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The Charts That Matter SNB, The Trader of the Month
February 2, 2015
Investir.ch powered by SEQUOIA Group – Loïc Schmid – 02.02.2015
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Views in a nutshell
Assets 02.02 S/T view
02.02 L/T view
15.01 S/T view
15.01 L/T view
Comments
Cash Keep cash for opportunities
Investment grade bonds Bubbly, buy on dips
High yield bonds Only special situations
Sovereign bonds Bubbly in Europe, US OK
Convertibles bonds Buy on dips
European equities Short term overextended, long term looks ok
US Equities Stay away
Japanese equities Long term trend is positive
Emerging equities Buy Chinese stocks on dips
Precious metals Attractive levels
Oil End of capitulation phase?
Hedge funds CTAs and Macro strategies continue to be attractive
Volatility Buy volatility on dips
USD Looks stretched short term
Negative Positive No view
Investir.ch powered by SEQUOIA Group – Loïc Schmid – 02.02.2015
Previous views Current views
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Central banks have created artificial growth QE has created deflation not inflation Are central banks long Wall Street / Short Main Street?
Artificial growth The beginning of the end?
Investir.ch powered by SEQUOIA Group – Loïc Schmid – 02.02.2015
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The richest 80 people own has much as the 50% of world’s poorest ! HELLO??? If situation does not improve, social unrests will be unavoidable Is wealth confiscation down the road?
Bankable assets? Real Estate? Gold?
Wealth inequality A growing problem
Investir.ch powered by SEQUOIA Group – Loïc Schmid – 02.02.2015
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January 15th, 2015 – The Swiss National Bank shocked the world (not us) by removing the 1.20 EUR/CHF peg and wiped-out many on-line forex accounts >> 35 big figures move that day (1.20-0.85) >> UNREAL !
According to a survey that we performed on investir.ch, EUR/CHF should sit around 1.03 (weighted average of answers) … (total votes: 510)
EUR/CHF
SNB – 1.20 PEG death They did it!
Investir.ch powered by SEQUOIA Group – Loïc Schmid – 02.02.2015
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Huge balance sheet for a small country … Draghi’s QE was imminent = drag on the EUR Huge quantities of EUR were bought late December and beginning of January to keep the
PEG alive By the way, huge quantities of EUR were bought after the de-PEG… … that probably means that they have made a couple billions trading between 0.85
– 1.05 …
Swiss National Bank Status quo was not an option for them
Investir.ch powered by SEQUOIA Group – Loïc Schmid – 02.02.2015
SNB Trader of the Month
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Swiss equities Good buy or goodbye?
It is very tempting to go shopping for Swiss stocks however, one must not underestimate the negative impact on margins and order backlog of the strong CHF
Swiss stocks remain expensive relative to European stocks especially Nestlé, Novartis and Roche
Have Swiss stocks just topped again after nearly reaching +2 standard deviation?
Eurostoxx50
SPI index
Investir.ch powered by SEQUOIA Group – Loïc Schmid – 02.02.2015
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Swiss yields 5Yr government bond yields at -0.53%
-0.53% Great, can they go lower? You pay to lend money, great concept!
By the way, Switzerland is not the only continental country to have negative yields however, ours are really negative…
Eurostoxx50 Swiss 5yr yields
Investir.ch powered by SEQUOIA Group – Loïc Schmid – 02.02.2015
Japanese model?
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European QE Done. Finally. And now?
Too late? Too small? Already partially or totally priced into bond markets? Will it work? Will it save or destroy Europe? 10Y Spanish bond yields are yielding less than US 10s >>> seriously?
Spanish 30Yr bond yields
Spanish 10Yr bond yields
Spanish 5Yr bond yields
“Whatever it takes” Mario Draghi, July 26, 2012
Investir.ch powered by SEQUOIA Group – Loïc Schmid – 02.02.2015
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EUR/USD Is anyone long?
1.1192 is the 61.8% fibonacci retracement level (2000-2008) USD is overbought, EUR is oversold, BUY EUR/USD at current levels ? Current level seems to be a great support zone !
61.8% retracement level Bottom of the regression range (-2 standard deviation)
EUR/USD
Investir.ch powered by SEQUOIA Group – Loïc Schmid – 02.02.2015
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The dollar New paradigm or END-OF-QE-rally?
Bear market is 30 years old It might have ended Recent breakout might signal a huge rally on the USD in the coming years!
Must wait for confirmation though If the FED starts QE again, the USD will fall…
Dollar index
Investir.ch powered by SEQUOIA Group – Loïc Schmid – 02.02.2015
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Short term : stretched, take the profits on the way up to 3500 Medium term : potential negative comments on QE and Greece saga could be a drag Long term: if we manage to close above 3500-3520 (weekly close) expect 4500!
Eurostoxx50 3500 is a given
Eurstoxx50
Investir.ch powered by SEQUOIA Group – Loïc Schmid – 02.02.2015
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Oil slump Traders are enjoying a contango curve
8 USD difference between Feb and Dec 2015 contract >>> spread widening Floating storage, what else? Will Saudi’s (new) King Salman be a game changer?
WTI DEC15
WTI FEB15
Investir.ch powered by SEQUOIA Group – Loïc Schmid – 02.02.2015
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S&P500 stalling? Ego trip ending
US stocks have stalled, are they priced for perfection? Due to high valuation? PE 2015e = 17.00x Long Europe/Short US?
S&P500
EUROSTOXX50
100 = 1 year ago
Investir.ch powered by SEQUOIA Group – Loïc Schmid – 02.02.2015
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Dow Jones 12% correction seems fair enough
Feels, looks, smells like a [rounding] top US equities seems priced for perfection Everybody is overweight US stocks Watch the 200 day moving average (blue line)
Dow Jones
Investir.ch powered by SEQUOIA Group – Loïc Schmid – 02.02.2015
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Copper slump Buy Freeport McMoran?
Copper slump is hitting Freeport McMoran (66% of total revenues) Bonds attractive? coupon 3.55% - 5.4% YTM – maturity 01/03/22 Stock attractive? Recent analysts upgrades on the stock suggest optimism … with 67.8%
return potential! Bad news seems priced-in now…
Freeport McMoran – 3.55% - 01/03/22 – corp. bond
Copper
Freeport equity
Freeport CDS
Investir.ch powered by SEQUOIA Group – Loïc Schmid – 02.02.2015
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Gold / S&P500 ratio Change of regime?
Gold is moving north Gold / S&P500 ratio suggests that the regime is changing in favour of Gold By the way, gold does not depend on a central bank like the… CHF (random example )
Breakout?
Investir.ch powered by SEQUOIA Group – Loïc Schmid – 02.02.2015
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US rates are still falling 30Yr yields dropping the fastest Where is the bottom?
US rates Falling inflation forecasts
30yr
10yr
5yr
5Yr inflation swaps
Investir.ch powered by SEQUOIA Group – Loïc Schmid – 02.02.2015
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Greek saga Monitor the Greek CDS
Default risk is moving north post-elections Default risk rising since last summer Will Apple bailout Greece ?
Greek CDS
Investir.ch powered by SEQUOIA Group – Loïc Schmid – 02.02.2015
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Nikkei The big breakout?
It is hard to believe, but Japanese stocks still have room for improvement JPY continued weakness is positive for Japanese exporters and earnings Long term economic perspectives look dreadful however, in the meantime, current
economic stimulus programs should be supportive for Japanese stocks…
61.8% fibo retracement = 26’784 Nikkei
Investir.ch powered by SEQUOIA Group – Loïc Schmid – 02.02.2015
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Bonus chart List of other currency PEGs, just in case…
Country Region Ccy Name Code Peg Rate Peg Ccy Rate Since
Benin Africa West African CFA Franc XOF 655.957 EUR 1999
Bermuda North America Bermuda Dollar BMD 1 USD 1972
Brunei Asia Brunei Dollar BND 1 SGD 1967
Burkina Faso Africa West African CFA Franc XOF 655.957 EUR 1999
Cameroon Africa Central African CFA Franc XAF 655.957 EUR 1999
Central African Republic Africa Central African CFA Franc XAF 655.957 EUR 1999
Chad Africa Central African CFA Franc XAF 655.957 EUR 1999
Dijibouti Africa Franc DJF 177.721 USD 1973
Equatorial Guinea Africa Central African CFA Franc XAF 655.957 EUR 1999
Eritrea Africa Nakfa ERN 15 USD 2005
Gabon Africa Central African CFA Franc XAF 655.957 EUR 1999
Guinea-Bissau Africa West African CFA Franc XOF 655.957 EUR 1999
Ivory Coast Africa West African CFA Franc XOF 655.957 EUR 1999
Lesotho Africa Loti LSL 1 ZAR 1980
Mali Africa West African CFA Franc XOF 655.957 EUR 1999
Namibia Africa Dollar NAD 1 ZAR 1993
Niger Africa West African CFA Franc XOF 655.957 EUR 1999
Republic of the Congo Africa Central African CFA Franc XAF 655.957 EUR 1999
Senegal Africa West African CFA Franc XOF 655.957 EUR 1999
Swaziland Africa Lilangeni SZL 1 ZAR 1974
Togo Africa West African CFA Franc XOF 655.957 EUR 1999
Hong Kong Asia Dollar HKD 7.75-7.85 USD 1998
Nepal Asia Rupee NPR 1.6 INR 1993
Cuba Central America Convertible Peso CUC 1 USD 2011
Panama Central America Balboa PAB 1 USD 1904
Bosnia and Herzegovina Europe Convertible Mark BAM 1.95583 EUR 2002
Bulgaria Europe Lev BGN 1.95583 EUR 2002
Denmark Europe Krone DKK 7.46038 EUR 1999
Latvia Europe Lats LVL 0.702804 EUR 2004
Lithuania Europe Litas LTL 3.4528 EUR 2005
Bahrain Middle East Dollar BHD 0.376 USD 2001
Jordan Middle East Dinar JOD 0.709 USD 1995
Lebanon Middle East Pound LBP 1507.5 USD 1997
Oman Middle East Rial OMR 0.3845 USD 1986
Qatar Middle East Riyal QAR 3.64 USD 2001
Saudi Arabia Middle East Riyal SAR 3.75 USD 2003
United Arab Emirates Middle East Dirham AED 3.6725 USD 1997
Venezuela South America Bolivar VEB 6.3 USD 2013
Source : http://www.investmentfrontier.com/2013/02/19/investors-list-countries-with-fixed-currency-exchange-rates/
Investir.ch powered by SEQUOIA Group – Loïc Schmid – 02.02.2015
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Key takeaways
Switzerland is still digesting the Swiss National Bank’s “panicky” decision
Long Europe / Short US
Stay away from US stocks
Add Freeport McMoran to your watch list
EUR/USD could rebound soon
The Nikkei could leap
Will the USD/HKD peg be continued, changed, stopped?
Did you like the ideas? Contact us for our solutions >>>
Investir.ch powered by SEQUOIA Group – Loïc Schmid – 02.02.2015
Disclaimer
ECB
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The information contained in this material should not be construed as a recommendation or solicitation to buy or sell any security, or to participate in any investment strategy. It does not take into account the specific investment objectives, financial situations, or the particular needs of any specific entity or person. Investors should make their own appraisal of the risks and should seek their own financial advice regarding the appropriateness of investing in any securities or participating in any investment strategy. This material should not be construed as legal, business or tax advice. While the information (including any historical returns) in this material has been obtained from sources deemed reliable, SEQUOIA Asset Management S.A. does not guarantee its accuracy, timeliness or completeness. Any opinions expressed herein are statements of our judgment on this date and are subject to change without notice. Past performance is no indication of the future return. This information document or any part of it should not be copied, reproduced or distributed to anyone without the prior written approval of SEQUOIA Asset Management S.A.
Investir.ch powered by SEQUOIA Group – Loïc Schmid – 02.02.2015