NOMURA: 7 KEY CALLS FOR 2012
2 January 2012 by Cullen Roche
6 Comments
From a recent Nomura research notes comes 7 key trading calls for 2012:
“Key Call 1: Buy Gilts with Sterling exposure
Key Call 2: Buy US investment grade corporate bonds
Key Call 3: Buy 10Y US Treasuries, expect the curve to flatten
Key Call 4: Buy Emerging Asia curve steepeners (but caution on EM FX)
Key Call 5: Long US Dollar / Short Euro
Key Call 6: Long Gold / Short Oil
Key Call 7: Long European Telecoms / Short European Utilities (equity)”
Source: Nomura
I like #7 and #2
-A recession in Europe is going to hurt the Utilities
-I still think the yield chase is on. People are going to want safe investments, and what better than the High graded debt of great companies like ATT (for example)
I can’t remember the last decade I followed the advice of a broker. They exist to move product so they can generate commissions, not make customers money. I say this as someone who worked for one of the “better” ones three decades ago.
A better piece of advice would be to grab a copy of “Money and Power” by William D. Cohan. It highlights the serial stupidity and numerous near death experiences of Goldman Sachs over the last 100 years. It will disabuse anybody of the fantasy that the “smart money” exists anywhere on Wall Street.
Sherman, as someone currently working in one of the bulge bracket IB’s, I’m seriously inclined to agree. The single-most important piece of information I think we can take for investing from the brokers calls in what it tells us about market positioning. I’d call pretty much all the market calls they’ve made above as being pretty much consensus calls. Ie I’d be tempted to go the other way on a lot of them (check out any sort of positioning surveys on EUR and you can see the potential for a huge squeeze- shorts there are now at record highs). And let’s face it, with correlation across asset classes so high, and the outcomes in the eurozone being pretty much the lead driver for anything in the market in the near term, then, unless your view is that the eurozone is going to break up (not an unreasonable view given european politics), the potential for risk on squeeze led by eur in the first couple of months of this year is significant
Clearly this list is quite heavily influenced by their Chief Economist being Richard Koo. You won’t get many IB’s posting lists quite as bond bullish/equity bearish as this.
I read Koo’s book over the holidays and I thought it was fantastic! here’s my write up on it.
kelpie-capital.com/2011/12/29/balance-sheet-recession-basics-not-your-fathers-economic-cycle/
I’m positioned for the the opposite of “key call 3″ as in a short term trade, I’m constantly amused that people around me think that one needs to be able to get predictions right to make money from the market, if yields do fall further – so what. I’ll profit elsewhere.
I kind of like call #6 (short term). The oil trade, based on Iran, will end and consumers will be reluctant to drive their automobiles with oil spiking as it is. ECRI’s 2012 recession call, I feel, is only going to be helped along in this falling wage economy and consistent shocks in crude pricing.