Gary Smith’s Market Take for January 31, 2012

January 31, 2012 By Leave a Comment
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Here’s my take on the markets today, January 31, 2012. If you’d like to read more of my articles, click here.

Credit gauges are mostly improving today. The Libor-OIS Spread is falling -1.4% to 44.9 bps(back to early-Dec. level). The 3M EUR/USD Cross Currency Basis Swap is rising +4.58% to -71.62 bps(back to early-Aug. level). The 2Y Swap Spread is falling -8.2% to 30.2 bps(back to early Nov. level). The TED Spread is falling -2.93% to 48.6 bps(back to late-Nov. level). The European Financial Sector CDS Index is falling -2.0% to 186.65 bps(back to late-Oct. level). The Portugal sovereign cds is falling -1.76% to 1,500.12 bps(+37.9% in 12 days and just off all-time high). The Italian/German 10Y Yld Spread is falling -3.4% to 415.56 bps(back to early-Dec. level). However, the Western Europe Sovereign CDS Index is rising +.60% to 345.95 bps, the European Investment Grade CDS Index is rising +.45% to 135.75 bps and the Emerging Markets Sovereign CDS Index is rising +.98% to 275.50 bps. The France sovereign cds is gaining +2.81% to 181.62 bps.

Major Asian indices rose around +.75%, led by a 1.96% gain in India shares. Major European equity indices rose around +.5%, led by a +1.04% gain in France shares. Spanish stocks fell slightly and remain Europe’s worst-performers, dropping -.31% ytd.

Weekly retail sales rose +2.7% this week versus a +2.9% gain the prior week. This is now a sub-par pace for a recovery and the slowest growth since the week of April 5th of last year.

The 10Y Yield is falling another -4 bps to 1.80%, which remains a large concern. Natural gas is plunging -8% today after a recent bounce. While the commodity may stabilize around current levels, I doubt a sustainable advance is in the offing anytime soon. Oil continues to trade toppy given all of the positive catalysts(stock rally, euro rally, rising interest from speculators, falling euro debt angst, subsiding emerging market hard-landing fears,  improving US data, soaring Mid-east tensions) that have failed to propel it higher. I remain long SCO. I added to my trading hedges on the open and I am positioned 50% net long.

 

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Filed Under: All-Star Originals, Economy, Euro Zone, Finance, International, Markets, Portfolio strategies
About Gary D. Smith

Gary Douglas Smith actively trades his portfolio as well as the portfolios of family members. In addition, Mr. Smith maintains Between the Hedges, an investment-oriented blog. Previously, he was founder and managing member of Olympus Capital Management, an alternative investment firm. Olympus consisted of a long/short diversified hedge fund and a long/short technology sector hedge fund. Prior to the formation of Olympus, he spent five years as Vice-President of Research and Portfolio Manager for an independent money management firm. Mr. Smith has been engaged for the past 23 years in the analysis and selection of equity and other investments. His expertise is in long/short U.S. equity investing across all market sectors with an emphasis on technology stocks. He uses a top-down investment approach, investing in securities at a reasonable price relative to their growth prospects. As well, technical analysis plays a role in the timing of his investment decisions. He received his undergraduate degree from the University of Tennessee and subsequently received an MBA, with a concentration in finance, from Vanderbilt University’s Owen School.

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