From a trading perspective, Q3 is now over and looking at quarterly returns, its passing is not something too many of us will be mourning. Anyone who is in the risk asset business, be that equities or debt, would now be well advised to begin preparing themselves for a pretty austere bonus season.
What’s not already secured in the bin will barely come streaming in during Q4 and given the battering which investors and dealers alike have taken in the past few months, it’s hard to imagine management anywhere taking anything other than a dim view of anyone trying to load up the risk needed in order to make up for lost time.
More to the point, the fear and confusion which has led to some of the sharp declines in key indices – quarterly losses read as follows: Dow -8.91%, S&P -8.68%, Nasdaq -9.42%, FTSE -9.38%, Dax -13.66%, Cac -9.32%, Nikkei -11.32%, Hang Seng -22.00%, Shanghai -29.23%… need I go on? – will barely be cleared up within the next three months.
In fact, Thanksgiving is eight weeks tomorrow and given the convention that the serious part of the year more or less ends on that last Thursday in November, the horizon looks pretty close and hence the chances to make up for losses is severely limited.
With 2015 looking as though it is going to have been a bit of a write-off, it might be wiser to take one’s hits like a man and to begin thinking of how the books should be positioned going into 2016. Liquidity remains scant but with the best part of two months ahead, any desired shifts in tactical asset allocation should be able to be made with little or no rush.
Up in smoke
Tuesday was another pretty aimless day with the key themes of VW, Glencore and Petrobras haunting markets. I had the Dax on one of my screens for most of the day and watching it going up and down like the proverbials gave a good idea of just how nervous and unsure of itself the market is. It was also one of those days where statistical rubbish flourished.
Records will show that Glencore’s share price rallied by 16.95% on the day from 68.62p to 80.25p which makes that one of the year’s outstanding performances by a FTSE 100 stock. I’m sorry but, going back to the beginning of the quarter, it has lost 67.4%. I wonder how many shares traded at the low? Lies, darned lies and statistics? That said, I can’t see the company going under but I suspect that it will be a very different animal in 12 months time. Just nine days ago it issued 1.3bn new shares at 125p. Roughly a third of that has gone up in smoke; that’s £400,000,000 in nine days. Not bad.
I was asked by the principal at one hedge fund whether I thought it was time to take the company private again but although I think it’s not a bad idea, I can’t see the board of any bank condoning the provision of funding for such a venture.
That apart, how do Glasenberg and Kalmin explain that they sold their company to the public at 560p and are trying to buy it back at 80p? One way or the other, I can’t see Glencore paying dividends for some time and punting the equity around as a “zero coupon” is a mug’s game. I suspect the hedgies are amongst themselves but even they know that if real money doesn’t ultimately pitch up and buy into the story, it just ends up as a game of pass the parcel.
The Wild in DC
The English language can at times be a very strange but entertaining creation. My thanks to the incomparable M2 Davis for pointing out that the collective noun for baboons is a congress which, as she adds, explains a lot. Last week’s announcement by John Boehner that he’s had enough of the nonsense on Capitol Hill which is pushing American politics ever deeper into the abyss. This really does look like a case of the lunatics taking over the asylum.
I picked up a comedian on the wireless yesterday who made a point that Pakistan’s National Assembly with its 342 seats has 60 specifically reserved for women whereas in the 226 year of the existence of the US Senate, a total of only 44 women have served in its chamber. I understand the comedian, himself of Pakistani origin, was trying to offer the Americans some assistance in achieving gender equality.
Joking aside, the chances of the country ending up with its first female President after the elections in 405 days time look to be diminishing and it appears as though Hilary Clinton might be set to blow a seemingly unassailable lead for a second time. Could Joe Biden really stand up and find himself not only nominated but ultimately also elected? The pieces are beginning to be set out on the electoral chess-board; the real game has yet to begin.
Much will ultimately depend on the mood of the electorate in November next year but so far as its overall sentiment remains good. The Conference Board’s Consumer Confidence index for September came within a whisker of its eight year high at 103.04. The Case Shiller also came out yesterday and although it disappointed slightly, I did try to remind the other day that even booming economies rarely go up without the odd hiccough. There are a few statistical bits and bobs due today but little of relevance until the Manufacturing PMI tomorrow and then the DoL’s Payrolls Report on Friday.
Does any of this really matter at the moment? We study economic stats in order to try to second guess the central banks. Currently, the monetary authorities are peddling their own boat with their own agenda and I doubt whether anything we see between now and December, if that is when the Fed does move, will signify enough of a trend change to influence whatever is going to happen. How does it go? “Don’t confuse me with facts; my mind is made up”.
