The week in the markets (6-13 Nov)

Personal comment.

On Friday the markets seemed to launch a feeling of strength: General Motors touched historic lows and reported that without government help would go into bankruptcy and unemployment in the U.S. grew in two months in more than half a million people and yet the stock market rose. However, if one takes into account that since 1896 he had never lost the Dow Jones in the three days of a presidential election, which the lower SP on Wednesday and Thursday together is the biggest in two days since 1987 and that the rebound technician, was lowered after so much with little volume, and could give an explanation and feared it was an exception to the trend weekly. The large package of measures the Chinese government at the weekend ($ 600 billion is the fifth of GDP, "it will be another and a few cartridges) extended this positive feeling in Asia and Europe on Monday morning With the exception of Ibex. There are over the joys until the afternoon of Thursday in USA.

The bank Santander on Oct. 28, at the mouth of its CEO Alfredo Saez, refused to need more capital. On November 10 announced an expansion. In these few days has been convinced of the impossibility of selling the Bank of Venezuela, the assets in ABN shares, Cepsa, which manages the funds and insurance, at the price demanded. In short, you have bought unsold before and now has been found with a liquidity problem ... (safe somewhere caught in a mortgage-bridge that sounds something) and the expansion is costing him all shareholders in market capitalization million euros. And serve to illustrate what is happening with the economy and that makes this crisis unique: no matter how much lower interest rates, including the Euribor, if that cheaper finance is not paid and if there is interest in using this possible liquidity to invest. Until Santander wants to sell assets and unable to do so raises the liquidity of its shareholders or tries to tap new. Santander can do that but, how many companies can do the same, how much they will get lower financing rates?

I attached two charts USA, with shaded on the cycles of recession, one is the unemployment rate in the U.S. and its forecast to reach 8%

This is another of the ISM manufacturing index:

In Spain the situation is similar, we have known in the past economic data and much worse if we do if the figures do not even bank bad debt is still worrisome (http://www.economistas.tv/la-morosidad-oficial-no- is-so /) As can be seen in other economic cycles figures have been more hopeless, it could be a cyclical crisis and give more reason for the optimists who think they can get out of it in months. But it is necessary to recover the credit market, without that status data will continue to deteriorate and, as we have seen this week, the suspensions of payments that began in financial, went to banks and then to insurance companies, will reach shops and industrial companies.

And that perception is reversing in the economy and stock markets, the beneficial impact of lower interest rates. If we add to this the fact that I commented on the need to sell assets as they lose value to dispose of cash, accounts for the balance of the week. The best quality of the bag-your-liquidity is now one of the biggest obstacles to the upward trend because it is one of the few markets to resort to if you need cash, even at the level of citizens is easier to sell shares even though much is lost to try to sell some other property. As positive aspects of this bad stock market week, two factors: the low volume on downhill (although it can mean that we are still far from the capitulation of course also of the soil) and the finding by the Telecoms sector as a refuge-of-date valid. Now we have to have faith in the famous meeting this weekend but particularly in the aspect stock market got more faith in the possible manipulation of the bullish effect by next Friday 21 to the expiration of some futures (which is the Ibex) and options almost all indices. In fact, statistically the next week is a pretty favorable to the stock exchanges.

Finally, it is very remarkable, despite a rebound from yesterday evening, the lower crude (although the effect of the weakness of € and other causes less understandable its effect on the price of a liter of fuel is less noticeable) of gas natural and generally of all raw materials. This is no longer seen as something positive on the stock exchanges because it's getting a lot of problems in economies where there are a lot of money invested ... the prime example is Russia. You may see manipulative maneuvers to prevent the oil-icon of all raw materials-stop-down and personally I hope to make a speculative-operation in a possible rebound in oil prices and gold.

Some views .-

• Finally some good news for the stock market given its low degrees of success: "The experts predicted a difficult 2009 for bags."
• J. Bradford DeLong, professor of Economics at the University of California at Berkeley and former assistant Treasury secretary for the U.S. is inclined to inflation, not deflation: Before the Second World War, when governments clung to the gold standard, depressions were times of deflation. However, after World War II, a time when social democratic governments maintain social spending and Keynesian economic advisers are seeking to use fiscal policy to stimulate the product is much more likely that a depression of earnings is accompanied by inflation.
• Goldman says that the crisis will generate 1.4 trillion dollars of losses, and so far only 800,000 have left millions.
• I leave with you an article of mine before the summer on General Motors
• And this from the beginning of September on Santander
• The opinion of a prestigious professor of economics Spanish on the steps of "support" for the mortgaged
• Article very pessimistic about the economic situation in Spanish
• Before leaving to do so, Treasury Secretary Paulson (ex-Goldman) extends the benefits to AIG and curiously brings great benefit to Goldman with this measure (the complaint here in English), Suspect?
• "A deep recession is now inevitable and the possibility of a depression can not be ruled out," Soros said

The opinion of the week .-

On a possible rise in regulating the meeting of the G-20 + ZP ", highlight a comment by JRRallo:

We are told that this crisis will not be repeated if the risks are controlled. In the abstract, this sounds pretty good. The problems begin to arise when a little down to reality. The risk is a concept totally subjective: what for some can be a very risky project (such as creating an Internet browser in 1998), others clearly can be a profitable business and insurance. Similarly, which for some can be a very safe investment (such as purchasing a home in Spain in 2005), for others it could be a brutal error analysis on market conditions.

Therefore, restrict who can assume the risk investors (and banks) is very delicate. Can you imagine that in 1998 the State had prevented Sergey Brin and Larry Page that created Google (or have someone give them money to create it) arguing that this was a project too risky?.

On the other hand, and on the same grounds, claiming to inform savers about the risks they are taking no exact ceases to be an unattainable goal. Exactly who will measure and quantify that risk? Are the banks that are breaking through its successful investments? Do the rating agency in 2005 and 2006 said that most of the assets that were being unpaid maximum security? Do central banks, which not only created the current bubble, but hoped that would never end? Are the governments that joined the bandwagon of a false prosperity and declared themselves united in 2007-and some in 2008 - which had not any serious crisis on the horizon? Is it not obvious that if savers were still more than what they did, the signs of all these agencies, the batacazo today would be even greater?

Data for reflection .-

• Close correlation between the lower index of raw materials (CRB) and emerging stock markets

• The Hegde Funds lost an average of -5.4% in October.
• The information ECRI future inflation in the euro has the largest drop in a month since October 2001 and is a minimum of 16 months.
• The unemployment rate in USA is placed in 6.5%, the highest in 14 years.
• The institute's business cycle indicator ECRI gives its annualized growth down to -24.6 from -21.9, new record since its existence (1949) for the second consecutive week.
• Crude oil closed the week down 10%
• As every weekend lately gone another regional bank USA-but this time were two-and van 19:
• Last weekend rate fell unexpectedly to Taiwan while China approved a financial plan very ambitious
• More and more debt differential:
• And the problem of lack of liquidity persists even get off the Euribor
• Sentix indicator of investor confidence in Europe on Monday touched historic lows in -36.4
• On Monday the bankrupt retailer Circuit City (a kind of Media Markt) with 1400 stores in USA and Canada.
• On Monday, American Express received permission from the EDF to become a commercial bank. As I happened to investment banks, this change allows you to access aid from the U.S. Treasury.
• On Tuesday, a holiday in the U.S. government and mortgage entities Fannie Mae and Freddie Mac announced a massive plan to accelerate the modification of hundreds of thousands of mortgages and avoid embargoes homes. The plan is aimed at mortgaged that have delayed their payments in more than 90 days and seeks to reduce the monthly payment up to 38% of their income. The possibilities to achieve this include cuts in mortgage rates lower, losing the principal or extend the term of these loans, including up to 40 years.
• On Wednesday, despite having been rejected, amended and then approved by politicians, the Treasury decided to radically change the American Rescue Plan (do not know whether Obama agreed with or not) and renounced the use of that money to buy assets Banks and decided to buy more shares in direct banking, helping other non-financial companies and try to support the mortgage directly.
• On Wednesday, the Russian stock exchange was suspended when it fell 12.5% and the Kuwait on Thursday closed until Monday.
• On Thursday, Germany officially entered into recession.
• At last it seems that they are going to ask responsibility to the rating agencies
• Thursday marked the Nasdaq minimum of 5 years and a half and played SP500 prices not seen in 11 years.

The data of the week.

For me this week the primary datum has been the confirmation of the falsity of several "totems" of the bag as long that is never lost or values that are "safe". Look at this chart of decades of General Motors to close on Wednesday ($ 3.08):

Summary of day day of the markets.

- Friday
Despite the fall of 3.55% of the Japanese stock market, the balance in Asia was mixed and the recovery from minimum, the rise of future U.S. and a slight rebound of oil and € helped to open up Europe to a flat which happened in minutes to be positive environment to +1%, returned to zero and then slightly negative to positive ... and in that environment narrow range spent the morning with the disappointing results of Ford bypassed and a disastrous U.S. jobs data but in orbit than expected. The revision to the sharp decline in the employment data for September (almost double, leaving even worse than that of October) that it took a minimum stock exchanges but not exceeded by far the -1% and as USA opened upward (and overcome in a few minutes +1%) Europe regained positive and at the time was above +2% at the same USA, as it did also ignore the disastrous results of General Motors urged Europe to close above the 2%. USA after some hesitation, and despite some very negative statements by Greenspan and -9% at the end of GM, had a closing peak at around +3%.

- Monday
Strong increases in Asia (Japan +5.81%), thanks to an ambitious economic plan approved by China (+7.27%) - accompanied by a rebound of crude and € and a fall of the yen that led to Europe to open up about +3 E% +3.5% go towards midday. The increase was substantiated by the sector of basic materials (closely related to China and emerging stock markets), which exceeded the two-digit percentage rise on par with banking sector is not accompanied by the movement. In fact, the Ibex, adversely affected by the increase in capital of Santander, was the least climbed, half that in the other half. The disastrous results of AIG (which however will go up to the value at the announcement of further cash injection of the EDF), Fannie Mae and the bankruptcy of Circuit City were reduced by 1% gains. Although USA opened climbing more than 2% in a few minutes went by diluting the progress being in half in half an hour (GM landed with a 30% after the opinion of Deutsche Bank stating that its value is $ 0 per share) and lost all their profits, like the crude but Europe (except the Ibex) was able to close in positive while the Dax exceeded only +1%. USA in the afternoon came down almost 2%, rebounded somewhat, fell more than 2% in the last minute and a strong recovery ensured that only the Nasdaq closed down more than 1.5%.

- Tuesday
Day by emphasizing the bass player in Asia -3% of the Nikkei and with little change in foreign exchange and commodities. Europe opened down 2%, minimum rebound from that area and return to being the low Ibex the only one that clearly exceeded the 3% again weighed down by banks. The German ZEW was a bad back but better than expected and Vodafone dragged its sector with its rising by good corporate news which could bounce and slightly towards the end of the morning went something so the Ibex is considered the most rare in the indices: across Europe was a minimum-on par with crude oil to break down 60 $ / barrel, surpassing the 3% and then the Ibex stopped falling and even rebounded thanks almost exclusively to TEF. USA-a national holiday but with bag-opened to fall at around 1.5% while Europe did it twice in percentage. USA soon went from -2% and -3% to exceed rushed sales in Europe and closing the Dax € Stoxx with more than 5% drop and the Ibex just over 4% (when was the morning that was worst in Europe) and the much weaker €. General Motors fell minimum of 65 years and the crude touched minimum of 21 months but the U.S. stock market managed to reduce its losses in half by the submission of a plan to help the U.S. mortgage and finally closed at -2%.

- Wednesday
Moderate decreases in the Asian session and rebound shy of the future USA (with the conviction of the adoption of public aid GM) that helped open in Europe buoyant at +1.5% in minutes that were reduced to below 1% and within two hours and were mild losses in banks and energy (crude oil fell to $ 58) and pushing the bad influence of the collapse of the Russian ruble. Stabilized in an area between losses and gains slight and the statements of the Bank of England announcing further decreases in rates again to push the bags at +1%. Not long argued for lowering the estimate for the retailer BestBuy USA and the suspension of the Russian stock market fell to 12.5%, and an hour before the opening American in Europe was overcoming the negative -1%. USA opened down 1.5%, similar to what Europe in a half down at that time. Before the hour and was down more than 2% and closed-European FTSE except that the lost half-half was at -3%, which at that time fell USA. The reasons may be on the Treasury's decision to be more stringent with banks in risk assessment of new credit operations and the distribution of dividends and payments to executives as well as the announcement not to buy asset-backed mortgages, but earmark Consumer borrowing money, as well as to assist other non-banking sectors (read: GM, Ford etc.). With the sector of basic materials (in fact arrived in Brazil dropped nearly 8%) very touched by a $ 56 crude, banks falling before the announcement of Treasury does not buy its assets "toxic" (Citigroup fell minimum of 13 years ) And Google in minimum of 3 years, surpass the USA and -4% at the close both the SP500 and the Nasdaq reached -5%.

- Thursday
After closing lower in 5 years of Nasdaq, the Nikkei, which usually follow him faithfully, fell more than 5%, significantly harmed by further lowering of forecasts for Intel. However, Europe opened down less than 1% (except for the FTSE, which has doubled the losses after several days being the strongest) and in minutes had a slight positive movement in a correction from the oversold. This movement is amplified by overcoming the +1% but there was not too long and mid-morning was returned to the uncertainty in the indices at midday and downs in excess of 1%. These are minimum bounced back to mild positive, after a very bad data in weekly unemployment slight negative and when he opened USA (at +0.50%) was rising 1% to move seems to consider the ill-data as a confirmation more decreases in rates. Europe endured in positive even when the USA went to ground and closed negative on average in +1% except for the FTSE it did in the negative. The narrow range in Europe is not infected U.S. pressure that led to bearish: the Nasdaq fell more than 4% a minimum of 5 ½ years, followed him from -3.5% in the Dow and SP500 (the latter also marking minimum levels 11 years ago and a half) ... And in less than an hour on the SP500 returned to positive in a sharp rebound with little volume and that he accompanied a crude and a € upwards and within two hours, the 3 indexes approached to +3% , Fell within minutes to half the profits and returned to pick up momentum in the last hour of meeting with a spectacular closing short (especially in the financial sector) to mark the highest closing above the +6.5% over 10 % Between minimum and maximum in a day with nothing remarkable to justify something like that.

Droblo written by the November 14, 2008 with 275 points.
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