Sunday, January 31, 2010

XLF - SPX - EUR - Update: 1.31.10

Following up from 1.28.10 : <--- click here


Current Close: 14.18
Previous Close (1.28.10): 14.28


Current Close: 1073.87
Previous Close (1.28.10): 1084.53


Current Close: 138.39
Previous Close (1.28.10): 139.48


It appears all or short term calls are playing out as we predicted except financials. We will be watching over the next week to see if support levels form earlier than the specified two week period (short term).


Weekly Chart has yet to converge to Daily Charts which points to further movements south. You may see temporary slight whipsaws (entries for shorts) to the upside, but eventually the 137- to low 138 levels will be testing long term support from June 09 levels. In which we would expect the temporary dollar weakness (our Mid term view on EUR).


Friday was a temporary down day caused by sentiment which helped lead the SPX down. But We are confident 40 support on RSI is holding as MACD momentum is reversing. We expect temporary whipsaw up (short term bull). Currently weekly charts show 50 RSI support is holding (short term whipsaw to upside). But mid term, fundamentally, we are bearish on financials and expect that to filter through in quarterly earnings reports.


The weekly chart rally is finally broken (via upper 1st and 2nd BB analysis). Daily chart anlysis shows bottoming over the next two weeks. This would coincide with below 1070 support (confirms short term bear). At which at that point 50 RSI on the weekly chart should hold. This should lead to side ways trading (our neutral bearish view). We will follow up on sentiment analysis to confirm our mid term view (may
change depending on analysis).


Alexander Lê
Managing Partner
Analyze Capital LLC

Academic Hedge Funds - 1.31.2010

Via The Huffington Post

I found this to be a very interesting article about the current academic institutions. I agree with a good number of the sentiments presented in this article.

Often Academic Institutions of what society deems as "the best" often miss the point of education and do not focus on giving what students need in terms of learning. I am not sure if the academic model presented in the article will solve all the problems, but I do certainly agree that reform is needed and what qualifies a school as "the best," should be reassessed.

Thursday, January 28, 2010

Market Forecast: 1.28.10

Short Term: ~ two weeks
Medium Term: ~ two months
Long Term: ~ Quarterly

S&P500 Current Close: 1084.53
XLF Current Close:14.28
EUR/USD Current Close 139.48


*side note:

WFC current close:28.45


Alexander Lê and Pat Ambrus
Managing Partners
Analyze Capital LLC

Durable Goods Orders- 01/28/10

Via Bloomberg:

Today's durables report is showing the manufacturing sector continuing to slowly gain momentum. Despite a December gain, the immediate question for the markets is whether a disappointment on headline expectations is offset by upward revisions to November and favorable detail for December. New orders for durable goods in December rebounded 0.3 percent after a revised 0.4 percent drop in November. The November number had previously been estimated to be a 0.7 percent decline. However, the December gain fell short of the market forecast for a 1.6 percent spike. But weakness was the lack of a rebound in Boeing orders. Excluding the transportation component, new durables orders advanced another 0.9 percent, following a 2.1 percent rebound in November.

Despite a shortfall in headline expectations for December, upward revisions to November, a jump in ex-transportation in December and another gain in nondefense capital goods ex aircraft may turn the report into a net positive-even compared to overall expectations. However, initial jobless claims were worse than expected.

In my mind the biggest question is how long will it take for inventories to wind down to the bone? When that happens, what will the economic environment look like?

Patrick M. Ambrus
Managing Partner
Analyze Capital LLC

Monday, January 25, 2010

Todays Market Reaction: 1.25.10

"Short Covering"

  • Are we in intermediate down trend?
  • Price recovery back to resistance levels?
  • Currency Markets gone haywire...

I'm till putting the pieces together. I will have more in a few days hopefully.


Alexander Lê
Managing Partner
Analyze Capital LLC

Death of The Investment Bank

United States President Barack Obama proposed on Thursday a novel set of stringent restrictions his administration plans to implement in order to exile “risk” from Wall Street. The new directives include limiting Prop Trading, restricting investment in Hedge Fund and Private Equity groups, and curbing the size of an individual bank based on deposits.

"You can choose to engage in proprietary trading, or you can own a bank, but you can't do both," an administration official said. Do these same rules apply to Credit Agricole, Deutsche bank, Société Générale, UBS, Credit Suisse, Barclays, HSBC, ING Group, RBS, Mitsubishi UFJ Financial Group, etc…? This much is not yet clear. However, one can presume the answer to be no. So then why is Washington hell-bent on wringing out U.S. based financial institutions? U.S. banks received “bailout” money from the infamous Troubled Asset Relief Program. Let’s examine the “Tarp” for a moment.

As of February 9, 2009, $388 billion had been allotted, and $296 billion spent, according to the Committee for a Responsible Federal Budget

Of these banks, JPMorgan Chase & Co., Morgan Stanley, American Express Co., Goldman Sachs Group Inc., U.S. Bancorp, Capital One Financial Corp., Bank of New York Mellon Corp., State Street Corp., BB&T Corp, and Bank of America have repaid TARP money. Most of these have been done with capital raised from the issuance of equity securities and debt not guaranteed by the federal government.

The largest outstanding Tarp repayments come from AIG, General Motors, GMAC, and Chrysler. So I ask the question: “Are any of these companies Bank holding companies? Back to my original question: Why has the Obama Administration harped on Bank holding Companies?

The answer is quite simple. It builds political capital. The new administration has struggled time and again to justify spending $787 B in stimulus money, Health care overhaul with a public option, the war in Afghanistan, and most importantly create jobs. Many Americans remain unemployed, more than 10%. When those Americans read Goldman Sachs makes record profits and allocates funds for record payouts, anger and frustration ensue.

Also, even the most educated American does not understand what an Investment Bank does or its purpose in the global macro economy. Hence, it is easy for President Obama to say "Never again will the American taxpayer be held hostage by a bank that is too big to fail." What bank is holding us hostage? As the above chart indicates most all Banks with the exception of few smaller players have repaid Tarp funds with dividends. For example, Goldman Sachs paid a $1.3B dividend. Not to mention, The Federal Reserve is sitting on billions of dollars in paper profits from its controversial effort to unwind credit insurance contracts that AIG provided to banks such as Goldman Sachs.

However, there is no news like bad news. I point the finger at the media in this case for failing to educate the general public with these headlines. Yet, it is not all their fault. The Global Financial System barely dodged the Asteroid that could have been the trigger to a greater Apocalypse. I do agree that reform, new regulation, and risk management need to be considered in order to prevent things from spiraling out of control again. Though, I am disappointed that Washington officials are spinning this for personal reasons rather then taking the time to educate Americans on the causes of the crisis.

What will happen to the once ironclad Investment Banking model going forward? It is hard to say. Surely, lobbyists will be hired and lawsuits will arise. Not to mention regulation takes years to truly make an impact. One thing is for sure; this is a dangerous game of Liar’s Poker.

Patrick M. Ambrus
Analyze Capital LLC
Managing Partner

Monday, January 18, 2010

Equity Call for the New Year: WFC 1.18.09

Hello Ladies and Gents,

Back in the states and ready for the new year! Apologize for the long period with no publications, but fear not our team is back with a burning motivation like no other.

Though my equity performance is not so hot, I will start out by making a call on WFC (Wells Fargo). Knowing about WFC's management and company culture should be enough reason to short the company at these levels. Though the bad news doesn't end at the latter two points.

Management Issues:

I haven't had time to break down their statements but its clear that their poor retail practices and super tight loaning standards are certainly not in their favor. Considering the nature of Wells Fargo's business I'm sure these management practices filter through to their other commercial and corporate banking arms.

Listening to the front line retail solider at local branches (sales personnel) I learn of a great disparity between high level management and local level management along with retail employees. There is poor communication of the wants of management and and the feasibility of these wants that must be carried out by the sales staff (akin to typical state planner wants and production possibility feasibility problem found in Soviet and Indian economic history). Much of this reminds me of asymmetric literature on financial crises (Particularly Miskin's work on using the asymmetric model across historical financial crises). It would appear that the WFC banking model hasn't improved much since the crises; and perhaps this holds true for other retailers as well.

The above paragraphs outline the management issues. Which does not even begin to discuss the fundamental problems.

Some Fundamental Issues:

At the height of the crises Wachovia bought into lots of bad paper. From what I know (though I am not to familiar) there have been at least 52 billion dollars of write downs from these poor investments. One can be sure that there should be more write downs to come, or at least the downside risk remains high.

Though low quality commercial paper seems to have stabilized, the fact is that it still remains fundamentally poor. Though I will note as long as people hold faith in the Fed this risk factor maybe minimal.

All in all I will call a short at these levels; current close 28.08.


Alexander Lê
Managing Partner
Analyze Capital LLC
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