Sum of Market Signals: 1.499
Sum of Market Predicted Percent Gain: 0.0398
Number of Negative Signals: 7
Selection based on prediction magnitude and Rank MV
Trade Cmb: +--------+------------+--------+------------+--------+ | Symbol | Date | Signal | Prediction | RankMV | +--------+------------+--------+------------+--------+ | ADRE | 12/12/2011 | 1.000 | 0.023840 | 11 | | ILF | 12/12/2011 | 0.567 | 0.015753 | 10 | | EPP | 12/12/2011 | 0.333 | 0.007650 | 7 | | RWR | 12/12/2011 | 0.333 | 0.007010 | 4 | | TLT | 12/12/2011 | 1.000 | 0.004541 | 1 | | DBC | 12/12/2011 | -0.767 | 0.002144 | 2 | | EWJ | 12/12/2011 | 0.133 | -0.000241 | 9 | | VB | 12/12/2011 | 0.333 | -0.001124 | 6 | | GLD | 12/12/2011 | 0.333 | -0.001390 | 2 | | IEV | 12/12/2011 | -0.100 | -0.001428 | 8 | | IVV | 12/12/2011 | -0.333 | -0.013801 | 5 | +--------+------------+--------+------------+--------+
Equity markets fell back last week as the markets have let the EU solution settle in and are realizing it's just a, "We will have a new treaty sometime down the road and there will be real consequences this time.. we mean it, really". The Federal Reserve has said they will not bail out Europe but.. we shall see. The MF Global bankruptcy continues to make headlines due to the $1.2B of missing client account funds. I learned a new word last weekend, "hypothecation" which apparently is a legal word for promising assets as collateral. It appears MF Global would re-hypothecate funds over and over until they became over-leveraged and it all fell apart. There is now real concern over the exchanges such as the CME as to whether it is wise to hold assets such as gold in their custody as if those assets are hypothecated and then re-hypothecated you may or may not have a legal claim on something that is yours. Apparently this is a wide-spread issue amongst hedge funds. Yet something else to worry about from a macro perspective. Based on the MF Global issue, hedge fund manager Kyle Bass went and spoke to the CME about gold assets they hold in his name, didn't get sufficient answers, and asked for physical delivery.
ReplyDeleteInterestingly, European bond yields fell. Their is growing belief that the ECB will do a back-door bailout of the troubled countries use the Euro via providing loans to the in-country banks who will then buy their own country's sovereign debt. There is issue around the legality of this since the treaty states the ECB cannot buy debt directly or indirectly. Regardless, it's money printing and that may lead to stronger asset markets via inflation.
Speaking of which, gold/silver is taking a beating. Two theories… people are improving their liquidity by selling the only assets which made money this year and the other theory is that Europe is still going to go down in flames so I better have cash on hand. I still own gold ETFs in my accounts. It's a hedge.
Oil came down for the week but longer term, OPEC said they will cap production at 30 mb per day.
On economic news, the Philly and Empire State manufacturing surveys came out on Thu and surprised to the upside.. ditto for initial jobless claims. CPI came out in line with expectations. Mortgage refinancing is on the rise. On the negative side, European CPI is running at 3.4% y-o-y and that's the highest in 3 years. China continues to drop and there is a vocal debate amongst high-profile hedge fund managers such as Jim Chanos and Jim Rogers as to what will happen. Chanos bets on a very hard landing and Rogers says no.
I was in the model for the last two weeks, first time in about 10 weeks. I finally decided my fear of loss needs to be overcome. TLT did well this week also because there was a high demand at the auctions for 3-year, 10-year, and 30-year issues. This drove rates down and TLT up. Works for me.
This week is ADRE and my personal take is to still be prepared for very sharp market sell-offs. I will be developing an S&P500 put strategy to offset any long positions if well… I panic.