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Treasury Yield Curve Update 8.16.2012

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This morning’s job’s continuing claims number did not completely tarnish the demand for U.S. treasuries, however I believe that the employment numbers are accurate for a few reasons. The Department of Labor and the BLS constantly revise their numbers shortly after they are released, as well as exclude important factors such as parts of the workforce that have given up looking for work and the underemployed.


The treasury should gain traction as Germany, one of the safest assets on the planet, is facing a possible bailout request from Spain. I will be keeping my out out for any yield curve shifts during the next few months with the coming elections. I believe that the elections will be a pivotal event and key names have speculated that QE3 would not happen before the election is over.

USYields8.16.2012

David Cornes holds a degree in economics from the University of Montana.

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Signs the Market is Getting Complacent – 8.16.2012

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Call buyers are dominating this strange market and I feel that there should be more fear than what is present. The VIX spot price is below 15 points and is trading near a key support level. I remain bullish on the VIX, as I do not think that it is currently pricing in the uncertainty that is present in the market. I will be watching for a rise in the VIX which will imply higher implied volatility on SPX options, hence rising options prices. I am expecting movement in the S&P in the near future as soon as a catlyst is exposed. Whether the catalyst is Euro fears, QE3 or the election, I am looking to buy vol.

As you can see from the chart below, the spread between the VIX and S&P is relatively tight. Based on the chart I think that this spread is about to widen.

PutCall8.16.2012


David Cornes holds a degree in economics from the University of Montana.

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Morning Rage 8.16.2012

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The Hang Seng slid its way down to finish -0.5% today led by China Mobile. China Mobile, the second
heaviest weighted stock on the index, dropped 5% with a 0.9% drop in first half EBITDA today, due to
an increase in competition. Internet giant Tencent rose again today jumping 6.4%, putting it to a 57%
gain so far this year. Lenovo, the world’s second largest PC maker, grew 6.3% as quarterly profits beat
expectations.

In Europe, the FTSE 300 is down .2% as the rally weakens, yet again, due to lack of action by the central
bank and also a warning from China that its trade outlook for 2012 was worsening. Trading has been low
as many investors see no reason to commit or take risk in Europe until the central banks give incentive.

UK retail sales were up .3% in July and 2.2% year over year, showing the Olympics to not have had as
much of an impact as expected.

World gold consumption is down 7% in Q2, drug down mostly by India and China, says the world gold
council.

Commodities are currently showing crude down, while natural gas, silver and gold are all ready to trade
positive.

Contributer Chris Rygh is currently pursuing his MBA in Wisconsin and has a passion for the Market.
Comments can be directed to ryghcw19@uww.edu

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Doherty at the Close 8.15.2012

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In earnings news, Staples (SPLS) fell -14.53% after they announced that the company will be lowering its full year outlook after weaker than expected quarterly results. Target (TGT) gained 1.74% after the retailer reported better than expected Q2 earnings, raising Q3 and full year projections above analyst estimates. Finally, Abercrombie & Fitch (ANF) jumped 9% to lead the S&P after reporting good quarterly earnings and a 10 million share increase to its buyback program.