The Weekly Report: Awash With Opportunity

28 November 2011


The majority of you Firstline blog readers may not be American, but Happy Belated Thanksgiving anyway! A Happy Belated Black Friday as well, because no matter where we live, we can all do with some retail therapy.

This week’s blog title alludes to the floods that hit T&T two weekends past, and as poor drainage, litter and precariously positioned houses exist, it seems as though no end is in sight for this challenge. While I’m tempted to develop a treatise on the frustrating subject, all I will say for now is that it seems as though we (individually and as a nation) only hear (forget about accepting) calls to action, far too late. What really needs to happen before we make a move?

“Who can’t hear will feel.”

Sounds familiar right? My apologies if this evokes any painful primary school memories, but I’m sure you can relate this to today’s investment climate as well.

As the S&P 500 approached its YTD low of 1099.23 last week, and has since bounced back (see chart below), what comes next?

Think about it as an adventure novel with alternate endings if you will, and consider these two disparate possibilities:

  1. Forecasted year-end S&P level of 1,350.00; or
  2. More haircuts & restructuring takes place within European economies to wreak further havoc on global markets.

Whether the S&P prediction is self-fulfilling or not, history will repeat itself… in other words, look out for short-term gains! Although we associate bonds with long-term investment horizons, there are short to medium-term plays that can be made in the bond market.

In a previous blog (The Growing List of Bloopers that is Europe), I mentioned capital gains of 300 bps or higher observed across a few investment grade sovereigns and corporates throughout the region. While Europe is rife with headwinds, that doesn’t preclude the occurrence of intermittent fillips in the market.

The good news is that these markets will most likely exist in an infinite continuum, giving us the chance to at some point, get it right. So, keep reading because the European story is far from over! Absorb and internalise the information that’s available.

On our end here at Firstline, we’re doing our own set of absorption and internalisation so that we can, not just write this blog, but understand how the markets move and provide access to the bonds that move within them.

Anyone can be passive in the face of difficulty, which is why success stories are so rare.

No need to thank me for this moment of zen as we part ways. Just ask yourself: why should you remain trapped in inactivity when the results haven’t changed in your favour?

The knowledge of the world is only to be acquired in the world, and not in a closet.  ~Lord Philip Dormer Stanhope Chesterfield

Gerard Stephens
Account Executive

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