Mortgage lending in UK to get ugly in UK in 2011.
Net lending in 2006 was £110 billion.
In 2008 - net lending was still at £40 billion.
In 2009 - net lending was £ 12 billion.
Expectations are that net lending in 2011 will shrink to £6 billion.
I see 2011/12 as tough years for UK Housing.
Friday 24 December 2010
Thursday 23 December 2010
2011/12 - Themes to keep an eye on...
Keep an eye on -
- US Muni Market - Nov 2010 saw the first signs of stress
- European Sovereign Crisis - Greece was in April 10 and Ireland in Nov 10
- Rate hikes in China - Can they break / slow the commodity bull
- Property bubble in Australia + Canada - Will Chinese slowdown burst the bubble
- USD to be strong Vs EUR
- Decoupling (Asia Vs WEST) and Diversification - This is a myth
- Gold and Silver may drop but it may be possible that they fall less relative to equity and commodity markets
- Japan - This may surprise us to the downside most probably after mid 2011 (NKY to peak close to 12,000, weak YEN beneficial for NKY in short term)
Also please note that the only 3 assets that were +ve in 2008 were Short Term US Treasuries, Gold and US Dollar.
HF's in general will most likely suffer in 2011 as intra asset correlation is running at high levels and a reversal will hurt most players.
2011/12 - Is it going to look like a mini - 2008 ?
It is pretty likely that the European crisis may turn out to be so problematic that the sub prime US crisis would look like a blip.
The EU could engage in QE or so.
A full blown sovereign crisis in Europe is in the making (look at Spain, Italy, Belgium and later France and Germany).
A run on the bank in Spain or Italy is inconceivable but definitely possible if things are not sorted out soon and this will be the one to watch (like Ireland now).
Germany on the face of it looks OK but I think this is the one to watch as they cant completely bail the GIPSI out nor can they back off and let them fail. They are as they say - going from the frying pan into the fire.
USD will be stronger in 2011 and look for EUR touching 1.0 to 1.18 territory with the USD in 2011/12.
The EU could engage in QE or so.
A full blown sovereign crisis in Europe is in the making (look at Spain, Italy, Belgium and later France and Germany).
A run on the bank in Spain or Italy is inconceivable but definitely possible if things are not sorted out soon and this will be the one to watch (like Ireland now).
Germany on the face of it looks OK but I think this is the one to watch as they cant completely bail the GIPSI out nor can they back off and let them fail. They are as they say - going from the frying pan into the fire.
USD will be stronger in 2011 and look for EUR touching 1.0 to 1.18 territory with the USD in 2011/12.
Australia - Down Under or Should we say - Going Down and Under !!!
Something does not feel right in Australia.
A strong USD in 2011 can create havoc in "Risk Assets" and I look at Australia and China both being exposed to this risk. Also please note that recently there has been a very high correlation between the AUD and Chinese Stock Market.
The Aussie Housing Market looks frothy to me.
Keep an eye on this one in 2011.
A strong USD in 2011 can create havoc in "Risk Assets" and I look at Australia and China both being exposed to this risk. Also please note that recently there has been a very high correlation between the AUD and Chinese Stock Market.
The Aussie Housing Market looks frothy to me.
Keep an eye on this one in 2011.
2011 - Kick Start
Expect 2011 to begin with a bang in European peripheral equity markets.
Very high probability of seeing Spain and Italy drift lower / crash in the first 6 months of 2011
Very high probability of seeing Spain and Italy drift lower / crash in the first 6 months of 2011
Tuesday 21 December 2010
Bond Yields - Up or Down ?
It is likely that bond yields in US on the long end of the YC will now start to fall.
So bonds will rally for some time in price terms.
Let us see how this pans out.
It is possible for us now to see the 30 Yr US Bond Yield to head towards the 4% territory.
Monday 20 December 2010
Death of Diversification
It is looking like a lot of markets are about to peak in sync with each other in the next quarter or so.
So all risk assets will fall in value - all at the same time.
May be a mini-2008 like event is about to happen soon.
Diversification is dead !!!!! ( or will die soon )
So all risk assets will fall in value - all at the same time.
May be a mini-2008 like event is about to happen soon.
Diversification is dead !!!!! ( or will die soon )
Equity Vol Spike
Looking at the VIX Index it feels like it is close to a bottom.
It would be great to have some long VIX exposure going fwd from here.
Expect equity vol - VIX to spike higher in coming months.
It would be great to have some long VIX exposure going fwd from here.
Expect equity vol - VIX to spike higher in coming months.
Friday 17 December 2010
US IPO Indicator ?
Amongst the top 5 largest IPO's in US , Visa IPOed in March 2008.
That marked the top of the US market in 2008.
Could the GM IPO in 2010 , mark the top of the market in 2010/2011.
We shall see and time will tell.
It has been seen that extremes in sentiment usually do coincide in large IPO's.
We have seen both happen now.
That marked the top of the US market in 2008.
Could the GM IPO in 2010 , mark the top of the market in 2010/2011.
We shall see and time will tell.
It has been seen that extremes in sentiment usually do coincide in large IPO's.
We have seen both happen now.
Dubai - Up Next ???
Looks like it is now time to go bullish on Dubai.
A market bottom seems to be in place.
Expect the same with the Real Estate Sector as well in Dubai.
This is a medium term market call and the next 3 to 5 years should look good for Dubai.
Europe - Trouble Ahead
Expect deflation to take hold in Europe in the coming years.
Europe's Bail Out Fund is set to collapse.
So far only Greek FTASE Index is below March 2009 bottom.
Expect Ireland, Portugal and other countries like Spain and Italy to test March 2009 lows in coming years.
Expect UK Housing market to be under stress in the next 5 years.
Expect much more pain in the UK Commercial Real Estate sector in the coming years.
This space is set to get ugly.
Europe's Bail Out Fund is set to collapse.
So far only Greek FTASE Index is below March 2009 bottom.
Expect Ireland, Portugal and other countries like Spain and Italy to test March 2009 lows in coming years.
Expect UK Housing market to be under stress in the next 5 years.
Expect much more pain in the UK Commercial Real Estate sector in the coming years.
This space is set to get ugly.
Japan - 2011 / 2012
Expect NKY (Nikkei 225 Index) to head towards 12000 and then retreat lower.
A weaker YEN Vs USD is bullish for Japanese stocks.
A weaker YEN Vs USD is bullish for Japanese stocks.
Indian Rupee - Long Term Bullish Call
The Indian Rupee is set to strengthen Vs USD in the coming years.
A period of lasting strength in the INR has begun.
Expect INR to head towards 40 and then 30 before the end of this decade.
A period of lasting strength in the INR has begun.
Expect INR to head towards 40 and then 30 before the end of this decade.
Peak Silver
Silver seems to have peaked at $30 or so.
Low probability of seeing $40 or $50 next year in Silver.
My view is to see Silver at $25.
Low is Silver could be in the range of $8 to $12 in the medium term horizon.
This is my call in the midst of huge bullish sentiment in the market in Silver.
I can see large number of Silver bulls on the horizon.
Low probability of seeing $40 or $50 next year in Silver.
My view is to see Silver at $25.
Low is Silver could be in the range of $8 to $12 in the medium term horizon.
This is my call in the midst of huge bullish sentiment in the market in Silver.
I can see large number of Silver bulls on the horizon.
Flash Crash - 2011
I expect a flash crash to happen in the next year.
Technical indicators do suggest that we may have one in the making.
US Market Update - 17th Dec 2010
Bullish sentiment on SPX stands at 94%.
This is an extreme reading in the last 4 years.
Only 2% bulls remained on the SPX in March 2009.
So there were 98% bears on SPX in March 2009.
Majority of the crowd expected the SPX to decline further but as we have seen - the SPX surged higher in the opposite direction.
This caught the crowd off-guard.
So we have seen a dramatic reversal from bearish to bullish sentiment in SPX since March 2009 low.
Also note that - mutual fund mangers' cash/assets ratio is at 3.6%.
This is a major low if not the most extreme.
So they are positioned heavily bullish.
The market may surprise them on the downside like it did in March 2009.
As I mentioned last time , the TRIN ratio was at a multi year low.
Low TRIN indicates more volume chasing UP stocks.
So it can be an indicator of market momentum.
We all know momentum chasers end up in tears.
Many other momentum indicators are reaching record extreme readings all at the same time.
This may be viewed as bearish.
We are seeing sentiment readings reach an extreme level of bullishness and momentum indicators showing the rally losing steam.
This is not a bullish market as per the data.
Decreasing volume and breadth are not the signs of a coming bull market.
TICK is one more indicator that is worth looking at.
It notes the net number of stocks up Vs down all during the trading day.
In a real bull market both TRIN and TICK should be strong.
We are seeing now that they are diverging.
This is clearly bearish.
This year Gold and Silver have shown extreme sentiment readings.
It does not look and feel like we are at the start of a bull market in either Gold or Silver.
There is more downside risk Vs upside reward from here.
The one asset class no one wants to go long today is CASH.
It would seem wise to stay in CASH or in DOLLARS.
This is a medium term market call.
This is an extreme reading in the last 4 years.
Only 2% bulls remained on the SPX in March 2009.
So there were 98% bears on SPX in March 2009.
Majority of the crowd expected the SPX to decline further but as we have seen - the SPX surged higher in the opposite direction.
This caught the crowd off-guard.
So we have seen a dramatic reversal from bearish to bullish sentiment in SPX since March 2009 low.
Also note that - mutual fund mangers' cash/assets ratio is at 3.6%.
This is a major low if not the most extreme.
So they are positioned heavily bullish.
The market may surprise them on the downside like it did in March 2009.
As I mentioned last time , the TRIN ratio was at a multi year low.
Low TRIN indicates more volume chasing UP stocks.
So it can be an indicator of market momentum.
We all know momentum chasers end up in tears.
Many other momentum indicators are reaching record extreme readings all at the same time.
This may be viewed as bearish.
We are seeing sentiment readings reach an extreme level of bullishness and momentum indicators showing the rally losing steam.
This is not a bullish market as per the data.
Decreasing volume and breadth are not the signs of a coming bull market.
TICK is one more indicator that is worth looking at.
It notes the net number of stocks up Vs down all during the trading day.
In a real bull market both TRIN and TICK should be strong.
We are seeing now that they are diverging.
This is clearly bearish.
This year Gold and Silver have shown extreme sentiment readings.
It does not look and feel like we are at the start of a bull market in either Gold or Silver.
There is more downside risk Vs upside reward from here.
The one asset class no one wants to go long today is CASH.
It would seem wise to stay in CASH or in DOLLARS.
This is a medium term market call.
US Market Update - 17th Dec 2010
The 10 day CBOE Put/Call Ratio hit a low of 0.72 or so.
This is the lowest reading since Jan 2010.
Please keep an eye on this development.
Extremes in sentiment are at multi year extremes and as stated this week TRIN is also suggesting a pull back.
The market seems frothy.
We are also see a bit of divergent behaviour in NASDAQ Vs SPX.
This could be a bearish signal.
It looks like the 30 Yr Bond Yields in US may have topped for now.
Expect yields to drop now and bonds to rally (in price).
I am concerned about Silver and expect a pull back from $30.
This is the lowest reading since Jan 2010.
Please keep an eye on this development.
Extremes in sentiment are at multi year extremes and as stated this week TRIN is also suggesting a pull back.
The market seems frothy.
We are also see a bit of divergent behaviour in NASDAQ Vs SPX.
This could be a bearish signal.
It looks like the 30 Yr Bond Yields in US may have topped for now.
Expect yields to drop now and bonds to rally (in price).
I am concerned about Silver and expect a pull back from $30.
Wednesday 15 December 2010
Metals Update - 15th Dec 2010
On a medium to long term basis - we may see Gold and Silver form a significant top.
If we look at the move in Gold from 2000-2001 low, it is quite likely that in the next 6 months we may see a top in place.
This will lead Gold and Silver to have substantial declines.
It may be possible that Gold may touch $1500 territory and Silver $35 territory ( but it is also possible a major top is already in place ). We shall see and time will tell.
But the medium to long term call is that in the next 3-5 years we may see both these metals head south.
Gold also seems to form a top in non dollar currencies.
It is quite likely that a strong USD across the board will be seen as well when metals and other currencies drop in value.
If we look at the move in Gold from 2000-2001 low, it is quite likely that in the next 6 months we may see a top in place.
This will lead Gold and Silver to have substantial declines.
It may be possible that Gold may touch $1500 territory and Silver $35 territory ( but it is also possible a major top is already in place ). We shall see and time will tell.
But the medium to long term call is that in the next 3-5 years we may see both these metals head south.
Gold also seems to form a top in non dollar currencies.
It is quite likely that a strong USD across the board will be seen as well when metals and other currencies drop in value.
Asia Update - 15th Dec 2010
Looks like Indian market has progressed very well from its end 08- early 09 lows.
Lets look at the bigger picture move here.
We may see a short term correction unfold here that could last weeks and not days but once that is complete - on a medium term basis we may see the resumption of the bull market that will take the Indian market to much higher highs.
Lets look at the bigger picture move here.
We may see a short term correction unfold here that could last weeks and not days but once that is complete - on a medium term basis we may see the resumption of the bull market that will take the Indian market to much higher highs.
Tuesday 14 December 2010
US Market Update - 14th Dec 2010
It looks like a good opportunity to short Silver at or near $30.
Prices are expected to head lower in the coming days.
Lets keep an eye on how this pans out.
Prices are expected to head lower in the coming days.
Lets keep an eye on how this pans out.
Monday 13 December 2010
EU Market Update - 13th Dec 2010
It looks like once the 12% yield level for Greece 10 Y Govt bond is breached , look for rates to accelerate higher.
US Market Update - 13th Dec 2010
It looks like the US stock market is approaching a major top.
The stock market feels severely overbought and deeply over believed.
Sentiment measures are closer to an extreme.
The 10 day MA of the NYSE TRIN is at an extreme level not seen in years.
Bullish sentiment is approaching a multi year extreme.
Prices are advancing but the internal strength of the market seems to show deterioration.
This is not a bullish signal.
The stock market feels severely overbought and deeply over believed.
Sentiment measures are closer to an extreme.
The 10 day MA of the NYSE TRIN is at an extreme level not seen in years.
Bullish sentiment is approaching a multi year extreme.
Prices are advancing but the internal strength of the market seems to show deterioration.
This is not a bullish signal.
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