The dollar is strengthening again, giving the US equities a hard time. And in a change of character, Europe could not rally on a weaker euro today, like it was able to do in March and April while the S&P was sideways to down. The strongest market is ironically the one that seems to be the most hated of the big markets: China. Europe is completely saturated with fast money, and since they don't have the corporate buybacks and M&A like the US, the European equities rely on fund inflows to sustain the uptrend. That is the most fickle source of capital, as any little scare will have hot money funds bail out of Europe. Not so with corporate buybacks, where it will take a recession or lower profits to stop the buyback wave.
I believe we are starting a topping phase here, which should last into the middle of June. I am not going to be shorting yet, but if I do, I will focus on shorting Europe, as it is the weakest of the bunch.
As for other markets, Treasuries look like they are consolidating the down move and we should chop around the 2.10% to 2.25% 10 yr level for a while here. I expect another up move in the euro and crude oil in the coming weeks.
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5 comments:
Did you get long Euro?
No, I didn't. I am waiting for next month's nonfarm payrolls report. I believe euro will be weaker for the next couple of weeks.
Really? I just got long today through FXE calls. Bonds did what the market didn't expect and made another huge trade for those that had the faith.
Watching the Social Network right now and the story of Facebook.
You know that Facebook actually makes less than 4 bln in revenue per quarter and has a net income of about half a billion to a billion at most per quarter.
It doesn't pay any dividends. Yet the company is valued at 220 bln?
Would you pay more than 100 times to purchase a company than what you would receive every year in income if you owned the company outright?
To put things in perspective if you were to buy an average McDonald's franchise it would cost 1.5 mln and you would make around 10K per month in net income or 120K per year. So you would pay a little more than 10 times to buy outright what you would make every year from the business in cash flow.
Really? I just got long today through FXE calls. Bonds did what the market didn't expect and made another huge trade for those that had the faith.
Watching the Social Network right now and the story of Facebook.
You know that Facebook actually makes less than 4 bln in revenue per quarter and has a net income of about half a billion to a billion at most per quarter.
It doesn't pay any dividends. Yet the company is valued at 220 bln?
Would you pay more than 100 times to purchase a company than what you would receive every year in income if you owned the company outright?
To put things in perspective if you were to buy an average McDonald's franchise it would cost 1.5 mln and you would make around 10K per month in net income or 120K per year. So you would pay a little more than 10 times to buy outright what you would make every year from the business in cash flow.
I think we will get a strong nonfarm payrolls number next week and that should strenghten the dollar. Too early to get into euro long IMO but what do I know, FX is the toughest market to predict.
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