Investors are once again forced into going long the market. With both Bernanke and the HFT distorting the market, hedge funds are now going all in long. With every fund manager now front running the QE, this market is starting to show some peculiar signs. Maybe after all, we have found the perfect trade, where the economy slumps, Fed does the QE, funds front run the Fed, more QE and so on? Welcome to everybody (soon) long market. If unsure what to buy, just load up on Apple. By Bloomberg,
Hedge funds trailing the Standard & Poor’s 500 (SPX) Index for the last five months are giving up on bearish bets and buying stocks at the fastest rate in two years.
A gauge of hedge-fund bullishness measuring the proportion of bets that shares will rise climbed to 48.6 last week from 42 at the end of November 2011, the biggest increase since April 2010, according to data compiled by the International Strategy & Investment Group. The Bloomberg aggregate hedge fund index gained 1.4 percent last month, lagging behind the Standard & Poor’s 500 Index by 2.65 percentage points.
Guest post by Azizonomics.
From South Africa’s City Press:
South Africa will this week take some initial steps to unseat the US dollar as the preferred worldwide currency for trade and investment in emerging economies.
Thus, the nation is expected to become party to endorsing the Chinese currency, the renminbi, as the currency of trade in emerging markets.
This means getting a renminbi-denominated bank account, in addition to a dollar account, could be an advantage for African businesses that seek to do business in the emerging markets.
The move is set to challenge the supremacy of the US dollar. This, experts say, is the latest salvo in the greatest worldwide currency war since the 1930s.
Well — like the rest of Africa alongside all of its natural resources which (in spite of Kony 2012′s best efforts) becomes more Chinese by the day — it is clear where South Africa’s allegiance lies. Most interestingly, though, this is the first nation with an Anglo-American economic elite to come out against the present global order and more or less endorse China.
Readers are reminded of this chart:
Guest Post by Gresham’s Law.
The enigma that is eccentricity can be unravelled by grasping of this single statement; that which you perceive is both a matter of the object of your perception (in this case; the eccentric person) and your apparatus of perception. Eccentricity, then, is as much a quirk of the popular mind as it is of a particular person. So with the assumption that you seek creativeness and intrigue — here’s how to think eccentrically, find your edge and risk little for lots.
‘How to think’:
It may sound peculiar that contrary thinking is required to achieve creative thoughts… This, however, becomes self-evident when we realize that thinking the way someone else thinks results in mimicry — a “copy-cat” requires the minimum of creative thought… Therefore, the inference is that to achieve any creativeness, some change has to be made. From this, it stands to reason that the optimum in creativeness must approach the maximum change… and the maximum change must be close to the opposite.
— Zuce Kogan, Founder of the Creative Thinking Institute
As our readers know, The Trader has been very negative on the Spanish Economy and the Spanish markets. The focus seems to be shifting towards the Iberian Peninsula in an intensive fashion over the past days. Monti is out talking negatively of Spain, as well as other Eurocrats. The huge problems Spain is facing are probably too big to quick fix. The unemployment is a structural issue and will take many years to fix. The property sector, bottoming out by many pundits, creating great value buys for the cash rich investor, is a total fallacy according to us. The sector has come down, but the big sell off is still to come. There are simply way too many empty properties, not attracting buyers. These prices will need to change drastically, in order to start attracting real buyers. Many homeowners are not willing to realize that the Spanish property market will start selling under construction cost. Buying land and putting a house on it, won’t trade at a net premium, but on the contrary, will trade at discount. This is taking private owners time to realize, just as the banks are finding it hard to realize, their stock of unsold homes, is not worth where they “think” it is. Latest on the Spanish mortgages, from El Pais (via Google).
The number of home mortgages fell 41.3% in January to reach 29,167, according to data released this morning by the National Institute of Statistics. Thus, the amount of 21 months mortgaged leads downwards.The decline experienced in January was more pronounced than that of December, when the number dropped by 32%.
The average mortgage in January reached the 107,217 euros, 9.5% less than the same month last year, while the borrowed capital was reduced by 46.9% to 3,127,000. Year despite the drop in rate compared to December rose 18.5%, from 24,610 till 29,167.
Know your bull and bear markets. Further insight on the secular bull and bear markets by Hussman Funds.
“The world economy has stepped back from the brink and we have causes to be a little bit more optimistic. But optimism should not give us a sense of comfort and certainly should not lull us into a false sense of security.”
IMF Managing Director Christine Lagarde, March 17, 2012
As we examine the present evidence relating to both the financial markets and the global economy, the aspect that strikes us most is the extent to which Wall Street continues to emphasize superficially positive data in preference for deeper analysis, to extrapolate short-term distortions as if they were long-term trends, and to misconstrue freshly printed wallpaper and thin supporting ice as if they were solid walls and floors.
“While other countries struggle to command confidence in their fiscal forecasts we have created an internationally admired and respected independent office for budget re- sponsibility. These bold steps have made Britain that safe haven in the sovereign debt storm…”
– George Osborne, UK Chancellor of the Exchequer, August 11, 2011
The Economist on Financial Innovation.
FINANCIAL INNOVATION HAS a dreadful image these days. Paul Volcker, a former chairman of America’s Federal Reserve, who emerged from the 2007-08 financial crisis with his reputation intact, once said that none of the financial inventions of the past 25 years matches up to the ATM. Paul Krugman, a Nobel prize-winning economist-cum-polemicist, has written that it is hard to think of any big recent financial breakthroughs that have aided society. Joseph Stiglitz, another Nobel laureate, argued in a 2010 online debate hosted by The Economist that most innovation in the run-up to the crisis “was not directed at enhancing the ability of the financial sector to perform its social functions”.
Most of these critics have market-based innovation in their sights. There is an enormous amount of innovation going on in other areas, such as retail payments, that has the potential to change the way people carry and spend money. But the debate—and hence this special report—focuses mainly on wholesale products and techniques, both because they are less obviously useful than retail innovations and because they were more heavily implicated in the financial crisis: think of those evil credit-default swaps (CDSs), collateralised-debt obligations (CDOs) and so on. Full article here.