Sheikh Shakes the Market

I didn’t get around to penning anything yesterday. A combination of being busy and also a little bereft of inspiration. No matter, a couple of things of note over the last few days. As the $ weakness continues, it’s pretty clear FX is driving the markets at the moment. It’s the commodities and commodity stocks that are trading well as the banks have taken a back seat in the last few weeks. Equities are feeling a bit heavy this morning and it’s not that surprising; the BARC placing yesterday, Gamesa (and MS now owning 5%, ouch), MS, JPM, you name it they’re raising money. Sheikh Mansour’s come under a bit of stick for selling Barclays when the market thought he was a long term investor. To be fair, he has made 70% on it, which is be a pretty good return for a long term investment, let alone a few months and ultimately, investors are in things for the return, not the time frame. If the return comes quicker than expected, and you exit, does that make you any less serious an investor?

There are some headlines out from China saying a quick rebound is becoming less likely. I’m not sure when it was ever that likely but the miners are taking a bit of a breather on the back of this. I’ve mentioned before my doubts about a China led recovery and have talked about things like lower power usage, lack of credit availability to non government sponsored projects etc. I was talking to a mate the other day who’s just come back from 3 months in Beijing (just to give his thoughts some credence, he was out there working in the metal markets, not trying to find himself or anything soulful or worthwhile like that). Now this is anecdotal for sure but he was of the opinion that credit for the man in the street is still very hard to get and you can see how much slower things are over there by virtue of the fact there is far less air pollution than there used to be. I tried to dig out some data on this, the Air Pollution Index (API) but it seemed to only be accessible on a daily basis and then I got bored frankly. Who would have thought accurate Chinese data would be hard to come by??

This last piece is interesting, if not necessarily instructive and was picked up on by David Rosenberg. On Monday, equities rallied 2.5%. On that same day, the VIX rallied almost 4%. This is very odd. The VIX index has historically fallen over 95% of the time that the market rises. Even stranger, at no time in the last seven years did a 2%-plus surge in the S&P 500 coincide with an increase in vol … until Monday. For some good thoughts from Rosenberg, you can see them here…