Keep an eye on the little things today
The chase by Frances Horodelski:
As of last night there were about 46,000 customers in the Toronto area without power. My family is one of those customers. Maybe today……
While my house is an uncomfortable zero degrees (water turned off and pipes drained), the equity markets in New York were hot yesterday and there is lots of green fire today as well.The S&P 500 is up 29.16% on the year with three trading days left. The VIX has dropped back into the low end of the year’s trading range (12.33) and according to MKM Partners, we may be in for another year of low volatility. High volatility periods last on average 5.5 years. For this cycle, that high volatility period ended in January of 2013. While there have been six waves of volatility in 2013 (corresponding to only modest pullbacks), analysts at MKM believe 2014 will be similar. Low volatility corresponds to low correlations meaning individual stocks trade more on company specific information rather than en masse. This assessment should also determine hedging strategies. Portfolio management should focus on the individual stock or sector level rather than the entire market according to MKM Partners.
Once again, it is a quiet trading day but there are lots of little pieces of news that could move individual stocks. The Russians and Belarus could be getting back together says the new CEO of Uralkali (“We feel that the joint work should resume, and most likely that will happen”) according to a Reuters story. Blackberry co-founder Mike Lazaridis sold 3.5 million shares to now own 26.267 million shares (4.99%). Audi (owned by Volkswagen) plans to invest $30.3 billion US through 2018 in an attempt to catch up with BMW. Remember that recently VW announced big spending plans as well - $114 billion also through 2018. Sticking with cars, GM’s China division is recalling some 1.46 million Buicks and Chevrolets due to a problem with a bracket that secures the fuel pump. And a final auto comment, according to AutoTrader.com the top five vehicles in 2013 were: Ford F-150, Jeep Wrangler, Ram 1500, Ford Mustang and Chevrolet Silverado.
If you’re a global politics fans, here are the top five trends that will shape 2014 according to Stratfor: 1) An enduring detente between Iran and the United States; 2) The rise of nationalist and extremist parties in Europe; 3) Russia and Germany bargain over Central/Eastern Europe and energy policy; 4) China's return to strongman politics; 5) Domestic turmoil and economic stress in India and Turkey. What are your political hot spots? Who are you watching for the best prediction for 2014?
Things to watch in 2014: Copper (will it be the year of global growth that will put a bump into the global commodity complex?); currencies (will the upside pressure on interest rates allow the U.S. dollar to come back. And what about the Chinese renminbi which has been trading at all time highs relative to the U.S. dollar? Will this continue?) Interest rates – what will a 3% or 3.5% or even 4% yield do to the relative value call of stocks versus bonds (the 10-year yield is trading right now at 3.01%). These are the big stories that might dictate the macro call but would have important consideration for asset and sector selection in 2014.
Today we will receive inventories for natural gas and oil. The economic calendar is blank. There are, however, almost 100 small companies that are publicly traded in Canada that are releasing quarterly results! Textron is buying Beechcraft. Two states in the U.S. are reviewing options for recouping costs related to Obamacare.gov healthcare website from CGI Group according to the Boston Globe. Massachusetts has paid $11 million of $69 million – and will not pay a cent more until “a functioning website has been delivered”. Stories in various U.S. papers (including now the Wall Street Journal) are talking about the potential for another delay in the Keystone XL pipeline approval process due to a conflict of interest with one of the contractors. Our own Jameson Berkow has been reporting on this since these conflicts first surfaced in July.
My feet have just warmed up and that’s all I have today.
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