The Global downward spiral for markets
Though correlation steams on at near 90% in global equities and fixed income markets ( latter a simple tattle of everyone going
bankrupt at the same time) inflation has been broken in many larger markets led of course by China. With deep discounts in Emerging markets ETFs looking like Europe did six months back however, many market makers are likely to remain invested in Cash for the term to come, esp with holidays around the corner and a panic breakfast helping with each market open on a 24 hour clock around the world. Europe had some deep cuts at open, but wealth management / funds management inflows have been restored after a good four months of exits from Europe ( totalling an average of $50 bln each month) and before that , exits from emerging markets at the cusp on the downward roll in July and August of $15 bln each.
The US long Term Treasury ETF TLT is up from 95 to 120 in a year ( jumped near June -August) and funds have been flowing in steadily including 0.4% last week. The Euro ETF FXE had good inflows too, as did Select Sector Spiders ( S&P Sector based ETFs ) like XLI and those like State Street’s DIA based on the DJIA ETFs as a conservative class show restoring of long term confidence as risk is lowered by the upto 405 discount in each underlying selection of securities. FXE is based on Euro as the currency moves thru rejuvenation celebrating its resilience However the bottom has not been found with no long standing solutions likely to be found for Europe’s spending, China and india’s stalling or US’s $15 tln debt that remains unpaid ( the same amount additionally in credit cards and mortgages) So remember to invest and trade with eyes and ears open
EUROPEAN SOVEREIGN DEBT CRISIS
However with rate cuts likely in many larger economies including the $15 tln worth Eurozone ( incorporating next year’s contraction in the 17 countries ) and the Kyoto protocol extended good fiscal management is about to be rewarded by global investors in many markets. That unfortunately als means the shortening of the bull cycle for the next emerging markets like Philippines and Indonesia, Vietnam and mexico that rely on foreign funds more and that are likely to lose investors as allocations begin to favor Turkey and india and China along with others who manage the downward pitch and roll better in Brazil, Australia and the mining giants tied for the lack of production throughout the world
TRACKING BANKS AND RETAIL LIFESTYLE SUPERTRENDS
As we mention on our home page, the US recovery bodes well despite twists and turns as retail consumption is up 5% year on year although only as credit twirls up again and no political compromises have really been struck yet in US or Europe.
MF GLOBAL and more GOLDMAN SACHS
CFTC and the House Agricultural Committee’s ruminations show that the industry definitely observed much more casual mode of things in trading with primary members audit’s unlikely ever enforced by the exchanges. Though Corzine did well to avoid more arguments before legal proceedings begin, politicians are living a charmed life with the investigations hardly having any moments of doubt, each person they touch pinned to the post based on long held practices and beliefs of the industry’s infallibility. CFTC head Gary Gensler probably did not even bother about execution rules and recused himself before the hearing in the Senate as more Goldman Sachs alumni pay for everyone in the industry.
THE PROBLEM OF COLLATERAL AND INSIDER TRADING
We already know of discussions on Capitol Hill regarding the freedom among policy makers to indulge in side business when observing, enacting or reviewing the regulation for the industry without it being called Insider Trading. What is clear however is that $1.2 bln that went missing from client accounts was probably because the client securities for margin were rehypothecated for the margin the brokers had to pay and that such weak collateral practices truly make for a self prophesy in a thousand other cases already done and to be as the lender tries to save enough collateral for is cash requirements once the loan is not coming back) However one cannot see anyone getting to touch the subject as the market has already lost its glory and its time to beat the recession.
- Advantage China: Exports in double digit November, Inflation 4% (advantages.us)
- Fate of Emerging Market ETFs in 2012 (thestreet.com)
- Morgan Stanley: This Is What Will Happen In India Over The Next Two Years (businessinsider.com)
- Banks See Emerging-Market Rally as ‘Cheap’ Stocks Lure Ashmore (businessweek.com)
- “Over To You, Mr. Draghi” (forbes.com)
- China Inflation Falls To Lowest Level in 2011; ETF Beats Gold At Open (forbes.com)
- Emerging Stocks at 35% Discount Luring Goldman as Rates Drop (businessweek.com)
- Pimco Buys ‘Cheap’ Cyclical Stocks as China Moves on Growth (businessweek.com)