WEEKLY REPORT

Markets Research
SPOTLIGHT Dec 10th Dec 14th

US markets facing negative data

Despite Feds announcement about new incentives for US economy on Wed (Dec 12th), US markets were falling since the middle of the week as nations trade deficit increased 4.9% in Oct. QE4 announcement reveals Feds purpose to buy $45 billion of T-Bonds, as of January 2013. This was the first time Feds policy was attached to inflation and unemployment. Additionally, initial jobless claims dropped more than forecasted to 343k and retail sales rose 0.3% in Nov, though less than expected (0.5%). Fiscal Cliff talks remain, as Ben Bernanke warned that Fed incentives could not be enough to offset the negative effect of Fiscal Cliff denial.

FEP Finance Club; tradingeconomics.com

Indices Performance
Dec 10
PSI 20 CAC 40 DAX 30 FTSE 100 NIKKEI 225 S&P 500 NASDAQ 5.401,36 3.612,10 7.530,92 5.921,63 9.533,75 1.418,55 2.986,96

Dec 11
5.511,83 3.646,15 7.589,75 5.924,97 9.525,32 1.427,84 3.022,30

Dec 12
5.561,47 3.646,66 7.614,79 5.945,85 9.581,46 1.428,48 3.013,81

Dec 13
5.615,41 3.643,13 7.581,98 5.929,61 9.742,73 1.419,45 2.992,16

Dec 14
5.625,31 3.643,28 7.596,47 5.921,76 9.737,56 1.413,58 2.971,33

Wkly Chg % 3,48% 1,04% 1,05% 0,12% 2,21% -0,32% -0,23%

Eurozone at risk once again as Italys savior resigns

Eurozone crisis may be back on track as Italy loses its prime-minister Mario Monti which represents a significant setback in eurozones recovery. Despite such political crisis, Spains almost-4 billion debt issuing was successful once again (Dec 11th), which led to a fall of the Spanish yields. At the same time, Portuguese 2-year-yields also dropped to a new bottom since Nov 2010. Moreover, German Investors Confidence soared from -15.6 on November to 6.9 points on December, boosting European markets in the beginning of the week. Furthermore, Ecofin finally reached an agreement regarding the creation of a single banking supervisor.

FEP Finance Club; Google Finance

Commodities Energy & Metals

0,90% -6,69% 0,91%

Crude Oil WTI Natural Gas Crude Oil Brent

-0,52% -2,51% 0,22%

Gold Silver Copper

FEP Finance Club; Forexpros

Reference Rates
Dec 10
Euribor 1M Euribor 3M Euribor 6M Euribor 12M Eonia 0.110% 0.183% 0.322% 0.547% 0.069%

Dec 11
0.110% 0.181% 0.316% 0.540% 0.067%

Dec 12
0.110% 0.183% 0.318% 0.540% 0.066%

Dec 13
0.110% 0.183% 0.317% 0.539% 0.071%

Dec 14
0.110% 0.184% 0.316% 0.537% 0.071%

Chinese concerns melt while Japanese economy may contract

This week Chinese data reported a steep growth of industrial production of 10.2% for November, while retail sales also increased to 14.9% as inflation remained at 2%. However, exports rose much less than expected (9%), reaching only a 2.9% growth. Less positive news from Japan: the Tankan index, which indicates industry confidence, reported lower than expected results once again, signaling the risk of new contraction in 4Q 2012. Along with prospects of more fiscal incentives, Yen hit new 9-month bottom against dollar.

FEP Finance Club; BPI

Currencies
Dec 10
EUR/USD EUR/JPY EUR/GBP EUR/YUAN 1,294 106,560 0,805 8,060

Dec 11
1,301 107,390 0,807 8,128

Dec 12
1,307 108,740 0,810 8,172

Dec 13
1,308 109,420 0,812 8,149

Dec 14
1,316 109,900 0,814 8,214

Wkly Chg %
1,83% 3,04% 1,04% 1,96%

FEP Finance Club; Financial Times

Financial Markets | fepfinanceclub@gmail.com| www.facebook.com/FEPFinanceClub

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WEEKLY REPORT
Portfolio Management
Portfolio Markowitz vs S&P 500
Markowitz S&P 500 99%

Dec 10th Dec 14th

Markowitz Mirrors the Market

Both Markowitz and S&P are showing a very similar behavior in the last couple of weeks and as a result Markowitz is still ahead due to past advantage. This weeks performance recorded a 0.4% gain with the same weekly volatility (7% annual) as the benchmark as US markets improved with the drop in unemployment and the announcement of QE4. Day-by-day it was a very mixed week with S&P outperforming Markowitz portfolio on most of the week.

97%

Increase in Risk sets off Markowitz Returns

Asset Contribution for Markowitz Performance
Rf DBP LEMB AFK ILF SPY -0,6% -0,4% -0,2% 0,0% 0,2% 0,4%

The higher risk in European markets driven by poor economic data and especially by the announcement of Monti resignation from the Italian government made the German sovereign yields rise, thus increasing our short position return. On the other hand, high yield bonds performed very well as a result of a decrease in global volatility. Our short position on the African assets was the major responsible for the negative contribution to Markowitz. We have a big exposure to AFK and prices rose 2% this week. Our portfolio also suffered from the drop on the precious metals.

Portfolios Weekly Performance

Values Portfolio Extraordinary Performance

Its the second week since its inception and our portfolio is having an exceptional performance. Since its creation, two weeks ago, it has given us a return of more than 2.5% despite the higher volatility especially in the last days of this week where it showed negative returns. Its also important to remember that all the securities selected are from the US market, so we expect to find a big correlation in returns of our portfolio and S&P returns. For the next week, we will hold the same securities and no significant changes were made in each weight on the investment.

1,1%

0,4%

0,4%

Value

Markowitz

S&P 500

Financial Markets | fepfinanceclub@gmail.com| www.facebook.com/FEPFinanceClub

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