Friday, October 26, 2012

Flags in Corporate Profits

After being about 1 week, and 5 trades too early for the current sell-off, we've seen the corrective action that I had though would occur a few weeks ago. Whilst I didn't capitalise as much as I would've liked, I've been very well protected in the past correction due to 0.7 equity holding.

AMZN missed on revenue and APPL missed on earnings. The past few weeks of earnings season has seen quite a few EPS beats, but a lot of revenue misses. This is definitely a warning signal against the potential for continual margin expansion in profits, and signal that the revenues may face some challenges in the first quarter of 2013.

We are seeing Oil diverge from the stockmarket which is negative for risk sentiment:

Credit growth in Australia remains weak; although we see some pickup in business credit. The lowering cycle of the Aussie markets may see another upswing in housing prices, but this will only inflate the bubble into dangerous territory. I keep having to remind myself that we have like the most expensive cities to live in, and at some point this will normalise to a more affordable rate.

China has been a key macro factor in the global economic recovery. The equity market has been sold off heavily in 2012: given where the PMI is leading; are we likely to see a strong bounce? We saw the 10% capital gains being discussed last night which lead to the 2% selloff.