Japanese Unemployment- 04.29.10

The number of unemployed persons in March 2010 was 3.50 million, an increase of 150 thousand or 4.5% from the previous year. The unemployment rate, seasonally adjusted, was 5.0%.


Patrick M. Ambrus
Managing Partner
Analyze Capital LLC
ambrus.anlzgroup@gmail.com

German Unemployment for March- 04.29.2010

The unemployment rate was forecasted to be 8.00%. Instead we saw a 7.8% rate this morning. This correlates with a 20 basis point drop in Unemployment from February to March. Sustainable?

According to provisional results of the Federal Statistical Office (Destatis), the number of persons in employment living in Germany amounted to 39.9 million in March 2010. Compared with March 2009, that was a decrease of 138,000 persons or 0.3%. In January and February 2010, the number of persons in employment was 0.4% each below the previous year's level. Consequently, a somewhat slower year-on-year decrease in employment was observed in the reference month of March 2010.

As a result of spring recovery, the number of persons in employment rose by 114,000 or 0.3% in March 2010 on the preceding month. After seasonal adjustment, that is after the elimination of typical seasonal variations, there was a small increase of 12,000 persons (+0.0%) compared with February 2010.

Beyond the first calculation of the number of persons in employment for reference month March 2010, the monthly results on employment published previously were recalculated for the second half of 2009 and for January and February 2010. All sources of employment statistics that became available in the meantime were evaluated for the purpose. The recalculation of the monthly results produced year-on-year rates of change that were only slightly higher or lower than the previous results (deviation of a maximum of 0.1 percentage points at the level of the overall economy).


Patrick M. Ambrus
Managing Partner
Analyze Capital LLC
Twitter: AnalyzeCapital

Brief Market Notes: April 28, 2009

Thoughts:

ETF markets - Post crisis investors are looking to increase their risk appetite. It would seem that brokers/financial institutions are repeating the same mistakes pre-crisis; and the same practices seen throughout retail banking, of pushing products not fully understood, onto unknowing consumers.

ETF's are quite complex structured products akin to derivatives imho. My partner, Pat, can tell you much better than I, as he has way more experience in trading commodity related ETF's. Often correlations will remain high with the underlying instrument it is built off, but has many more dynamics of its own.

ETF's built off other indices or built off futures or bonds are at risk to those respective market risks, and the risk of the product itself. Indexation and limits to indices are complex issues in itself, enough to make my head spin.

In addition to those risks are the risks of the ETF market itself pertaining the economic aspects. Supply/Demand balances are often limited to how the product maybe structured. Due to limits of the product excess demand can out-weight supply causing price correlations to break down in the short term (or flip flopping between backwardization and contango if based of futures). The short term being a few days to a few weeks of price divergence as we saw in the natural gas ETF market back in summer of 09.

If traditionally passive investors are informed by their brokers that ETF's make an alternative low risk way to diversify their portfolio, this is a grave mistake. This in effect will make the ETF market more naive in the long run if more passive type markets start to invest into the market, thus increasing the risk of adding more volatility to their portfolio. Often short run fluctuations can cause investor/trader behavior to panic and cause herd mentality sell offs (or bullish runs in light of positive sentiment).

I am not trying to say if x happens then y and z shall follow but, there are real risks that makes the ETF market much more complicated on a deeper level than simple indexed products that mirror larger products at a lower cost (the cost issues are a whole different topic on its own that I shall not get into).

Hopefully going forward investors will keep up with due diligence and not blindly invest in products unknowingly as back in 2008.


----

Alexander Lê
Managing Partner
Analyze Capital LLC
email: analyzecapital@gmail.com

Those Grey Swans of Extrimistan- 04.28.10

“The issue is rollover risk,” said Jonathan Tepper of Variant Perception, a research group based in London and known for its bearish views on Spain. “Spain has to issue new debt to the tune of 225 billion euros this year. Forty-five percent of their debt is held by foreigners. So they are dependent on the kindness of strangers.”

I found this excerpt interesting as I was browsing the NYTimes this morning. Is this a crisis of debt or of confidence? I prefer the latter. Without confidence in the market place refinancing or issuing new debt will come at the cost of a hefty liquidity premium. Additionally, the media continues to hype up this mess, fueled by the ratings agencies (fools) whom are also growing extremely pessimistic.

Will this crisis of confidence cause us to play another lethal game of musical chairs? I hope not. No one is safe in those type of games. I am not sure The Global Financial Markets can go another round without some type of catastrophe. And by catastrophe I mean something along the lines of the Russian Ruble crisis in August of 1998. Not, Systemic Risk or the Moral Hazard of bailing out large institutions. The day a sovereign nation becomes an institution that needs loans beyond reasonable measure of the IMF or an unnamed central bank is the day I dread.

Throughout the Crisis of 2008 till present times, financial gurus, experts, and publications alike claim stability and recovery based on changing and unconfirmed information. Unfortunately, there is no way to confirm a positive outcome in these type of games. Tomorrow is promised to no one. For instance, what if Spain is pummeled by a meteor tomorrow? Debt ratings will be the least of their concerns. There is no way to calculate irrational randomness.

My solution: look for information that disconfirms/challenges the common or popular information that looks for stability and normalcy, which is presented by financial experts, analysts and journalists alike. When I find this information, I most likely will not know it. Also, the disconfirming information probably hides where I would least expect to find it. Thus, I will need to maintain a disconfirming/challenging mindset and logic out the details/nuances of new/sexy/popular information. For example, the disconfirming information may be what FOMC Chairman Bernanke does not say. A Nascent recovery is far from a Definite recovery.

Henceforth, I will trade with agressive caution. I will look to minimize my greatest risks while also maximizing my smallest risks. Well wouldn't this be the same as swapping risk and/or increasing my unknown risks? No. By identifying the greatest risks with disconfirming information, the least risky opportunities should become readily identifiable. For instance, If I want to vacation in either Los Angeles or New York this weekend I would probably think about witch one would provide greater returns of fun. However, if I knew that there was a 30% chance of an Earthquake in LA, but in NY 90% chance of cold rainy weather, I would go to New York and maximize my fun returns or stay home and host a cocktail party with friends. Therefore, the least risky opportunity presented itself once I ascertained my greatest risk (vacationing in L.A.).

I hope I did not confuse anyone with my logic here. Recently the writings of Nassim Nicholas Taleb have influenced me to start thinking or become confused, depending on your own interpretation of my thoughts.

As I start finding disconfirming information I will present it. Maybe then my ideas/reasoning will become transparent. Until then, enjoy the uncertainty and opportunities to make a killing.


Patrick M. Ambrus
Managing Partner
Analyze Capital LLC
Google Buzz: Analyze Capital

Early Bird Missed the worm but got it later: Shorting the SPX - April 27, 2010

April 27, 2010:

A 2.34% move is certainly nothing to scoff on the SPX. As shown by the red line my entry was a few days too early as my position moved against me 1.33%. I kept my stops wide enough and today paid off. I expect prices to at least reach 1160 where I will take some profits and reassess as 50 SMA resistance can be strong, however as the blue circles indicate there is plenty of technical bearish indication the trend may go lower (Volume confirmation and momentum reversals). As is, I will be riding the short term trend for as long as it stays healthy. Though overall, quarterly time frame I am leaning to be more bullish, but more on that later... back to finals studying!

German Import Prices- 04.27.10

As reported by the Federal Statistical Office (Destatis), the index of import prices increased by 5.0% in March 2010 from the corresponding month of the preceding year.From February 2010 to March 2010 the index rose by 1.7%.

The index of import prices, excluding crude oil and mineral oil products, was 0.7% above the level of a year earlier (+1.1% compared to February 2010).

The index of export prices increased by 2.0% in March 2010 from the corresponding month of the preceding year. From February 2010 to March 2010 the index rose by 0.8%

Why am I posting at this time of night? Good question. However, I am concerned about the run-up in global equity prices. I expect to see a pullback of 3-5% within the next week or 2. Hence, any data that might give an indication of trading sentiment (SPX, DAX) will be useful. Currently I am analyzing the SPY and SSO (2 ETFs which track the SPX).


Patrick M. Ambrus
Managing Partner
Analyze Capital LLC
Facebook: Analyze Capital

PPI- April 22, 2010

Via Bloomberg:

Producer price inflation unexpectedly surged as atypical winter freezes jacked up food prices and gasoline made a partial comeback. The overall PPI rebounded 0.7 percent after declining 0.6 percent in February. The boost in March was considerably above analysts' expectation for a 0.4 percent increase. At the core level, the PPI inflation rate was steady with a 0.1 percent gain that also matched market forecasts.

The jump in the headline PPI was led by a 2.4 percent spike in food prices, after a 0.4 percent rise in February. The March surge reflected the loss of some vegetables to atypically cold winter weather in key growing regions in the U.S. For the latest month the fresh and dried vegetables category surged a monthly 49.3 percent.

Turning to energy, this component rebounded 0.7 percent after dropping 2.9 percent the month before.
Gasoline rose 2.1 percent after a 7.4 percent drop in February.

At the core level, inflation is almost nonexistent outside of commodities related gains. According to the BLS, 85 percent of the core rise came from higher jewelry prices due to higher gold and other metals costs.

For the overall PPI, the year-on-year rate jumped to 6.1 percent from 4.6 percent in February (seasonally adjusted). The core rate year-ago pace edged down to 0.8 percent from 0.9 percent the month before. On a not seasonally adjusted basis for March, the year-ago increase for the headline PPI was up 6.0 percent while the core was up 0.9 percent.

Inflation at the producer level jumped in the latest month but much of it is temporary as food price inflation will ease as crops from other regions come into play, adding to supply. And while high, oil prices have steadied.

More evidence to the Fed to keep rates in check through years end? Maybe not. However, If I had more time I would pick apart the energy portion of this report. I would like to know if their are any potential inflationary trends. Also, Check out Alex's update on Financial Equities.


Patrick M. Ambrus
Managing Partner
Analyze Capital LLC
Facebook: Analyze Capital(click the link up top)