The NA Equity markets closed nasty today.
In the last 10 minutes of trading the TSE lost 70 points while the DJIA retreated another 50 to close at 7886.57.
Whether it's BOTs or weak hands, it is interesting to note that this is the first WEDNESDAY since February that the DJIA closed DOWN
Looking at the US stock tape, We came to the conclusion that armchair accountants were being taught a lesson by PRO Firm capital. When a company with $50MM in sales proposes a $280MM write-off and the stock goes up 25% today alone, you have a machine trading with no sentiment. Just as well, a company with a Debt to equity of 6 could go up 19% when it announces an EXTENSION from its banking syndicate...
Sorry to repeat the same thing for a THIRD time year to date but this is not a market for people clicking their orders from a Second Cup outlet! The ability to Read a balance sheet and open an E trade account does not qualify you to be short this market! BEFORE you say it, "NO"! Just tagging along for the squeeze will protect you when the inevitable fall comes...
What's a trader to do?
CHINA SHORT?
Not quite but China looks particularly ominous... While NA American are in their own little bubble the Hang Seng looses 1000 points in last 2 trading sessions... That concerns us greatly! From 12 to 6 and now probably 3% growth is the trend about to reverse or getting worse?
US REAL ESTATE
US real estate in terms of price has bottomed especially in areas that have come off the hardest Miami, CA, Las Vegas, Phoenix.
US FIRST OUT OF THE GATE
WE still believe the US will be the first to recover, followed by Emerging Markets, especially China. Europe will lag behind.
FX: GBP
THe Brits are doomed and their currency is the best short out there. The double whammy of real estate bubble burst combined with the dilapidation of banking assets leaves the country unable to come back and justify the Pound as a viable currency.
Lastly US T-Bonds...
My favorite short ... June bonds 124.10 is CRUCIAL
Fed been buying notes it seems to keep mortgages rates alluring but the Fed wants mortgage refi to go in the 30yr range. We were surprised to see on CNBC the proverbial cheerleaders showing off a consumer so happy to lock a refi at a 5yr rate of 3.05%... good for him but next week Treasury has a bunch of 5s and 10s to issue. We don't think brokers will be so hot for that market if they are competing with the refi market.
WHAT the FED should do is take care of the 30s market but Mr.Geithner is not so naive NOT to understand that a bps on a 30yr is much harder to come by than on a 5 or 10 year. Word to the wise, If you want a positive yield curve, you are going have to do the heavy lifting Mr. Secretary. You can't have your cake and eat it too!!!
124.10 Remember that number!
Good trading to you
DCW
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