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Liontrust Dealer's Roar - 31/03/2011

The printing press is either the greatest blessing or the greatest curse of modern times, one sometimes forgets which” – James Matthew Barrie, creator of Peter Pan, (9thMay 1860 – 19thJune 1937)

Volumes in US markets picked up a bit yesterday but with Chinese PMI tomorrow night, non-farm payrolls andthe results of the Irish stress test on Friday there were still a few reasons to sit on the sidelines. The S&P has only had two down days in the last ten. It’s up to 1328 just 1.2% below the year’s high made on 18th Feb and as we’ve pointed out the last few days it continues to feel bullet proof right at this moment. Echoing this ‘risk on’ theme the Russell 2000 index, made up of US smaller companies, actually made a new high for the year. This index is comprised of the 2000 smallest companies in the Russell 3000 index (it only represents 8% of the market capitalisation), so it outperforming it’s bigger cousins is a sign investors are having to bet on more inherently risky businesses, it’s up 7.2% this year vs. the Russell 3000 only up 3.3%.  

Liontrust Dealer's Roar - 30/03/2011

“The true meaning of Christmas will not be revealed until Easter – or possibly much later” – Mervyn King, Governor of the Bank of England, born March 30th 1948

Despite low volumes again, the S&P closed on its highs for the day and we have seen a decent follow through across the board in Asia. Japan bounced hard as exporters surged after the USD climbed sharply from the upper 81-yen zone to 83-yen level. On top of that, automakers and tech shares were also boosted after the media reported that Nissan and Hitachi are resuming their operation soon. Inevitably European markets opened in good heart, shrugging off the double sovereign downgrades from S&P yesterday that saw Portuguese and Greek debt get ever closer to junk status. 

Liontrust Dealer's Blog - 29/03/2011

The Minister of Transport issued this appeal to motorists: Can anyone give him a lift to Leicester?”  - Eric Idle born March 29th 1943

US markets initially traded sideways post our departure but in the last 30 minutes of trading they sold off to close at the worst levels of the session (S&P -0.4% from where we left last night). Concerns touched familiar themes with S&P downgrading 5 Portuguese banks, worries as Ireland edge closer to the results of recent bank stress tests (€23bn required rumoured in the Irish press) andMerkel suffering a set-back in an important regional election (the takeaway seemed to be German hostility over nuclear energy). MENA headlines are not going away, Libyan rebels secured some more towns, Syrian protestors were killed by police andviolence is erupting in Jordan. Like the UK,the standout takeaway was the dire volumes;it was the quietest turnover day of the year, with the largest volume coming in the 30-minute sell-off (a worry perhaps).

Liontrust Dealer's Blog - 28/03/2011

“If inflation continues to soar, you're going to have to work like a dog just to live like one.”  - George Gobel, American comedian and actor, May 20th 1919 – February 24th 1991.

Last week saw equities bounce sharply from their latest cyclical lows, rising each day to finish with weekly moves: S&P +2.7%, EuroStoxx +4.3%. A key issue for the week however was low daily volumes, highlighting an underlying lack of conviction/participation in the up-move from the recent cyclical lows – weekly volumes versus their 6 month average were 93% for the EuroStoxx and 85% for the S&P. 

Liontrust Dealer's Blog - 25/03/2011

“No matter what political reasons are given for war, the underlying reason is always economic”.  AJP Taylor, British historian, March 25th 1906 – September 7th 1990

How distant does last week’s wobble in equities seem already! The current mood of the market is well summed-up by one of the most respected fixed income strategists in London today:

There's a lot of bad news around at the moment. From Japan to Portugal, from Ireland to Libya, and from the downgrade of Spanish banks to UK inflation. However markets are shrugging these events off and are being propelled forward by three forces in our opinion.

Liontrust Dealer's Roar - 24/03/2011

"The shareholders are looked after by me. And they should be very thankful. I run Amstrad as if it was my own. They get their accounts every year, their profits and dividends. And if they don't like it, they should sell their shares. But I'll run my - the - company the way I want to. Not the way some tw*t in the City wants me to” (Sir Alan Sugar (born 24/03/1947) interview with the Sunday Times 2006

The S&P initially traded lower after another rather poor housing number; economists were predicting new homes sales would have risen 2.1% during the month of Feb, instead they fell 16.9% to the lowest level since 2003. Jim Cramer (CNBC Mad Money fame) commented that hopefully this dire number would prompt homebuilders to finally stop building new homes as despite the dire sales of existing homes they’ve continued to add to supply driving down prices further; glass half full.  

Liontrust Dealer's Roar - 23/03/2011

"The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt." Marcus Tullius Cicero, Roman philosopher and statesman, January 3rd 106 BC – December 7th 43 BC

The world of European sovereigns came sharply back into focus once again yesterday, with the focus of concerns being Portugal and Ireland.  

Liontrust Dealer's Roar - 22/03/2011

Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man.” – Ronald Regan

US markets had opened strongly on the back of a stabilisation of the Fukushima situation andthe large M&A deal Richard mentioned yesterday, however they failed to push on post our departure as the situation in the Middle East remains a headwind andexisting home sales printed at the lowest level since 2002 

Liontrust Dealer's Blog - 22/03/2011

“I wouldn’t say I was the best manager in the business. But I was in the top one.” Brian Clough, English footballer and manager, March 21st 1935 – September 20th 2004

All in all, I picked quite a week to be away! Events at Cheltenham were as wonderful as they were ghastly elsewhere.

Europe started the week in robust form, helped by a positive tone in Asia overnight and encouraging developments at the Fukushima nuclear plant. Japanese authorities appear to be making some progress in stabilising the nuclear reactors but the weekend press has reported radiation contamination in food products from areas near the nuclear plants. Indeed the International Atomic Energy Agency (IAEA) said that despite the positive developments over the last 24 hours the overall situation remains "very serious" and the food and water contamination is becoming a key concern. And with news this morning that some workers at the stricken facility were evacuated on Monday after smoke was seen rising from reactor No 3, it is clearly far too early for markets to become dismissive of the gravity of the situation and the enormous risks still in play.

Liontrust Dealer's Blog - 17/03/2011

“I am only conscious of any satisfaction in Scientific Reading or thinking when it rounds off into a poetical generality and vagueness” – Wilfred Owen (18/03/1893 – 04/11/1918)

Today there was a welcome change from sell-side notes which began with the phrase, “I am not an expert in nuclear reactors but..” as at 13:32 today a note with the words “I am not a military or Libyan expert, but…” landed in my inbox. To echo Wilfred Owens point,if such ‘information’ was in any way poetic perhaps I andSimon our head of credit wouldn’t mind but unattributed opinions are probably not what the market needs right at this moment in time. The US markets closed up on the day, although the rally couldn’t be described as anything other than lacklustre. Volume was terrible (down 28% DoD) andthe S&P failed to hold the 1275 support level . The VIX did move down 10% but reports were of a lot of hedging/buying puts in case of a major market correction. After hours numbers from Nike disappointed as the for the first time in 19 quarters they missed market expectations (Q3 net income rose $1.08, consensus was at $1.12).

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