Oliver Schwindler

Week in Review: Financials in Downtrend

The XLF SPDR includes a wide array of diversified financial service firms with business lines ranging from investment management to commercial and investment banking and also insurance companies. Among the companies included in the SPDR are Citigroup, Bank of America, American International Group, Goldman Sachs, Fannie Mae. You can find a detailed list here.
In my opinion the resent sell off is mainly due to the current problems in the mortgage sector, especially the mortgage backed securities (for example see the near collapse of the Bear Stearn's hedge fund due to mortgage losses). I think market participants are currently demanding a higher risk premium for financial stocks because of the uncertainties in regard to a possible "mortgage implosion" and it's effect on the financial sector.

Countrywide Financial: The Price is Right, The Market Isn't

Dear Erik,

I think a comparison against the broad consumer financial services is not the right standard of comparison, as there seem to lurk default risks in the books of mortgage lenders. A comparision against other mortgage lenders by far more insightful.

Oliver

The Yen is Over-Rated: Don't Buy the Hype

Dear Mr. Dr. Enzio von Pfeil,

you mentioned in your comment the New Zealand and Australian dollar, the Pound, and the Euro. What's about the US dollar? Should the Yen also be weak againts the US dollar?

Oliver

Four Undervalued Israeli Small Caps

All of the four mentioned stocks are Micro-Caps with less an 100 Mio. $ in marketcap and none of them is currently profitable.
I think all are very high risky!

Classic Bull Trap? Last Week's Bull Run Missing Confirmation of Breakouts

Jonathan,

I have to tell you that I am currently still bearish for the US market.
However I think there are two important factors which should be followed closely as they currently indicate a different outcome of the latest correction.
At first, the VIX has broken its support zone between 13-14 on the downside, which can be intertreted as a positive sign for a possible bull market.

As Gray Dorsch pointed out in his latest Global Money Trends Newsletter, another important factor is the Reuters/Jefferies CRB Index which broke below its 200 day moving average on Thursday. I would interpret this as a negative sign for a possible bull market.

I think a strong rise in commodities, while the VIX stayes at these low levels, could help the small and mid caps to break out.

Stock Earnings Yields vs. Bond Yields 1/85-7/06

Hi Barry,

unfortunatelly, you can not set up a spread trade, since the yield of the S&P depends on two factors, the price of the S&P and the earnings of the S&P companies. The spread could narrow due to falling earnings witout a move in the price of the index.

Oliver