Friday, July 15, 2011

Michigan visits level that meant S&P500 @ 850 in April 2009

The Michigan Consumer Confidence was released this morning and it came in 8.4 points below expected representing a drop of 7.7 points.

The curious thing here is that the last month this Confidence Index was at this level... the SPX average 850 points.

Everyone talks about a good level in earnings and cyclical multiples at inexpensive levels... but with Confidence in the doldrums will revenue remain strong? I do not believe there is a lot of room for lay-offs and cost-cutting anymore. Perhaps input prices will drop, but where will earnings growth come from?

I am still pretty bear (globally speaking), but don't like shorting the SPX too much. The short IBOVESPA Index 1x + 1.4x shorting USDBRL is my lower-vol + high carry + risky bet on this global equity-bearishness.

*Disclaimer: charts and data are presented as I receive/see them. Sources are usually not checked for validation and my own calculations are of 'back of the envelope'-type. I am aware that some math that I do myself might be wrong and/or misleading to some extent. In financial markets the rate of change of economic data is often more important than the actual level and the perception of 'what is priced in' is more important than 'what is actually going to happen'. This is actually the way people pick entry and exit points. So... yes, sometimes you might say 'This guy is an idiot, this is way wrong!' with a high conviction, being right. Not to worry. Markets are made of expectations and the clash of conviction between its participants. Portfolio managers know that being an idiot is sometimes profitable and being smart is often a bad choice. It is all reality, sometimes good, sometimes bad. By the way: corrections to my analysis and intelligent debate is welcome. theintriguedtrader AT gmail do com

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