ES Journal Archive (2009 - 2010)
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http://www.ft.com/cms/s/0/ffd950c4-0d0a-11df-a2dc-00144feabdc0.html?nclick_check=1
Paulson - Russians are to blame. Of course they are!
Paulson - Russians are to blame. Of course they are!
From our friendly neighbourhood investment bank GS :
US equities extended recent losses this week as macro concerns ranging
from China tightening to European sovereign worries to US policy
confusion continued to overshadow the strong earnings season underway.
The S&P 500 is now down 3% since the start of the year, in-line with levels
not seen since November 2009, and is trading at a 2010 P/E multiple of
13.4x. While the recent string of US economic data misses and Chinese
policy moves have given us pause, we continue to believe that strong EM
growth and accommodative US policy will lead equities higher by mid-year.
Maintaining our cyclical posture. We continue to favor the globallyexposed
cyclical sectors (Info Tech, Energy, and Materials) and stocks with
BRICs exposure and a high degree of operating leverage. Since January 19th,
Tech, Energy, and Materials have declined 8%, 7%, and 11%, respectively,
our BRICs basket has dropped 6%, and the S&P 500 has fallen 6%. Our
long/short Operating Leverage trade is up 30 bp during that time. We are
reluctant to change our stance now that positioning and valuations look
meaningfully more attractive than they did at the start of the year. The
strong results from 4Q 2009 earnings season reinforce our core views.
A strong earnings season below the radar. So far, 222 S&P 500
companies (comprising 59% of the index market cap), have reported 4Q
2009 results. 50% of companies have beaten consensus earnings estimates
(above the historical average of 40%) and 7% have missed estimates (below
the average of 15%). Excluding the Financials sector, we have seen a
greater percentage of positive earnings surprises (53%) and fewer negative
surprises (4%).
The current earnings season is shaping up to be as good â or better â than
the strong 2Q and 3Q 2009 seasons which helped propel equities higher last
year. For 2Q and 3Q 2009, respectively, 46% and 53% of companies beat
earnings expectations as compared to 50% so far this quarter.
...
Similarly, we note that the solid 5.7% 4Q 2009 GDP figure released this
morning was due mainly to a sudden stabilization in inventories. Final sales
rose only 2.2% on an annualized basis, suggesting that end demand has not
recovered as strongly. Goldman Sachs Economics has not upgraded its
2010 GDP forecast, suggesting that the stronger inventory cycle is
temporary in nature and more front-end loaded that anticipated.
Accordingly, we see recent improvements in sales trends as a reflection of a
compressed inventory cycle more than a true pick-up in end demand
US equities extended recent losses this week as macro concerns ranging
from China tightening to European sovereign worries to US policy
confusion continued to overshadow the strong earnings season underway.
The S&P 500 is now down 3% since the start of the year, in-line with levels
not seen since November 2009, and is trading at a 2010 P/E multiple of
13.4x. While the recent string of US economic data misses and Chinese
policy moves have given us pause, we continue to believe that strong EM
growth and accommodative US policy will lead equities higher by mid-year.
Maintaining our cyclical posture. We continue to favor the globallyexposed
cyclical sectors (Info Tech, Energy, and Materials) and stocks with
BRICs exposure and a high degree of operating leverage. Since January 19th,
Tech, Energy, and Materials have declined 8%, 7%, and 11%, respectively,
our BRICs basket has dropped 6%, and the S&P 500 has fallen 6%. Our
long/short Operating Leverage trade is up 30 bp during that time. We are
reluctant to change our stance now that positioning and valuations look
meaningfully more attractive than they did at the start of the year. The
strong results from 4Q 2009 earnings season reinforce our core views.
A strong earnings season below the radar. So far, 222 S&P 500
companies (comprising 59% of the index market cap), have reported 4Q
2009 results. 50% of companies have beaten consensus earnings estimates
(above the historical average of 40%) and 7% have missed estimates (below
the average of 15%). Excluding the Financials sector, we have seen a
greater percentage of positive earnings surprises (53%) and fewer negative
surprises (4%).
The current earnings season is shaping up to be as good â or better â than
the strong 2Q and 3Q 2009 seasons which helped propel equities higher last
year. For 2Q and 3Q 2009, respectively, 46% and 53% of companies beat
earnings expectations as compared to 50% so far this quarter.
...
Similarly, we note that the solid 5.7% 4Q 2009 GDP figure released this
morning was due mainly to a sudden stabilization in inventories. Final sales
rose only 2.2% on an annualized basis, suggesting that end demand has not
recovered as strongly. Goldman Sachs Economics has not upgraded its
2010 GDP forecast, suggesting that the stronger inventory cycle is
temporary in nature and more front-end loaded that anticipated.
Accordingly, we see recent improvements in sales trends as a reflection of a
compressed inventory cycle more than a true pick-up in end demand
Posted some examples before in this thread.
Here is a simple one.
Buying specific Dow components agreesively, like raid the price ladder, for a very short time period, 5 to 10 seconds is enough. Then you have very predictable change in the Dow cash index.
Classic premium statistic arb would do the offset trades in the index future at once to lock in profit should there be enough premium discrepencies. But no, that is no longer the dominate arb trades in indices.
At the end of that price raid, these new arb programs wait for the index future to drift up as other market participants trying to ride the coattail from the move of the cash index ... like having sitting offer/ask waiting at the projected price change target.
Should the effect magnified as stops are triggered in various other components, then the initial position can be carried over into a directional play. If failed to induce further momentum in the position's favor, then complete the offset trades in the index future aggressively to turn it into a wash trade.
In short, it is better than playing poker. With a raise against your opponents, in turn you can push the cards coming to be in your favour automatically. Isn't that nice?
Thanks.
The big money made by power brokers aren hugely a premium on the personal level connections the brokers have with the wealthy ones in the societies.
Rolling over 20 mil bonds with 50 basis pt commission = 100K
For people outside of that circle, would think why paying such huge commission? But that is the norm and how a lot of these profits are made by the ibanks.
Trying to rewrite history ... as usual. =)
Thanks
Ammo,
They may have broken the pattern on Friday as the sell off was contained very well in the 3 pm time slot.
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