seeking absolute returns
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The trick is finding the correct entry point during the current wild volatility.TRANSCRIPT
MODEL PORTFOLIO SEEKING ABSOLUTE RETURNS
Sound Advice 12th March 2009
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
Only our most robust investment ideas will be placed into the portfolio explaining the
rationale, entry price with comments on reasons for holding and explanation of the exit
and price and net profit and loss.
Open trades Date Asset size FX price value margin Price
now value £ P/L
26/1/2009 MRW shares
Long £50k CFD’s
GBP 258.00 50,052 7,500 255.5 49,567 -485
26/1/2009 SBRY shares
Short £50k CFD’s
GBP 309.75 -50,024
7,500 304.25 -49,056
969
25/2/2009 EURUSD FX
Short EUR 100k
1.2786 88,152 1,763 1.2763 100,180 167
26/2/2009 10/3/2009
Gold Long 100 ozs
USD 913.5 91,350 1300 927.15 92,715 990
Closed trades Date Asset size FX price £ value margin Exit
date Exit price
£ P/L taken
26/1/2009 EURJPY FX
Short EUR 100k
118.606 92,988 2,800 02/02/2009
113.35
4,155
26/1/2009 Carrefour shares
Long €50k CFD’s
EUR 26.495 50,341 7,000 04/03/2009
24.97 -2,580
26/1/2009 LVMH shares
Short €50k CFD’s
EUR 43.42 -50,367
7,000 04/03/2009
45.25
-1,890
26/1/2009 June Gilt Future
Short 1 GBP 118.71 118,710 3000 05/03/2009
122.00 -3,290
*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.
Starting Value £100,000
Portfolio NAV £98,037
Loss £1,963 -1.96%
Loss taken £3,605
Current Positions
FX
Short €100k EURUSD @
1.2786
Commodities
Long 100 ozs Gold @ $913.5
Fixed Income
None
Equities
Food Retail Spread
Long Morrison CFD 258p
Short Sainsbury CFD
309.75p
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.
MODEL PORTFOLIO SEEKING ABSOLUTE RETURNS
Sound Advice 12th March 2009
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 10
th 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.
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.
Source: Saxo Bank
MODEL S Sound Advice
Equities
Equity markets are having a recovery today on news that the US will relax marked to market and fair value accounting 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 sight. The chart below shows the performance of the major indices since the its ultimate peak at 1,565.
Below is a chart of equity index performance 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
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
120.00%
Oct/2007 Jan/2008 Apr/2008
S&P500 down 54%FTSE100 down 45%CAC40 down 55%S&P/MIB down 67%
ODEL PORTFOLIOSEEKING ABSOLUTE RETURNS
12
recovery today on news that the US Financial Accounting Standards Boardwill relax marked to market and fair value accounting rules to effectively allow financial companies to lie on the
to give them breathing space to resume normal activity. It is going to take more than smoke and earnings estimates are sliding fast without any “green shoots
The chart below shows the performance of the major indices since the 9th October 2007 when the S&P 500 had
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
pan out over the subsequent days as Governments struggle to reflate
Apr/2008 Jul/2008 Oct/2008 Jan/2009
FTSE/Xinhua China 25 down 60%DAX down 52%Nikkei225 down 58%Shanghai Comp down 63%
Data
Yahoo Finance
Data
Yahoo Finance
ORTFOLIO
2th March 2009
Financial Accounting Standards Board (FASB) effectively allow financial companies to lie on their
to give them breathing space to resume normal activity. It is going to take more than smoke and green shoots” of recovery in
October 2007 when the S&P 500 had
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
overnments struggle to reflate economies.
Data Source:
Yahoo Finance
Data Source:
Yahoo Finance
MODEL PORTFOLIO SEEKING ABSOLUTE RETURNS
Sound Advice 12th March 2009
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 We re-iterate the four thoughts from our “Clear as a Bell” report from Tuesday 10
th 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.
EquityBell Securities 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.