Market Update September 26, 2012 Team Delta Jesse Pytlak, Luc Troiani, Brad Wolfe, Rohit Lobo
Mar 26, 2015
Market Update
September 26, 2012
Team DeltaJesse Pytlak, Luc Troiani, Brad Wolfe, Rohit Lobo
Source: Google
Source: Google
Weekly Performance: S&P500, Dow Jones, NASDAQ
Weekly Performance: TSX Composite
Equity Markets Review
Valuations Stretched?
Mean: 15.48
Median: 14.45
Min: 5.31 (Dec 1917)
Max: 123.79 (May 2009)
• S&P appears overvalued on a trailing P/E basis• S&P 500 within 10% of all time high• What are fund managers outlook for equities?
• How are they positioned?• Short position constraints?
• Risk/return: equities vs. fixed income
Source: Multpl.com
Historic price to earnings ratio, based on trailing twelve month “as reported” earnings
Volatile Week for Oil
Source: CNBC
Weekly U.S. Crude futures (NYMEX, November contract) performance
• Oil as a leading economic indicator• Rumours of a release of U.S. Strategic Petroleum Reserves • Saudi Arabia suggests increasing supply• A strong correlation exists between oil prices and CAD• What are managers views on energy prices?
• Does it align with their views of the economy?• Current positioning? FX exposure?
Economic Indicators
Manufacturing sales (Sept. 14) Wholesale trade (Sept. 21)
Source: StatCan
Economic Indicators
Consumer Price Index (Sept. 21) Energy Index (Sept. 21)
Source: StatCan
Economic Releases
Release Date
CA – Retail Sales Sept. 25
CA – GDP Sept. 28
US – Consumer Confidence Sept. 25
US – House Price Index Sept. 25
US – New Home Sales Sept. 26
US – Durable / Capital Goods Sept. 27
US – Initial / Continuing Jobless Claims Sept. 27
US – Personal Income/Spending Sept. 28
Late August- SEC Proposes Changes to Advertising Restrictions
• The SEC proposed changes to the advertising restrictions on hedge funds, meaning they could potentially begin to advertise publicly
• One argument against this is that “unscrupulous” hedge funds managers may take advantage of uneducated investors
• What image does that argument give people about the ethics of the industry?
• Discussion: How will this affect hedge fund performance?
September 17th - Starboard Value Takes Activist Stake in Office Depot
• 13.3% equity stake makes it the largest shareholder
• Public letter issued to Board to push an improvement in operations
• Office Depot shares were up 10.5% in premarket trading on Monday
• Is this potentially a strategy we should look at? What are the risks?
China
Source: Google Finance
China
Source: The Economist and Forbes Magazine
• China’s Debt to GDP ratio at 16.3% - considerable “wiggle-room”
• Ample room for easing can result in a soft rather than hard landing
• Forbes estimates with “Hidden Liabilities”, Debt to GDP ratio between 90% - 160%
• Chinese communist leaders are traditionally very sensitive to inflationary measures due to potential widespread unrest
China
Source: The Telegraph and Sydney Morning Herald
• China’s manufacturing level fell to its lowest in nine years – HSBC PMI rating of 47.6
• China’s central and local governments launch a 7 Trillion Yuan stimulation package for roads and infrastructure
• Approved 60 new projects led by railways, roads, harbors, and airports
• Head of China’s Central Bank indicated that easing is not an optionZhou Xiaochuan