market and common equity that has a record of raising dividends and stable cash flow yield.
Barometer Capital Management's broad cross section of equity risk indicators continue to point toward consolidation. When coupled with a steady stream of weakening economic indicators, our process dictates we remain focused in market leading themes which include defensive sectors, dividend paying equities and an elevated cash position.
Please find enclosed this week's Private Pool Holdings, as of May 30, 2011.
http://bit.ly/kMUVdP
Tuesday, May 24, 2011
80 - 60 - 40 Rule Spells Correction
One of our favorite indicators of equity market conditions looks at the percent of stocks within a market that are trading above their long term moving averages (% above the 30 week MA). After hitting a recent high at over 86% in January the % above the 30 dropped to below 60% this week indicating that market breadth is waning.
According to work done by our friends at Dorsey Wright and Associates, of 17 occasions this occured since 1970, the indicator fell to below 40% before the correction had run its course in all but one of the instances. In some cases this measure of market breadth ultimately fell to between 10 and 30% by the time it was done.
16 of 17 occasions over 40 years is a powerful statistic. This would indicate that there could be considerable room for this correction to run before we set up for the next sustainable rally.
Given this and other global equity risk indicators that point to correction, the various Barometer equity mandates currently are playing defence with a significantly reduced equity exposure and an elevated cash weight.
According to work done by our friends at Dorsey Wright and Associates, of 17 occasions this occured since 1970, the indicator fell to below 40% before the correction had run its course in all but one of the instances. In some cases this measure of market breadth ultimately fell to between 10 and 30% by the time it was done.
16 of 17 occasions over 40 years is a powerful statistic. This would indicate that there could be considerable room for this correction to run before we set up for the next sustainable rally.
Given this and other global equity risk indicators that point to correction, the various Barometer equity mandates currently are playing defence with a significantly reduced equity exposure and an elevated cash weight.
Wednesday, May 18, 2011
A More Defensive Stance
A sharp correction in small and mid cap risk assets globally has been well masked at
the index level by active rotation into more heavily weighted, large cap, defensive,
yield oriented, positions. We are now in the third year of a cyclical bull market and
there are rising concerns that the end to QE2, sovereign debt problems in Europe,
tightened reserve requirements in China and focus on deficit reduction in the US
could curtail the recovery. These concerns serve to put more emphasis on the value
of a steady stream of income. It is clear that investors continue to favor yield with
some inflation protection as we see continued strength in common shares with
growing dividends, reits and high yield bonds.
In the world of equities, commodities fell victim to coordinated hikes in margin
requirements which has driven liquidation across the complex. If the goal was to
cool speculative interest, it is clear that in at least the short run, policy makers are
having success.
As is our strategy, we don't fight the tape. Defense in risk assets appears to be the
path best followed until there is evidence to the contrary. Risk models for Canada,
Brazil, China, India and Australia have turned lower. Equity portfolios holdings are
focused in targeted large cap situations where there are catalysts driving rising
earnings estimates and likelihood of re-valuation. Sector exposures include industrials,
telecom, healthcare and consumer. Barometer sector risk models have moved us away
from metals, golds and energy that provided us such strong returns in Q4 2010 and
early 2011. When these factors are paired with weakness in the Nasdaq risk model,
it will be clear why we are operating with a reduced net long exposure across all equity
mandates.
the index level by active rotation into more heavily weighted, large cap, defensive,
yield oriented, positions. We are now in the third year of a cyclical bull market and
there are rising concerns that the end to QE2, sovereign debt problems in Europe,
tightened reserve requirements in China and focus on deficit reduction in the US
could curtail the recovery. These concerns serve to put more emphasis on the value
of a steady stream of income. It is clear that investors continue to favor yield with
some inflation protection as we see continued strength in common shares with
growing dividends, reits and high yield bonds.
In the world of equities, commodities fell victim to coordinated hikes in margin
requirements which has driven liquidation across the complex. If the goal was to
cool speculative interest, it is clear that in at least the short run, policy makers are
having success.
As is our strategy, we don't fight the tape. Defense in risk assets appears to be the
path best followed until there is evidence to the contrary. Risk models for Canada,
Brazil, China, India and Australia have turned lower. Equity portfolios holdings are
focused in targeted large cap situations where there are catalysts driving rising
earnings estimates and likelihood of re-valuation. Sector exposures include industrials,
telecom, healthcare and consumer. Barometer sector risk models have moved us away
from metals, golds and energy that provided us such strong returns in Q4 2010 and
early 2011. When these factors are paired with weakness in the Nasdaq risk model,
it will be clear why we are operating with a reduced net long exposure across all equity
mandates.
Monday, March 28, 2011
Relief rally may be fading.
March break is over and it is back to work!
After a seven day relief rally that brought indices within striking distances of their highs, many saw downside reversals today. We continue to prune lagging positions.
The rally has been on weak volume and many internal indicators have not been able to reverse the damage of the past few weeks. While some leaders have been able to make new highs, there has been rotation and a significant percentage of previously leading companies have lagged, pointing to a tired market.
Breadth models for North American markets continue to point to near term consolidation / correction.
Yield oriented positions remain strong on continued narrowing spreads.
After a seven day relief rally that brought indices within striking distances of their highs, many saw downside reversals today. We continue to prune lagging positions.
The rally has been on weak volume and many internal indicators have not been able to reverse the damage of the past few weeks. While some leaders have been able to make new highs, there has been rotation and a significant percentage of previously leading companies have lagged, pointing to a tired market.
Breadth models for North American markets continue to point to near term consolidation / correction.
Yield oriented positions remain strong on continued narrowing spreads.
Tuesday, March 15, 2011
This is Where it Gets Tactical
At some point, near term macro events overwhelm an otherwise longer-term constructive environment.
Through the fall, while developing and international markets underperformed, developed and specifically North American markets advanced in a broad based rally.
Even through the recent news flow in the Gulf, leading stocks simply consolidated a short term overbought condition. However, the events in Japan over the past few days have washed through an otherwise technically sound equity markets and have now pushed us into correction in many of the leading stocks. Our job is to assess the current market environment and act based on our disciplines when conditions change.
In the end, flow of funds drives markets and stock prices. Short and long term uncertainty has paused equity buyers in their tracks. As a result despite only moderate selling, it has had an out sized impact on prices.
Coming into the recent events, based on our Long Term Risk Models, the various Barometer Equity mandates have been focused almost entirely in North American companies, and more specifically Canada based on the strong currency setup.
Given the near term negative changes in Barometer's LT Risk Models for North America, we reduced higher beta positions and have hedged a significant portion of our continuing common equity exposure. This will be a work in progress. While we recognize that many of the factors are short term in nature, we are not paid to speculate, and managing risk is a big part of our mandate.
We always get impacted in the initial stages of a decline; there comes a point where defensive measures protect against a prolonged decline. The defense is on the field.
In the High Income Mandates, where yield and cash flow are the name of the game, our positions have held up well and continue to meet our tests.
Our monitoring of credit default swaps and other credit market indicators shows very little damage and a VERY different picture than the 2008-2009 setups. Given that both the top down work and bottom up analysis remains positive, we are making very few changes in the High Income holdings.
In all of our mandates, exposures continue to focus on energy (specifically oil and thermal coal), technology (services and communications), and capital equipment. We are also focused on infrastructure and inflation protected yield positions across mandates.
Please click through the following link to view a 10 minute BNN interview from this morning (March15th) discussion of our current views and portfolio strategies
http://bit.ly/fcCmtx
Through the fall, while developing and international markets underperformed, developed and specifically North American markets advanced in a broad based rally.
Even through the recent news flow in the Gulf, leading stocks simply consolidated a short term overbought condition. However, the events in Japan over the past few days have washed through an otherwise technically sound equity markets and have now pushed us into correction in many of the leading stocks. Our job is to assess the current market environment and act based on our disciplines when conditions change.
In the end, flow of funds drives markets and stock prices. Short and long term uncertainty has paused equity buyers in their tracks. As a result despite only moderate selling, it has had an out sized impact on prices.
Coming into the recent events, based on our Long Term Risk Models, the various Barometer Equity mandates have been focused almost entirely in North American companies, and more specifically Canada based on the strong currency setup.
Given the near term negative changes in Barometer's LT Risk Models for North America, we reduced higher beta positions and have hedged a significant portion of our continuing common equity exposure. This will be a work in progress. While we recognize that many of the factors are short term in nature, we are not paid to speculate, and managing risk is a big part of our mandate.
We always get impacted in the initial stages of a decline; there comes a point where defensive measures protect against a prolonged decline. The defense is on the field.
In the High Income Mandates, where yield and cash flow are the name of the game, our positions have held up well and continue to meet our tests.
Our monitoring of credit default swaps and other credit market indicators shows very little damage and a VERY different picture than the 2008-2009 setups. Given that both the top down work and bottom up analysis remains positive, we are making very few changes in the High Income holdings.
In all of our mandates, exposures continue to focus on energy (specifically oil and thermal coal), technology (services and communications), and capital equipment. We are also focused on infrastructure and inflation protected yield positions across mandates.
Please click through the following link to view a 10 minute BNN interview from this morning (March15th) discussion of our current views and portfolio strategies
http://bit.ly/fcCmtx
Tuesday, March 1, 2011
Market Call with BNNs Andrew Bell
A discussion about current markets, leading stocks and sectors and answers to callers questions
http://bit.ly/dEEh1b
http://bit.ly/dEEh1b
See this interview Cramer did last evening with CEO of Globe Specialty Metals
GSM is a current holding in various Barometer mandates.
Strong, well protected market position with pricing power.
Cramer interview - Globe Specialty Metals (GSM)
Strong, well protected market position with pricing power.
Cramer interview - Globe Specialty Metals (GSM)
Friday, February 25, 2011
Divergence - Gold vs. Gold Stocks...There are better fishing ponds
Despite a significant rally in gold over the last week, stocks have underperformed. In fact, many such as Newmont (NEM) and Kinross (KGC) have broken down.
The gold sector has been exhibiting deteriorating breadth since the middle of January and we now are running into a seasonally weak period. Caution is warranted.
Bullish % for Precious Metals Sector
Barometer Readings
Despite recent geo-political activity overseas, our long-term sector models remain intact with developed market equities favoured over developing market equities and higher yielding corporate bonds and yield based equities favoured over sovereign fixed income. It is always strange how markets telegraph developments before reasons become obvious. Over the past few months, our sector work has pushed us toward virtually a max weight in energy (specifically oil), in both our equity and income mandates. While a quick contraction in risk appetite is having an impact in the last couple of days, it appears to be an effective allocation given what is happening in the gulf.
Across mandates, portfolios currently target multi-year secular growth themes where the supply/demand situation allows for pricing power vs. rising input costs. On top of our energy exposure, Canadian REIT's offer three attractive characteristics which include strong AFFO growth, a decreasing cost of capital and incremental demand for space from new tenants such as Target. Finally, we want to highlight our focus on technology which includes semi conductor and semi capital equipment, fibre optics, mobile data and IT services. Each of these areas are experiencing strong demand growth with good pricing power.
Cyclical Bull markets are characterized by steady advances, marked by short, sharp corrections so we could see further short term profit taking but liquidity and re-allocation should bring buyers into leading names on pullbacks.
Barometer Pool Holdings http://bit.ly/e2FRZ5
Across mandates, portfolios currently target multi-year secular growth themes where the supply/demand situation allows for pricing power vs. rising input costs. On top of our energy exposure, Canadian REIT's offer three attractive characteristics which include strong AFFO growth, a decreasing cost of capital and incremental demand for space from new tenants such as Target. Finally, we want to highlight our focus on technology which includes semi conductor and semi capital equipment, fibre optics, mobile data and IT services. Each of these areas are experiencing strong demand growth with good pricing power.
Cyclical Bull markets are characterized by steady advances, marked by short, sharp corrections so we could see further short term profit taking but liquidity and re-allocation should bring buyers into leading names on pullbacks.
Barometer Pool Holdings http://bit.ly/e2FRZ5
Thursday, February 24, 2011
UNX to be acquired by HRT at $6.95 per share - a significant premium
Brazilian oil company HRT Participacoes (HRTP3.SA) said on Thursday that it is acquiring Canada's UNX Energy for 1.3 billion reais ($781 million), according to a filing with the securities regulator CVM. HRT said it would pay for the deal with depository receipts of the company abroad. (Reporting by Guillerme Parra-Bernal; Writing by Raymond Colitt Editing by Gary Hill) -
Held in Lakeview Canadian Equity, Barometer Long/Short and various seperately managed account mandates.
Held in Lakeview Canadian Equity, Barometer Long/Short and various seperately managed account mandates.
Thursday, February 10, 2011
Arm Holdings based Qualcomm chip chosen by HP
SAN FRANCISCO, Feb 10 (Reuters) - Qualcomm Inc said on Thursday that its newest dual-core processor was designed to compete in the red-hot tablet market against Texas Instruments and smaller rival Nvidia, which has dominated design wins in early 2011.
Qualcomm's APQ8060 dual-core Snapdragon processor is being used in Hewlett-Packard Co's "TouchPad", which was unveiled on Wednesday.
Steve Mollenkopf, Qualcomm's Group president, said in an interview on Thursday that companies had agreed to use its processors in more 20 tablets.
He gave no further details but said, "If you look at our customer base it tends to be a blend of traditional phone manufacturers going after that market as well as traditional PC manufacturers going after that market and we have a good mix of both."
Qualcomm shares rose 1.41 percent to end at $57.
HP is betting heavily on the its TouchPad tablet, due to be released this summer, making the design win significant for Qualcomm.
Qualcomm's newest processor belongs to the Snapdragon line and it allows for high-definition and 3D video.
Nvidia, which specializes in graphics chips, has led tablet design wins so far this year with its Tegra 2. Its shares are up almost 50 percent since the end of December.
Earlier this week, Texas Instruments announced its newest mobile processor, the OMAP 5, which is also a two-core processor and will be available for tablet and phone makers to test in the second half of 2011.[ID:nN07128252]
All three chipmakers' mobile processors' are based on an energy efficient architecture licensed to them by Britain's ARM Holdings.
So far, manufacturers have mostly avoided Intel's mobile chip offerings, which are based on scaled down versions of PC chips and use more energy. Intel expects to launch improved versions early this year and has said it is committed to the mobile market.
On Monday, market research firm IHS iSuppli said Apple's new CDMA iPhone 4 for Verizon uses a baseband chip made by Qualcomm, a major design win.
Qualcomm's APQ8060 dual-core Snapdragon processor is being used in Hewlett-Packard Co's
Steve Mollenkopf, Qualcomm's Group president, said in an interview on Thursday that companies had agreed to use its processors in more 20 tablets.
He gave no further details but said, "If you look at our customer base it tends to be a blend of traditional phone manufacturers going after that market as well as traditional PC manufacturers going after that market and we have a good mix of both."
Qualcomm shares rose 1.41 percent to end at $57.
HP is betting heavily on the its TouchPad tablet, due to be released this summer, making the design win significant for Qualcomm.
Qualcomm's newest processor belongs to the Snapdragon line and it allows for high-definition and 3D video.
Nvidia
Earlier this week, Texas Instruments
All three chipmakers' mobile processors' are based on an energy efficient architecture licensed to them by Britain's ARM Holdings
So far, manufacturers have mostly avoided Intel's
On Monday, market research firm IHS iSuppli said Apple's
Tech vs. Financials - A process of repair
When the tech sector rolled over in 2000 it went through the classic bursting of a bubble. After an initial rebound in 2003, the sector spent the next seven years underperforming on a relative basis as excess ownership was distributed into the market. ....so, after the collapse in financials through 2008/9 the sector rallied off the bottom and now unfortunately is displaying the same poor relative performance characteristics as tech did following 2004. It is likely that multiple compression will rule the day for the next several years as over-ownership is slowly washed out in favor of more timely opportunities.
(Chart courtesy of Mark Deriet - Cormark Securities)
Tuesday, February 8, 2011
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