Helix Partners

[Disclaimer: Market commentary posts are non-professional in nature.  To they extent they have any investable opinions, they do not indicate anything about the content of the Helix portfolio.  Helix uses a systematic process and will never make any discretionary investments based on these market views.]

Consensus this week was simply to worry. Worry about macro numbers from the US, worry about continuing Euro-zone debt problems and worry at home that our Chinese friends might slow purchase our golden soil.

Europe: Despite the Euro zone finance ministers giving their final approval to the $520bn rescue package the market has all but conceded that Greece will (in some form) default.  Gold continued to break record ground and be an appealing refuge.

China: Strong export data from China yesterday inspired a sigh of collective relief, placating the general jitters after May’s disappointing manufacturing numbers.  It would seem that the imploding Euro zone (China’s biggest customer) might not bring down the mighty Chinese exporting dragon…yet.  Reports of rising wages for striking factory workers might also be the first emergence of a middle class that will have buying power significant to make China a self-subsistent economic story.  This is great news for Australia, but it also highlights the potential tipping point of labour availability in the Chinese manufacturing sector.

Australia: The RSPT public mess is continuing to look messy to foreign investment.  It continues to act as a reason to repatriate investment back to the US.  Falls in the Australian market this week were continually on low volume with investors frozen stiff, not knowing whether to crystallize their losses into EOFY or hold strong and wait for the rally.  Therefore we’ve simply seen a reflection of US moves every day.

US: Even the flag waving and cheer-leading of Ben Bernanke couldn’t suppress the worry in the US.  His commentary on Tuesday was heartening, but realistic: “My best guess is we will have a continued recovery, but it won’t feel terrific.” Nevertheless, economic data in recent months have suggested that the economy is recovering. Jobs are being created, manufacturing has consistently expanded and inflation remains tame.   A solid string of good news could turn this sentiment around very quickly.

Clearly it is a time to weigh top-down analysis.  Fundamentals have less bearing on the trading movements of the market right now.  The most robust investment models will be those that can adapt to dynamic market environments.  Approaching the problem from the right perspective is sometimes more important than deciding the method used to solve it. The current market uncertainty highlights the benefits of having a portion of your portfolio as market neutral exposure.  It is exactly the times when “any news is scary news” that you want the comforting confidence of being invested in uncorrelated return streams.

As a leaving point for the long weekend (please excuse the photographic quality) – Walking down Sydney’s retail Mecca, Castlereagh Street, today, I spotted the best example of the global economy:

Note: For lease sign, a major international bank, and a “we buy gold” backpacker. Ben’s right, it may indeed not “feel terrific”!!