Charts that matter 07.05.2015 bund unloading

The Charts That Matter Bund-unloading

May 7, 2015 By Loïc Schmid

1 Investir.ch Charts That Matter are sponsored by SEQUOIA Asset Management SA Loïc Schmid – 07.05.2015

https://www.linkedin.com/pub/lo%C3%AFc-schmid/24/51b/824

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Views in a nutshell

Assets 07.05 S/T view

07.05 L/T view

04.03 S/T view

04.03 L/T view

Comments

Cash Keep cash for opportunities

Investment grade bonds Buy dips and new issues

High yield bonds Be selective

Sovereign bonds Great opportunities US and EU short term!

Convertibles bonds Equity-like risk

European equities Short term overextended, long term looks ok

US Equities Still waiting for a 10% correction, at least…

Japanese equities Long term trend is positive

Emerging equities Increasing attractiveness

Precious metals Buy dips

Oil Buy dips

Hedge funds CTAs and Macro strategies continue to be attractive

Volatility Buy volatility on dips

USD Looks stretched short term

Negative Positive No view

Previous views Current views

Investir.ch Charts That Matter are sponsored by SEQUOIA Asset Management SA Loïc Schmid – 07.05.2015

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Yields: US 10y / German 10y Unreal!

Price

US yields were 10x higher than German yields the other day. Thank you Mario D. Q/E is working. Its helping hedge funds. German 10y yields reached 0.07% the other day. As low as it gets? However, since Q/E is still “on”, yields could still go negative right?

German Bund bubble

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𝑟𝑎𝑡𝑖𝑜 =𝑈𝑆 10𝑦 𝑦𝑖𝑒𝑙𝑑

𝐺𝑒𝑟𝑚𝑎𝑛 10𝑦 𝑦𝑖𝑒𝑙𝑑

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UK and German yields used to be correlated until the European crisis begun But then came the European Debt Crisis… Brexit?

Yields: German 10y / UK 10y Oops!

German

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Equities: Dax index / S&P500 index Is 2015 the year of Europe?

German and US stocks have been pretty much correlated since 2006 2011 was tough for European stocks due to debt crisis German stocks are clearly outperforming US stocks this year Will this continue?

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Equities: S&P500 Index / MSCI World ex-USA End of the road?

US equities have outperformed world equities for the past 7 years However, seems that the bull market is getting old I believe that we are close to a secular top in US equities

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Same period length!


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Equities: Nasdaq Biotech index / S&P500 index What will stop the mania?

Biotech stocks are soaring Biotech stocks are in a speculative bubble Bubbles can go far

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Equities: SMI Index / Euro Stoxx 50 index A good thing that Switzerland is not in the EU

Since the introduction of the EU, Swiss stocks have outperformed European stocks! Greece is not in Switzerland – this explains the strong performance Nestlé, Novartis and Roche. What else?

€ introduced

QE + SNB

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Equities: Chinese equities / Japanese equities The Battle

Japanese stocks are soaring Chinese stocks are roaring Will Chinese stocks catch up ?

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Equities: Russian equities / S&P500 index Time to buy?

Nobody loves Russian stocks not compliant Russian stocks are still cheap (P/E 2015e = 7.2x) Russian stocks are risky and obviously dependant on geopolitics Russian stocks have room for improvement

1997

Oil boom

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Equities: Spanish equities / Norwegian Equities Northern power

Spain has olive oil Norway has brent oil Unfortunately, not same-same …

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After enjoying outperformance during last decade, emerging markets have been soft/hard landing for the past years

Chinese economic slowdown is the main reason However, other countries are taking the lead… like India…

Equities: MSCI Emerging index / MSCI World Buying opportunity?

Chinese boom

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Equities: Apple / S&P500 index What else?

Apple has been [massively] outperforming the S&P500 since 2005 Apple is an amazing cash machine Apple is still cheap relative to its earnings growth potential! PEG ratio (est) = 0.89x

iPhone introduced

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Equities: BBG Basic Materials / BBG Healthcare index Totally opposite!

It would have been a great to have shorted basic materials stocks Vs Healthcare stocks! However, healthcare stocks are crowded and getting expensive while basic materials stocks

are hated. Earnings growth is improving though… If you are a contrarian – like me - then why not going Long Basic Materials Stocks / Short

Healthcare stocks !

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Equities: Coca-Cola / PepsiCo Long Zero / Short Max?

Since 1998, PepisCo shares have [surprisingly] outperformed its rival The biggest difference between Coca-Cola and PepsiCo is that PepsiCo's food business is very

strong with good growth, particularly in emerging markets! I drink coca-colas but I enjoy Doritos

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Equities: Boeing / Airbus Boeing has lost altitude

A380 first commercial flight

B787 first commercial flight

Source: wikipedia.org

Order books since 2008

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UBS shares have been outperforming its rival since Lehman UBS’s business model seems more stable and more focused on wealth management Crédit Suisse has more risk-weighed assets

Equities: UBS / Credit Suisse Advantage: UBS

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Hedge funds: HFRX Global HF Index / MSCI World Hedge funds need volatility!

Regulation has increased Volatility has decreased Hedge funds are waiting for the next crisis to shine again!

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Gold has – unfortunately - no dividend policy (…) which explains partially the poor performance

While gold is snob-ed by WESTERN central banks, Asian countries are pilling-up But gold can't be printed, right?

Monetary policy: Gold / S&P500 ratio Central banks are outperforming

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Monetary policy: FED / ECB balance total assets Has the ECB taken the lead?

The FED has stopped QE The ECB has taken-on I believe that European QE will be slowed or stopped sooner than later due to European

political turmoil (…)

FED Q/E #1,#2,#3

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Key takeaways

US equities – the end is near

European stocks – room for improvement

Swiss stocks – expensive

Emerging markets – opportunities

Fixed income – current weakness in EU sovereign debt is a s/t buying opportunity

Commodities – buy dips in Gold, oil and commodity-linked stocks

Volatility – buy dips

Cash - overweight

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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.


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Charts that matter 07.05.2015 bund unloading