GOIH Capital Markets: Market Overview--10-09-07

We have received several requests to explain what is the quantitative finance models we use and how are they calculated?

The proprietary models we use to make market forecasting and predictions are based on quantitative economic and financial theory. Our models are developed in house by our Quantitative Finance Group (QFG) using the latest in economic and financial theory and application of that theory.

We have staff trained in statistical analysis, finance, economics and psychology. We believe these disciplines provide the theory of which we formulate our model for forecasting and provide a competitive advantage.

Purdue University
Carnegie Mellon
GA Tech
New York University
Boston University

Graduate Programs in Quantitative Finance.


The above list of universities offers graduate programs in quantitative finance for interested parties.

GOIH is preparing an educational institute for the individual investors who wish to learn of the techniques use to forecast the markets.
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The market is set to open higher today on no fundamental news or economic data. Google has cracked the $600.00 mark for the first time and we are developing an option strategy for Google trading at $617 and Apple $171, we are in Apple at $128, and Goldman Sachs at $172. Volatility is down under 20 indicating lack of fear and greed is creepy back into the market.

We are designing a model where fear and greed, stochastic variables, will feed a model of the market and predict trading opportunities. The model will be part of our proprietary behavioral finance strategies unit.

We earlier posted that we were designing a portfolio based on a model of political decision making and the trading opportunities underlying the political decisions. After the CNBC candidates forum today we will test the model and post our analysis.

CNBC will host the republican candidates for a round table discussion of the economy at 4:00 pm today. We will cover the event and report back with our economic analysis of what was said and trading strategies for the comments made.

We are exiting our position in KO after it was down graded, as well as our position in MCD and taking the profits.

We will post the trading profits realized from the trading of these stock later today.

We have several strategies we are currently developing designed by our quantitative strategies group using a new model of the global economy.

GOIH Capital Markets: Economic Report

The jobs report came in this morning with an increase of 110,000 new jobs created. This immediately send the Dow futures higher as well as the Nasdaq futures higher indicating a market opening to the upside.

The Dollar/Yen spread recovered as the improvement in the jobs market indicates the Fed may or may not cut interest rates in October. If the Fed does not cut rates, the Dollar will strengthen against the Euro and Yen.

We will publish a list of investment ideas we feel have profitable implementation now the market has digested the latest economic news.

We remain bullish on multi-national exports, MCD, KO, BA with the falling Dollar their sales will continue to be strong.

We are bullish on GM with the new labor contract adding cost savings daily to the profitability of GM.

Bullish on Google (GOOG) tech leader in internet technologies.

GOIH Capital Markets: Market Overview--10-02-07

GOIH Capital Markets’ market overview sees the market opening basically flat to slightly higher in the major market indices, Dow and NASDAQ. Monday’s Dow record closing is being commented on as an aberration in the market.
The flow of funds suggest that the money that went into the market on Monday was from foreign sources looking to boost their earning power with the weak US Dollar at an all time low against most major currencies.


Our market models and indicators suggest a sector rotation into large cap multinational exporters: MCD, KO, BA------technology: AAPL, INTC, CSCO and commodities.

High End Consumer Spending:

Reports are circulating that the high end consumer is starting to feel a little uneasy in their consumption patterns. The wealth of the high end consumer is composed of financial assets: stocks, bonds, equities and house equity.


The home equity refinance market is all but shut down and the financial market have exhibited volatility and the possibility of recession cramping their spending habits.

We see the major brokers GS, MER, LEH, MER, BSC being strong on another projected Fed rate cut at the next FOMC meeting in November.

McDonalds (MCD) and Coke (KO) Target (TGT) as market indicators.

Our models indicate that the above stocks are leading market indicators as food and basic consumer items for the household.

Both MDC and KO generate a majority of their earnings outside of the US and benefit from the weak dollar as well as being part of the consumer staples sector. Regardless of the economy the consumer has to eat and cloth themselves.


We see continued market trending based on economic data pending the next Fed meeting in November. The direction of the trend in the short term will depend on the money flow from external sources and reallocation into different sectors rather than a general market trend.


Market Forecast:

We see strength in the Dow components with exposure to the weak dollar and strength in technology with the capital expenditures of industrial companies exporting more and upgrading their infrastructure to produce more goods and services.

GOIH Capital Markets: Market Overview

Our indicators see the market opening slightly higher trading sideways on low volatility.

We car preparing a new quantitative analysis of the Dow components and what components tend to increase or decrease the Dow depending on the Dow futures trading.

The market is still uncertain of the Fed's interest rate cut. The cut of 50bps in both the Fed Funds Rate and the Discount Rate is causing the market to reflect on what is actually happening in the global economy.

The Dollar is at an all-time low against the Euro as oil made a new high last week on inflation fears. Gold is at a 24 year high on the weakness of the dollar causing inflation fears in long term interest rates.

It is our opinion that the Fed's actions will have little if any immediate effect on the market and the continued weakness in the housing sector will continue into 2008 due to the excess supply in housing units.

Even if Feddie and Fannie Mae increase the jumbo limits, beyond $417,000, the avaialble supply of new buyers is insufficient to increase demand for hte excess housing units.

The Dollar is trading at 141 to the Euro causing the exporters to MCD, KO, GE, BO and others to have a positive outlook as long as the Dollar is weak. As the Dollar weakens against the major currencies, European exporters’ sales will decrease relative to US exporters causing global markets to weaken.

GOIH Capital Markets: Quantitative Financial Group

We still have positions in GS, AAPL, LEH, MER, GM, MCD and we will post a mark to market at the closing today before we rebalance our positions.

GOIH Capital Markets: Coke Cola (KO)---Analysis

Earlier we posted we had entered a position in MCD (McDonald's). We believe that KO is a good entry point since if MCD's sales are up, then it follows that those sales include sales of KO products.

The weak dollar helps both KO and MCD since a majority of their earnings are earned outside the US. The dollar index against seven major currencies is at a 15 year low helping US exporter

KO is up about 7% in the last 10 trading days. MCD raised its dividend 50% today indicating strong growth.

GOIH Capital Markets: Market Overview

GOIH Capital Markets sees a strong opening in the market today. Our models indicating the Dow opening higher as well as the NASDAQ on slow volume pending the Fed's meeting on Tues.

Next week the investment banks report earnings for the second quarter. Trading has been volatile in the banks pending the announcement of earnings. Most of the large brokers have exposure to the credit market and earnings will depend on the management of the risk involved in the assets of that market.

McDonald's

In an earlier post here our models predicted that MCD, (McDonald's) was attractive. MCD raised its dividend by 50% after the close. A gap up in the opening.

We picked up a position in the after market long for 100,000 @ $51.20 on MCD.

We see the market trading sideways until the FOMC meeting on Tues.

Apple Inc.

Apple is up strong in the premarket with bid of $138.61 after closing at $136.85.

GM is up strong on news of the UAW contract negotiations......we see GM going higher if the contracts are positive. However, the gap up is based on costs saving rather than increased sales.


Crude oil traded over $80.00 per barrel in intra day trading.....strong oil should lower GM's sales relative to any gains made in the UAW contract.

Countrywide (CFC)

We exited our short CFC position at $16.45 for 300,000 shares for a profit of $465,000.

GOIH Capital Markets: Market Overview--Market Turmoil

Today trading resumes after the sell off on Friday after the job numbers disappointed. It is being discussed on Wall St of a sure Fed Funds rate cut of at least 25 basis points, with a high range of 50 basis points.

As we have discussed in several earlier posts we do not believe the rate cuts will have an immediate effect on the “economy”. We think if there is any immediate effect it will be on the financial sector of the economy, i.e., Wall St. and the large financial services providers.

Systemically, the economy is crippled wounded by the crisis in the subprime mortgage market. Essentially, aggregate demand (consumer purchasing power) has declined relative to aggregate supply (industrial production) in the housing sector which due to the multiplier effect, has a disproportional impact on the economy.

A Fed Funds interest rate cut even of 100 basis points will not increase aggregate demand where the excess capacity currently exists, the housing sector. The housing sector is so saturated with over priced current inventory; there will be no demand for loans even at the lower interest rate.

Because there will be no increase in demand for the lower interest rate loans, industrial production will not increase, no new workers will be hired and consumer consumption will remain flat due to the lack of any “new wealth” effect created by the increase in house equity.

Corporate profits will decrease due to the decrease in consumer spending causing earnings to decrease, causing stock equity prices to decrease, causing the stock market to decrease.

Global Equity Market Decrease:

Because the US is 30% of the global import market, any decrease in US consumer spending will decrease imports causing global markets to decrease for the major exporting nations.

Stocks we are watching for short term trades:

We are watching stocks that have exposure to international consumer staple or discretionary markets and technology that is not sensitive to interest rate gyrations.

We see MCD, KO, PEP, INTC, CSCO as good opportunities for short term trading profits. We will take positions in some of these on the opening.

We see Sony, Honda and the major Japanese exporters for short plays.