Tuesday, 01 June 2010 06:44

Quick Newscan for Tuesday, June 1st 2010

In the news this morning:

  1. Stocks, U.S. Futures Tumble on China Growth Concern, BP Spill; Oil Plunges: We discussed the topic of China's unsustainable growth and the knock on effects its slowdown would have on other economies in detail just last week. How timely...
    1. The Narrowing Chinese Trade Surplus
    2. In Australia, Tax as a Contagion
    3. Australia: The Land Down Under(water in mortgage debt)
    4. BoomBustBlog China Focus: Inflation?
    5. BoomBustBlog China Focus: Interest Rates
    6. My China Ruminations Have Come to Pass As the Country Enters a Bear Market
    7. Chubble (The Unmistakeable, Yet Thoroughly Argued Chinese Bubble), Unemployed/Deleveraging Shopaholics Pushing Retail Stocks & Other News
  2. Euro Weakens Against Dollar on Speculation Crisis Hurting Region's Economy: Nothing new here. BoomBustBlog newcomers, see the Pan-European Debt Crisis here.
  3. BP Tumbles Most in 18 Years After Abandoning Attempt to Plug Leaking Well: The company's future doesn't look to bright!
  4. Paulson Drops 6.9% as Hedge Funds Post Biggest Monthly Losses Since Lehman (HNWs and institutional investors should take the time to read this article and my summaries): Many funds, including Paulson's, made hard bullish bets on the financial sector recovering, in direct contravention to my positions and research. Yes, the financial sector took off like a bat out of hell the last 3 quarters of 2009, but one shouldn't confuse sharp market price movements with fundamentals. Many, if not most are in bad shape, and it ain't lookin' much better in the near term either. See The Next Step in the Bank Implosion Cycle???. Most importantly, many (if not most) professional money managers and analysts totally underestimated the extent of the damage being done Europe. I have was weary of Europe since 2008, put short research and positions on in 2009 (with mixed results due to the bear market rally) and went full blown GRIZZLY BEAR in 2010 (reference the Pan-European Debt Crisis which publicly documents and details it all). Back to the news clip:
    1. (Bloomberg) -- John Paulson, Louis Bacon and Andreas Halvorsen navigated the global market turmoil of 2008 with little or no damage. They weren’t as successful last month as the Dow Jones Industrial average had its worst May since 1940. Hedge funds lost an average of 2.7 percent through May 27, according to the HFRX Global Hedge Fund Index, as the sovereign debt crisis in Europe triggered declines in stocks, the euro and commodities, and the gap in yields between U.S. short-term and long-term debt narrowed. It was the biggest decline since November 2008, when hedge funds lost 3 percent in the wake of Lehman Brothers Holdings Inc.’s bankruptcy two months earlier. Almost every strategy lost money in May, according to Hedge Fund Research Inc. in Chicago, as the Dow index of 30 big stocks sank 7.6 percent including dividends amid speculation that Greece’s debt problems would spread to nations such as Spain and Portugal. Some of the best-known funds saw their gains for this year erased. “Attempting to manage risk in an environment where everything that could go wrong does go wrong seems like a fruitless endeavor,” said Brad Balter, who runs Balter Capital Management LLC, a Boston firm that invests in hedge funds for clients. “The only defense that seems to work in months like these is being in cash.”

    "SAC Capital Advisors LLC, the hedge-fund firm run by Steven Cohen in Stamford, Connecticut, with about $12 billion under management, lost 2.9 percent last month through May 21 with its SAC Capital International fund, trimming this year’s gain to about 4 percent, according to people familiar with the firm.

    Citadel Investment Group LLC, the $12 billion hedge-fund firm run by Ken Griffin, lost about 2 percent with its biggest funds last month through May 21, said people familiar with the Chicago firm. The funds soared as much as 62 percent last year as markets rebounded after losing as much as 55 percent in 2008.

    Brevan Howard Asset Management LLP in London, Europe’s largest hedge-fund firm, lost 0.1 percent for the month through May 21 with its Brevan Howard Fund Ltd., leaving it with a decline of 0.3 percent this year, according to an investor.

    1. I will gladly compare the performance of BoomBustBlog research to any bank, fund or asset manager that charges big commissions or 2 and 20! Reference Updated 2008 performance and the 2009 Year End Note to BoomBustBlog Readers and Subscribers for rough performance numbers covering 2007, 2008 and 2009.
  5. Analysts Boosting Forecasts See 25% Stock Gain Defying El-Erian New Normal: Yeah, but aren't analysts mostly wrong unless we're in  a bull  market? Stocks always go up, Right????!!!! Reference Blog vs Broker, Who Do You Trust?
  6. Cameron Bull Market in Gilts Beating Merkel Bonds as U.K. Keeps AAA Rating: For now, at least. Subscribers, see 
    File Icon UK Public Finances March 2010

Last modified on Tuesday, 01 June 2010 10:42

3 comments

  • Comment Link Reggie Middleton Wednesday, 02 June 2010 10:58 posted by Reggie Middleton

    A doomsday scenario doesn't have to play out to make money. As long as basic fundamentals can rule the day, overvalued companies will fall in price, and insolvent companies will eventually fail.

    CBs have never been able to overpower the markets over the medium term and I don't think things are any different this time around.

    Report
  • Comment Link Reggie Middleton Wednesday, 02 June 2010 10:58 posted by Reggie Middleton

    A doomsday scenario doesn't have to play out to make money. As long as basic fundamentals can rule the day, overvalued companies will fall in price, and insolvent companies will eventually fail.

    CBS h ave never been able to overpower the markets over the medium term and I don't think things are any different this time around.

    Report
  • Comment Link killben Wednesday, 02 June 2010 10:48 posted by killben

    Reggie,

    joining in on your discussion with sheep92...

    "The reason why CBs are afraid of Lehman is because there are implicit Lehman's ALL over the place"

    This is the crux of the issue ...

    We cannot know for sure how long and to what extent CBs CAN (LIMIT) intervene. As of now it appears that they are able to conjure up the $T as and when they feel like it.

    The corllary of this is we cannot be sure whether or even when the doomsday scenario will play out.

    Probably it is also one of the reasons why you could not estimate the length and extent of the rally.

    As long as intervention is possible by these CBs no doomsday scenario will play out.

    Assume even Greece defaults .. then Portugal, Spain ... even then if ECB comes up with $$T then again your doomsady scenario becomes a moving target

    Ability to intrevene is screwing up good analysis.

    Thus to get it right you would need to predict correctly when INTERVENTION WILL NOT WORK!!

    Report
Login to post comments