In addition to answering the questions on everyone’s minds, some of the more savvy Wall Street analysts will shed light on matters that investors realise are important only after they’re told about it.What follows are excerpts from 8 of our best stories this week. All of the important and interesting pieces of research you might have missed this week, right here.
The top minds in the investment business offered some novel analysis, broke conventional wisdom, and even opened our eyes to some misperceptions.
'SocGen's Patrick Legland and Daniel Fermon have produced this clever chart. It compares the Athens market to the Argentine market, during its crisis. Basically, Argentina was essentially in the same situation as Greece, except the Greek peso was pegged to the dollar. When Argentina de-pegged, its equity market surged when priced in pesos, and fell when priced in dollars. If Greece 'de-pegs' expect the market to rally when priced in drachmas, and tank when priced in Euros.'
'NASA has been reporting of a spike in solar flare activity on the sun, which has the potential to disrupt earth's electrical grids and communication networks. However, it seems that those same flares may actually impact trading activity as well. Bloomberg's Alexis Xydias dug up a 2003 paper by the Federal Reserve Bank of Atlanta. According to the paper's authors, stocks tend to underperform during the days following a solar storm.'
'The Obama administration is more likely than not to use the SPR, especially given that 2012 is an election year. However, if the release is purely politically motivated, it would do little to alleviate tight short-term market balances and simply make longer-term oil prices even more expensive.'
'There has been an unusual divergence in the data flow in the US. Last week, our tracking estimate of Q1 GDP slipped all the way from +2.2% to +1.0% in response to disappointing reports on durable goods, construction spending and personal consumption. At the same time, jobless claims continued to improve, consumer sentiment showed a decent pickup, chain store reports were positive, and motor vehicle sales surprised to the upside. The sharp divergence between the GDP arithmetic and better-than-expected performance from a range of indicators is unusual, but not unheard of.'
'The economic problem for China's new leaders is that radical reforms, which would divert the flow of financing, tax, subsidy and other benefits from state-owned enterprises and state-owned banks to private sector SMEs and households, could exacerbate the weakening investment trend and induce the very economic slowdown which they want to avoid.'
'Dray wrote about it in a note to clients today: Biggest Surprise: Russia and India were not part of the GE growth showcase...
...Regardless, it provided Dray with the opportunity to note that contributions from Russia and India haven't been that significant to GE. BRIC countries are frequently cited by corporations as sources of blazing hot growth. However, investors shouldn't blindly expect consistent growth because the company they're invested in has a footprint in any of those countries.'