Diamonds are a Girl's Best Friend

Triple Bottom at 1.3450 on Euro

antonne — Fri, 05 Mar 2010 16:59:30 +0000

Over the past few weeks the Euro has formed a triple bottom at 1.3450 against the Dollar (the lows were on 19 Feb, 25 Feb and 2 Mar 2010). Triple bottoms are rare in markets because most times a market prints a bottom, bounces off that bottom the first time it is tested but breaks through [...]

Fed gets its Ducks in a Row

antonne — Fri, 26 Feb 2010 06:19:06 +0000

Last Thursday the Fed raised its discount rate by 25 bps to 0.75%, as highlighted 8 days previously in Bernanke’s Exit Strategy speech on 10 Feb 2010. As a result it now stands 50 bps above the upper limit of the current 0% – 0.25% range for the Fed Funds rate. The Fed also took the opportunity [...]

Merkel Re-ignites the Convergence Trade.

antonne — Fri, 12 Feb 2010 06:28:10 +0000

German Chancellor Angela Merkel has extracted the necessary promises from Greece that they will be good in future and properly respect the rules of the euro-zone’s Growth & Stability Pact (i.e. bring their budget deficit back down to less than 3% of GDP). Whilst the bigger & stronger countries within the euro haven’t quite worked [...]

The PIIGS will escape slaughter.

antonne — Fri, 05 Feb 2010 12:10:27 +0000

The Euro continues to trend lower against the Dollar as the recent turmoil in Greece’s government bond markets has started to spread to Portugal and Spain too. Events are starting to spiral out of control, evidenced by 10-year Greek bond yields rising from below 6% to more than 7% over the past few weeks (inflicting losses on the [...]

Hoenig the Hawk Hoists the Flag

antonne — Fri, 29 Jan 2010 20:30:22 +0000

The first hint of higher interest rates in the States arrived after this week’s FOMC meeting. Thomas Hoenig (President of the Kansas City Fed) emerged as the first interest rate hawk on the FOMC and voted against an unchanged monetary policy. Hoenig “believed that economic and financial conditions had changed sufficiently that the expectation of exceptionally low levels [...]

Are Food Retailers Defensive?

antonne — Fri, 22 Jan 2010 15:28:23 +0000

With consumers set to be squeezed after the 2010 election, supermarket shares may not prove to be as defensive as they used to be. Stockmarket folklore has it that supermarket shares are defensive because people always need to eat and this held true in the days when supermarkets only sold groceries. But these days supermarkets sell far more than [...]

Avoid Retailers in 2010

antonne — Fri, 15 Jan 2010 21:07:03 +0000

The key issue for the markets to contend with in 2010 is the risk that the economy slips back into recession (the so-called “double-dip”). As the banks have now been largely fixed, should the economy double-dip then it is likely the retailers will be foremost amongst the suffers. The retail sector had a strong rally last year as [...]

Sterling Likely to Slide ahead of Election

antonne — Fri, 08 Jan 2010 21:13:43 +0000

UK politicians have started the new year with their eyes firmly focused on the upcoming General Election, which will most probably be held in May. This week’s Hoon-Hewitt challenge on Gordon Brown’s leadership has only served to increase the uncertainty surrounding the result of the General Election. Markets hate nothing more than uncertainty and although the Conservatives [...]

Has the Dollar already begun its 2010 rally?

antonne — Fri, 18 Dec 2009 21:29:00 +0000

Do the last three weeks of US Dollar strength represent the start of a bigger upswing in the fortunes of the Dollar? We have just seen the Dollar close higher for three consecutive weeks, as measured by the Dollar Index. This hasn’t happened since the Dollar topped out in March 2009 (as global stockmarkets simultaneously bottomed). We [...]

Intentionally Falling Behind the Curve

antonne — Fri, 11 Dec 2009 17:34:33 +0000

The Fed and the BoE are going to allow themselves to fall behind the curve as they seek to hold rates low whilst an economic recovery gains traction and begins to absorb some of the spare capacity which has been created by the recent recession (i.e. unemployment falls and manufacturers’ capacity utilisation rises). We saw the [...]

Beyond Petroleum

antonne — Fri, 04 Dec 2009 20:47:24 +0000

How do the major oil companies navigate their way from currently searching for, pumping, refining and finally selling oil & gas to consumers to a world which will eventually have to learn to survive on energy from another source. What is a sensible price (or p/e ratio) to pay for a major Western oil & gas company whose principal [...]

Unintended Beneficiaries of QE

antonne — Fri, 27 Nov 2009 13:17:39 +0000

Given that low Base rates are here to stay for a long while yet, which assets will benefit most from the BoE’s low-rates-for-yonks policy (which is primarily directed at halting the recession and, as a consequence of growth, reducing unemployment)? Normally government bonds sell-off (higher yields) when the market sniffs an economic recovery but with so [...]

The Myth of the Global Labour Market

antonne — Fri, 20 Nov 2009 07:35:11 +0000

Is there really such a thing as a global market in talent for top executives? Whilst compensation consultancies (wonderfully dubbed “Ratchet, Ratchet & Bingo” by Warren Buffet) would have us believe that such a market exists for talented individuals and therefore Boards of Directors should benchmark their executive’s pay against global peers (strangely those “global” peers [...]

RBS and LLOY – Put your money on the Black Horse

antonne — Fri, 13 Nov 2009 20:54:52 +0000

Now that LLOY has wriggled free of the APS and RBS has had no option other than to enter APS, there is uncapped upside in LLOY shares whilst RBS shares still remain effectively capped at 65 pence (due to the terms of the B shares). Both LLOY and RBS have now sufficiently strengthened their Core Tier [...]

Two Swallows don’t Make a Summer either.

antonne — Fri, 06 Nov 2009 22:26:30 +0000

So two central banks have led the way and raised interest rates (Australia and Norway), starting their journey on the long way back to interest-rate normality. But it does not necessarily follow that just because two commodity-linked countries have started to hike rates, the Fed, BoE and the ECB are about to follow suit anytime soon. Speculation [...]

Monkeys Typing Shakespeare

antonne — Fri, 30 Oct 2009 17:25:32 +0000

In the good old days there was a saying that if you let a million monkeys bash away randomly at typewriters they would, given enough time, eventually type out the complete works of William Shakespeare. However this would not prove that the monkeys were educated. In recent times it has also been opined that no matter how many [...]

Tight Credit Conditions are Desirable

antonne — Fri, 16 Oct 2009 06:25:12 +0000

It is broadly accepted that we got ourselves into this mess by allowing the banks to lend too much, too cheaply to people who were not really able to pay back the loans they shouldered. The way out (whilst avoiding a depression caused by deflation & debt-induced personal bankruptcies) involves making existing loans servicable whilst at [...]

Still in the Fog on the Battlefield

antonne — Fri, 09 Oct 2009 13:43:06 +0000

One year on from the bankruptcy of Lehman Brothers and we have seen global stockmarkets spend six months plummeting to a low in March 2009 and then another six months rallying back again. The Dow and S&P are now 15% below the levels at which they stood on the Friday before Lehman went bankrupt on the weekend of [...]

Climbing the Wall of Worry

antonne — Tue, 06 Oct 2009 07:58:44 +0000

Stockmarket rallies are said to climb a “Wall of Worry” as the stockmarket climbs higher in spite of the various problems that already exist or may be about to happen. There will always be many Cassandras and Perma-Bears out there highlighting the many reasons why the stockmarket is too high and is riding for a [...]

Race to the Bottom – Part III

antonne — Fri, 02 Oct 2009 06:47:59 +0000

The Bank of England continues to do its best to debase Sterling by printing as much money as possible without scaring the gilts market. The only reason Sterling hasn’t collapsed against other currencies is that the other major central banks are all involved in various forms of printing money (quantitative easing) themselves. Sterling is however [...]

Dow falls shy of 10,000

antonne — Fri, 25 Sep 2009 20:25:48 +0000

The Dow made it as far as 9,918 in the rally after the FOMC statement was released on Wednesday 23 Sep 09 before turning around and selling off for the rest of the week. Does it matter that this rally off the March lows hasn’t made it all the way to the magic round number [...]

The Old Troyes Gold Trick

antonne — Fri, 18 Sep 2009 07:07:28 +0000

One of the old routes for a traveller from England through France and on to Italy passed through the French city of Troyes, situated between Reims and Dijon (nowadays at the junction of the A5 autoroute (from Paris) and the A26 autoroute (from Calais) – the A26 is still called the Promenade des Anglais and [...]

Will Tesco be a Force in Finance?

antonne — Fri, 11 Sep 2009 21:16:50 +0000

There has been much speculation about the prospect of Tesco competing strongly with the existing UK banks as it increases its finance footprint and starts to offer loans to its customers. Tesco already has stores spread nationwide which could serve as a branch network to the millions of customers who already shop there each week. [...]

Playing for Time

antonne — Sun, 06 Sep 2009 18:29:01 +0000

If LLOY and RBS manage to drag out their “detailed discussions” with HM Treasury over the exact workings of the Asset Protection Scheme then with luck the UK economy will have recovered to a sufficient extent such that LLOY in particular will be able to avoid ever actually formally signing the documentation and entering the [...]

One Quarter at a Time

antonne — Fri, 28 Aug 2009 20:02:15 +0000

So has the economic recovery arrived or will the economy slip back into recession? For many, this is the key question du jour and the answer will determine whether the recent stock market rally will prove to be just a bear market rally or the start of the next bull market. Bull markets climb a wall [...]

General Election Likely to Precede a Base Rate Rise

antonne — Fri, 24 Jul 2009 06:54:45 +0000

The Bank of England is likely to wait until the first Budget after the next General Election (due before June 2010) before seriously contemplating raising the Base Rate from its current level of 0.5%. There is an outside chance Gordon Brown will call an election this autumn but it is far more likely to take place in May 2010. [...]

Pharma and the Logic of Logan’s Run

antonne — Fri, 03 Jul 2009 15:01:12 +0000

The costs of providing for a nation’s healthcare only ever move upwards. Most costs are incurred during the last year of a patient’s life. A hard-hearted economist would conclude that the cheapest thing to do would be to terminate people’s lives early so they never get around to being too much of a burden on the [...]

Keeping the Pedal Pressed against the Metal

antonne — Fri, 26 Jun 2009 05:10:33 +0000

The Fed made it clear to the market with this week’s FOMC statement that speculation of a rise in the Fed Funds rate anytime soon is completely misplaced. The Fed pointed out that with US GDP still contracting the economy has not yet even begun to work through the vast amount of slack in the [...]

Insurance – But not as we know it.

antonne — Fri, 19 Jun 2009 18:53:22 +0000

Insurers got themselves confused between the subtle difference of writing a diversified portfolio of credit default swaps (essentially a bet that credit spreads were too wide and the future level of defaults would more than compensate the risk taken) and investing in a diversified portfolio of corporate bonds (also a bet that credit spreads were too [...]

FTSE to break above 4506?

antonne — Fri, 12 Jun 2009 10:12:37 +0000

Over the past 6 weeks the FTSE has repeatedly pushed above 4500, only to fall back on each occasion. The best recent closing high was 4506 on 1st June and the other intra-day highs of the past 6 weeks were 7 May 4520, 19 May 4512, 20 May 4504 and 10 June 4505. There have been [...]