Are we repeating the same USD rally earlier this year and only to see another sell off coming? Is this deleveraging of USD funded trades over for this month? Can we say NFP? Another weak number can no doubt put all this into tailspin again!
Dollar Index March 28 2005
S&P 500 - looks like short term oversold for now. However given 10y note at 4.64%, oil > $50, the rebound of dollar may not be enough to generate flows into this stock market. If our call on shorting this dollar on this rally and high rates + commodity is correct then there is little to generate raging bull in this S&P.
Housing stocks - Can you believe that analysts raised TOL to BUY rating??? They are arguing that the Fed hike is non-effective on dampening demand since real rates are still low, low historical PE multiple, lack of supply.... are they forgetting that these ARM will kill mortgage buyers? Marginal buyers will get squeezed out? I would like to point out that RMS Index looks to retest the support at 700.
Emerging market - Ishares like EEM (Emerging Market) and ILF (Latin America) are down 9% and 11% from their peaks this year... no mercy. According to Emergingportfolio.com, EM funds lost $350m in the week ended March 23. So far there is $2.5bn inflow (versus $2.2bn for the entire 2004). JPM Emerging Bond Index Plus (EMBI+) is now at 374bp over treasury vs the low of 316bp back on March 8, 2005. Note that we didn't have to look far to see wider emerging market credit spread. Last year EMBI+ saw high of 523 and back during LTCM crisis (1998) it was over 1200. So if we get panic deleveraging, EMBI+ has a long way to go and probably their stock markets too.
Posts
