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MODEL PORTFOLIO
                                               SEEKING ABSOLUTE RETURNS
                                  ...
MODEL PORTFOLIO
                                           SEEKING ABSOLUTE RETURNS
                                      ...
MODEL PORTFOLIO
                        ODEL ORTFOLIO
                                           SEEKING ABSOLUTE RETURNS
...
MODEL PORTFOLIO
                                             SEEKING ABSOLUTE RETURNS
                                    ...
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Seeking Absolute Returns

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The trick is finding the correct entry point during the current wild volatility.

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Transcript of "Seeking Absolute Returns"

  1. 1. MODEL PORTFOLIO SEEKING ABSOLUTE RETURNS 12th March 2009 Sound Advice EquityBell Securities was set up in October 2008 by a collective of seasoned market professionals to provide outstanding investment advice to clients running non-discretionary portfolios through direct market access brokers and wealth managers. The credo is absolute returns by giving sound advice in asset classes that are individually appropriate to the risk appetite and base currency of each particular client. The EquityBell Securities leveraged model portfolio was started on 27th January 2009 as a paper trade with an initial value of £100,000. The portfolio currently has an NAV of £98,037 -1.96% in 43 days*. Leverage 2.14 times Starting Value £100,000 Only our most robust investment ideas will be placed into the portfolio explaining the Portfolio NAV £98,037 rationale, entry price with comments on reasons for holding and explanation of the exit and price and net profit and loss. Loss £1,963 -1.96% Loss taken £3,605 Open trades Date Asset size FX price value margin Price value £ P/L Current Positions now 26/1/2009 MRW Long £50k GBP 258.00 50,052 7,500 255.5 49,567 -485 FX shares CFD’s Short €100k EURUSD @ 26/1/2009 SBRY Short GBP 309.75 -50,024 7,500 304.25 -49,056 969 shares £50k 1.2786 CFD’s 25/2/2009 EURUSD Short EUR 1.2786 88,152 1,763 1.2763 100,180 167 Commodities FX 100k 26/2/2009 Gold Long 100 USD 913.5 91,350 1300 927.15 92,715 990 Long 100 ozs Gold @ $913.5 10/3/2009 ozs Fixed Income Closed trades None Date Asset size FX price £ value margin Exit Exit £ P/L date price taken Equities 26/1/2009 EURJPY Short EUR 118.606 92,988 2,800 02/02/ 113.35 4,155 Food Retail Spread FX 100k 2009 26/1/2009 Carrefour Long €50k EUR 26.495 50,341 7,000 04/03/ 24.97 -2,580 Long Morrison CFD 258p shares CFD’s 2009 Short Sainsbury CFD 26/1/2009 LVMH Short EUR 43.42 -50,367 7,000 04/03/ 45.25 -1,890 309.75p shares €50k 2009 CFD’s 26/1/2009 June Gilt Short 1 GBP 118.71 118,710 3000 05/03/ 122.00 -3,290 Future 2009 *These are gross figures that do not include commissions and funding charges on some products THIS IS A MARKETING COMMUNICATION Intended for information only and should not be construed as an invitation or offer to buy or sell any investment vehicle or instrument. This note has not been prepared in accordance with legal requirements designed to promote the independence of investment research; and is not subject to any prohibition on dealing ahead of the dissemination of this marketing note. EquityBell Securities will provide extra detail on data or graphs used in this note upon requested.
  2. 2. MODEL PORTFOLIO SEEKING ABSOLUTE RETURNS 12th March 2009 Sound Advice FX Yesterday the BoE bought £2 billion of Gilts with printed money as the first step of the £75 billion quantitative easing. The £10.5 billion worth of sellers that lined up were mostly foreigners taking the money home resulting in the current GBP weakness. Pension funds are not selling as the more risky assets the BoE wants them to buy with the proceeds are a step to far given their current liabilities. This suggests sterling may be weak for some time to come and the BOE may have to rethink its policy. We are considering shorting sterling against JPY and will publish targets when we have come to a decision. We are short EUR100,000 EURUSD at 1.2786 with a target somewhere close to 1.2000 and a stop limit of 1.3089 Commodities Gold traded down to 891.03 in late NY trading on Tuesday th 10 March 2009 and the model portfolio bought an extra 50 ounces at the previously published limit of US$893. We continue to hold the 100 ozs at an average price of US$913.5 with a long term target over US$1,000 per ounce. Source: Saxo Bank Fixed Income European Central Bank President Jean-Claude Trichet is allowing the ECB’s deposit rate, which lenders earn on overnight deposits with the central bank, to take over from the benchmark refinancing rate as the main driver of short- term borrowing costs. At just 0.5 percent, the deposit rate matches the Bank of England’s base rate and is only a step away from the zero-to-0.25-percent range the Federal Reserve uses. While this is providing liquidity, banks are still reluctant to lend to each other and Japan has shown the longer rates remain at virtually zero, banks have even less incentive to lend to each other and prolong the crisis. Longer term we see central bank rates staying close to zero for many years while encouraging the 10, 20 and 30 year rates rise significantly to spur risk activity. This will be bad for bond prices and short futures should do very well when we decide rates are about to embark on a concerted long term rise. For now we stay flat.
  3. 3. MODEL PORTFOLIO ODEL ORTFOLIO SEEKING ABSOLUTE RETURNS S 12th March 2009 Sound Advice 2 Equities Equity markets are having a recovery today on news that the US Financial Accounting Standards Board (FASB) will relax marked to market and fair value accounting rules to effectively allow financial companies to lie on the their balance sheets to give them breathing space to resume normal activity. It is going to take more than smoke and mirrors to hide the fact that 2009 earnings estimates are sliding fast without any “green shoots of recovery in green shoots” sight. th The chart below shows the performance of the major indices since the 9 October 2007 when the S&P 500 had its ultimate peak at 1,565. S&P500 down 54% FTSE/Xinhua China 25 down 60% FTSE100 down 45% DAX down 52% CAC40 down 55% Nikkei225 down 58% S&P/MIB down 67% Shanghai Comp down 63% 120.00% 100.00% 80.00% 60.00% 40.00% 20.00% 0.00% Data Source: Oct/2007 Jan/2008 Apr/2008 Jul/2008 Oct/2008 Jan/2009 Yahoo Finance Below is a chart of equity index performance each day past the ultimate peak of the market during a financial crisis caused by overburdening debt. We can directly compare how Wall Street 1929, Japan 1989, NASDAQ 2000 and the S&P500 2007 pan out over the subsequent days as Governments struggle to reflate economies. overnments Data Source: Yahoo Finance
  4. 4. MODEL PORTFOLIO SEEKING ABSOLUTE RETURNS 12th March 2009 Sound Advice The primary trend of equity indices is lower and if the markets follow the Dow Jones Industrial from 1929, technical support for the S&P500 is 400 and the FTSE100 at 2,000 over the next year. Even though we are “fairly certain” of a countertrend rally in equities coming soon, we find it difficult to recommend buying for the model portfolio as the scale and duration of such a rally is an unknown risk. Given our longer term view that equity markets still have further to fall, we would suggest taking a short position on equity indices at a suitable point in the near future to benefit from the long, grinding slide lower over the next 18 months. Food Retail Spread Morrison Supermarkets 255.5p on a 12.28 PE and a 2.01% div yield, 2009 est EPS 20.80p Sainsbury 303.75p on a 15.94 PE and a 4.17% div yield, 2009 est EPS 19.10p The spread between Morrisons and Sainsbury is now 48p is a small profit over our initial level of 52p having been as high as 76p. Morrisons deleivered good results today and appear better value than Sainsbury where we expect a dividend cut as they pay for the new Co-Op stores and other expansion. Comment th We re-iterate the four thoughts from our “Clear as a Bell” report from Tuesday 10 March 2009 where we like long Gold to add to the current US$934 position at around US$893, short US Treasury and Gilt futures, short EUR and CHF against US$ and short equity indices for the longer term. We will probably add a short sterling against Yen position fairly soon. The trick is finding the correct entry point during the current wild volatility. EquityBellSecurities Quay House, 2 Admirals Way, Canary Wharf, London E14 9XG Tel: +44 (0) 20 3189 2108 www.equitybell.com Risk Warning Notice: Equity Bell Securities is a trading name of Equity Bell Limited (registered office: Talbot House, 8 – 9 Talbot Court, London EC3V 0BP. Registered in England and Wales No. 6725781) is an Appointed Representative of London Islamic Investment Bank Limited, which is authorized and regulated by the Financial Services Authority. Whilst every attempt is made to ensure the accuracy of the information provided, no responsibility can be accepted for any inaccuracy. The information provided cannot be relied upon as constituting a recommendation, nor construed as any offer to sell, or any solicitation of any offer to buy investments. No liability is accepted for any loss whether direct or indirect, incidental or consequential, arising out of any of the information being untrue and / or inaccurate, except caused by the wilful default or gross negligence of EquityBell Securities, its employees, or which arises under the Financial Services and Markets Act 2000.

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