Gary Smith’s Market Take

0 Flares Twitter 0 Facebook 0 0 Flares ×

Credit gauges are mostly deteriorating today. The 2Y Swap Spread is rising +3.4% to 29.13 bps. The Libor-OIS Spread is rising +.93% to 32.7 bps. The TED Spread is gaining +1.3% to 39.4 bps. The European Investment Grade CDS Index is jumping +4.2% to 142.76 bps. The European Financial Sector CDS Index is gaining +2.3% to 249.31 bps. The France sovereign cds is surging +5.1% to 200.4 bps(+7.5% in 5 days). The Germany sovereign cds is rising +1.07% to 78.66 bps(+7.0% in 5 days). The Spain sovereign cds is gaining +1.3% to 495.67 bps. The UK sovereign cds is gaining +The Italian/German 10Y Yld is rising +1.3% to 377.25 bps. However, the 3M Euribor-OIS Spread is falling -2.1% to 39.9 bps and the 3M EUR/USD Cross-Currency Basis Swap is rising +5.6% to -49.0 bps. Overall, credit gauges continue to flash warning signals and remain at stressed levels.

Major Asian indices rose around +1.25% overnight, led by a +2.1% gain in Japan. Major European indices are falling around -2.25% today, led lower by a -4.0% decline in Spain. Spain is now down -17.4% ytd and very close to its March 2009 low. The Bloomberg European Bank/Financial Services Index is falling another -2.2% and is down -14.9% in less than one month.

The MBA Home Purchase Apps Index plunged -11.2% this week. This index is now back in the middle of the range it has been trapped in since May 2010. This week’s decline is one of the biggest during this period, as well. I continue to believe that nationwide housing, while stabilizing, is nowhere near the vigorous recovery that many perceive.

Copper still trades poorly, bonds still trade too well and the euro can’t sustain a bounce. In my opinion, the still persistent aggressive dip buying in US equities on any swoon indicates a fairly high level of complacency regarding the rapidly deteriorating situation in Europe.

One of my longs, (ISRG), is surging to another all-time high today after a stellar earnings report. I took some off the table recently in this name, but will look to increase my position again on any meaningful pullback from current levels. I added to my index trading hedges and I am positioned 50% net long. Long ISRG

0 Flares Twitter 0 Facebook 0 0 Flares ×

Bio
Latest Posts

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.