Ibex 9,030 pts. Or what is, almost 35% over the minimum of 6,700 pts we saw in March. Again the same story that "the worst is over" and blah blah blah. A kind of deja vu over January, when we had to Ibex in 9800 after hitting 7800 pts, up 25% from lows. Then he came to fall by 32% to above 6,700 pts. At such times it is re-read the entry the crash of 29 (written precisely in the previous peak) to keep things in perspective.
Why such optimism?
On the one hand, it is logical that in a downtrend so abrupt rebounds occur equally violent. Otherwise we would have all the indices to zero. Rebounds can be exploited in the trading day, but in no have so harnessed to the composition of our equity portfolio long term because the main trend remains bearish. I commented about this in a great blogger entry Bourning Markets that would have a significant rebound imminently. I commented on 7 March and a minimum of 6,700 pts Ibex saw him the next day with the market, on 9 March. All this euphoria
market has been driven mainly because of the comments of mark to market, which continues to be a bit absurd. This financial system is becoming increasingly creative accounting of and less than prudent accounting standards. On I highly recommend reading this entry of S. McCoy: Banesto or how to make up the accounts with the approval of the Bank of Spain . Honestly, this make us the lonely cheating is pretty scary.
regard to creative accounting, one that seems to be where each passing day more banks are based both one and the other side of the pond, I recommend watching the documentary: Enron, the guys who ripped off America.
already commented that the biggest U.S. banks are celebrating that they have finally returned to profit (or close to it.) We then see a graph of some ratios of Citibank, because most I look at it I do not see any sign of improvement. The graph is
loss ratios in mortgage loans and credit cards, along with the unemployment rate (click to enlarge):
In the English case, if we recent data we provides the Bank of Spain and we look at the column of dubious, we go a cold sweat by the body (click to enlarge):
then seen on a graph absolute delinquency, published in bubble . info for forero donjuli2002 (click to enlarge):
If the evidence we seek to find something like a global financial system stabilization is the number of bank failures in the U.S., the data are not exactly encouraging: in all of 2008 broke 25 banks in the U.S., while during only four months of 2009 we have broken 24 banks! U.S..
is also talking a lot about the stress test to which they are submitting to U.S. banks, whose results will be published in early May. I am optimistic about the results of these tests, and it is because we firmly believe in the solvency of U.S. banks, but rather because it says that the worst scenario envisaged in the test is even optimistic about the trajectory of decline which is indicating the real economy. In short, not really serve to assess the behavior of banks in the worst case scenario, because in all likelihood the worst case referred to is better than the real situation that we seem headed.
Other data that are being discounted by the market as are the Economic Cycle Institute (ECRI). One thing that I think is very valuable and reliable, but whose current value I think is very far from indicating improvement. Just the economy back to a slower rate than earlier this year. The latest data has been -19.7, compared to levels between -20 and -30 in recent months. A figure similar to the current issue we had in October 2008. We saw this flag in have we got soil in the bags? and I think it prudent to wait for a positive. The last data we had positive ECRI dates back to October 2007.
The NAHB housing index also showed a slight improvement, but again it is just that, and no change of trend. Minor improvements have been several since the beginning of its decline and meant nothing. When we actually see a change in trend will be an important indicator to follow, it usually acts as a leading indicator, especially his last column (green), which are potential buyers. An important point to follow along with the ECRI.
Yes there is a fact that would confirm the current surge in the stock, and is the iTraxx Crossover, current levels of 800 versus the 1,000 that were to be achieved. This index indicates the cost of insuring against bankruptcy a portfolio of bonds from 50 of Europe's largest companies and is a fairly reliable indicator of fear in strong hands. Clearly indicating less fear than in past months, but remains at very high levels.
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