Todays Macro Trading Focus

The freefalling Euro - soon at a theater near you

2011-11-01T10:50:00.004Z

* Another day - another Euro rescue package
They all follow the same pattern, and essentially boil down to the following;
- We dont have any money.
- We dont understand how the market works.
- We do believe politics can solve massive economic imbalances.
- We do believe more debt and increasing leverage is a real solution.

This is the current Brussel politruk behaviour and it is not likely to change as panic sets in and these basic behavioral patterns are set on autopilot.

The Greece population is to have a referendum on the latest hard fiscal measures, and there is a real risk of this putting an end to the Greece Eur adventure.

I find it very difficult for any politician and any rescue package to stop momentum from developing further from here. Economic deleveraging is about to get in motion.

Hold on to your job and your cashflow best you can. Consolidate your assets. Try to capitalise on the developments - if you dare. It will be a rough ride. Try to take advantage of the possibilities that will open up.

Be long USD.

As usual -good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Big bubble - big trouble

2011-09-24T13:15:00.008+01:00

As I´ve mentioned in the blogs during the financial crisis, the steps taken during it only postponed the inevitable. And here we are, facing the facts. Its time to pay up, or reduce the debt -rebalance -globally.

This means lower liquidity - higher volatility - lower asset prices -default - debt writedowns -taxpayer payups - lower demand for products and services - business layoffs and bankruptcies - more defaults - more debt writedowns. This scenario is excluding China getting into trouble.
Unfortunately, there are increasing signs that it will.

That scenario is a scary one - but if it happens - and the risks are way too high for anyone to ignore it - the outcome could be massive. China is currently the worlds credit multiplier and liquidity provider. The curse of the fixed exchange rate have much to do with the creation of this monster. The unraveling of it could be something we will have to witness before long.

Any household, corporate, or global fund not trying their utmost to find ways to protect themselves against this (economic only, we hope) risk are putting the economic survival of their family, corporate or fund at stake.

The positive fact is that this time around, compared to the financial crisis, the traditional banks and the media are quick to jump on the bearish macro band wagon. Unfortunately, their macro horizon stops at Europe and the US. They still believe the fairy tale story that emerging markets and China will do well. Unfortunately - they won´t. As witnessed during the last week, commodities, carry plays and emerging markets are getting hammered. China is pulling back.

China has pursued the illusion of a diversification process whereby they have misallocated capital into silly investments, as well as different asset classes, pretending they are diversifying.
Unfortunately, I fear this will come to a horrible end as correlations - once again become 1 between asset classes. The liquidity factor for return on capital will be painfully clear as many investments will not generate any return of capital as liquidity dry up.

China; 40% undervalued currency. Export companies with a 2 %! profit margin. An economy dependent on domestic construction. Heavy credit losses disguised by liquidity. A corrupt government driven by centralised leadership.

Go figure.
I hope you all have your hedges on - if not, go get them.

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Another dip lower in equities before pushing higher?

2011-08-16T07:56:00.002+01:00

* Equities should head lower short term - and then continue the correction higher.
However, equities have topped out for a while now. Risk for a heavier move lower is increasing.
But thats something for later on this summer/early fall.

* I am going short equities for this shortterm move lower.

As usual - good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Too high expectations

2011-08-09T07:39:00.003+01:00

* Wham Bam thankyou ma´m

Equity markets dropping sharply globally after lower future growth signals triggers drastic revaluation of equities.

The hopeless situation in Europe as well as the dissapointment that US consumers will not be acting as the buyer of last resort for goods and services for the foreseeable future.

Lets try to look at the " bright" side;
- US corporates are still doing well and are very well capitalised.
- Eurobonds could still be launched to fill the holes in the Eur pockets.
As usual, however, there is no free lunch. While it might solve market turmoil short term. Lower growth and purchasing power for Eur countries and citizens will be the consequence. It will happen anyway. Question is just - how low will they go?

* China - the elephant in the room
I would also like to mention China, which today launched July´s inflation number; 6.5% on an anuualized basis. This should really trigger further tightening measures from China, but during the current "equities falling of a cliff"
circumstances, they will probably not.

In either case, what markets - and the rest of the world, should fear now is China going bust. China has been experiencing a classic boom - and bust scenario and I believe they are about to enter the bust phase. This scares me and should scare you too - lets hope Im wrong. If I am not, you´d better prepare your house for the fiercest economic environment you might experience during your lifetime.

*Correction higher in equities starting today?
Meanwhile, the equitymarkets are bound for a rebound/ shortsqueeze.
Today could very well be the start for a decent correction higher. I am going long.

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

The ECB is forced to comply with markets expectations at todays ECB meeting.

2010-12-02T09:47:00.002Z

* The ECB is cornered - again.
Stuck between a rock and a hard place.
Upbeat ECB forecasts for the Eurozone to be expected for today. Simoultaneously the ECB is mulling whether to buy PIIGS bonds again. The Eurozone Emergencyfund is also out declaring an 8BN Usd bond issue for this SPV(Special Purpose Vehicle), a classic vehicle from the the financialcrisis, by the way. Evidently, Asian Central banks seems to have a vested interest in ensuring its success.

This all boils down to a a correction in the market, in my book.
Eur/Usd has fallen 12 cents in 3 weeks, so a correction towards the mid 1.3350 should be in order, it could even stretch above that. Anyway, Im viewing this from a xmas perspective and I am not expecting these festivities to last beyond xmas.

I believe markets are currently ignoring Chinas liquidity depleting measures. I am not. I am hearing the Chinese loud and clear. The Chinese liquidity generator is gearing down. Deleverage.
Get ready for higher rates and stagflation.

If this is the case. This xmas rally should be treasured.

*Positions and positionchanges
Ive bought Eur/Usd for a move towards 1.3350. Trusting ECB to oblige market expectations today.

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Keeping an eye on tommorrows ECB meeting; The ECB seems willing to buy peripheral bonds

2010-12-01T12:57:00.004Z

* It seems the ECB has become worried enough to consider buying peripheral bonds again.
This will of course only help short term, but this is nonetheless a shortterm solution to try and normalise current markets.

If they do, markets will shift towards a positive risk on mode, benefitting Eur/Usd, equities,etc.

*Positions and positionchanges
Ive taken profit on my short Eur/Usd position. Iam now awaiting the ECB meeting tommorrow.

As usual, good luck.

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

The curse of fixed exchange rates

2010-11-16T22:20:00.009Z

* Fixed exchange rates creates huge misallocations of resources and have very much contributed to the global problems we are witnessing today.
China, Europe, the Baltics etc are good examples of it.

Without floating exchangerates there is less of a " mark to market" of a countries worth. The interestrates mechanism is not capable of compensating fully for the lack of exchangerate flexibility.

The US of A is admittedly in trouble and they do have a floating exchangerate, but- one of the reasons it could build up such extreme imbalances was the fact that the USD is the worlds reservecurrency. Im just saying that this is a distortion in itself. Without such a status, the Usd would probably have been punished way earlier and quite severely, too.
Well, now the world order is what it is.

*The Eurozone is in deep trouble, much due to the common currency and a lack of common fiscal policy.
However, human nature, acting on economic incentives, creates far greater risks with fixed exchangerate regimes compared with floating ones.
Politicians have really stepped in it this time around. My view is that there is very little chance that any politician will be able to pull off extreme internal devaluations in these countries. No one else has succeeded so far.

The Baltics, you say? Right. Latvia failed to live up to its "money for budgetpromises" set up - twice. And still got the money (the EU commission was willing to pay all along, no matter what. )Estonia is now generating inflation - what happened to the internal devaluation?

Anyway, with the PIIGS countries its on a whole other scale. I doubt the Germans are willing or capable to pay that bill. Mrs Merkel has already stated bondholders will face some losses on any government default from 2012 onwards, as the EFSF set up changes - PIIGS bonds, anyone? Chile ,Norway and Russia has got the message loud and clear - and stopped buying PIIGS bonds.

Having said that - there might actually be a bailout of Ireland. When/if this happens, I suspect the markets will rally, anticipating bailouts for all of the PIIGS countries if necessary.

This conclusion is on very shaky ground and I would be more prone to sell into it.

*Chinas role as a liquidity generator is over.
From now on liquidity is set to tighten.
Since China does not seem to dare using the most efficient weapon - FX, in fighting cost push inflation. The consequences could actually become worse if they dont, due to overkill behaviour with blunt instruments such as the interest rate and bankreserve requirements.

*Emergings are getting hit by tidalwaves of liquidity and Turkey has now started what might become a new emerging country trend; keeping the repo rate stable but cutting the Depo waaay down.
Turkey reently cut by their depo by 400bp!
No more carry here, hot money!

Hmmmmm, and where are all the long funds, pensionfunds and lifers invested? Could it be?,,,,,, oh yes,,,,,, emerging markets, the secret holy grail,,,, could become scary, this.

* Dont mention commodities - dont mention China
"All" banks are touting the mantra of commodities and portfolio diversification. The latter actually sounds good. The only problem is that currently, all assets are driven by hot money and the correlation is way up there. I bet that on a sensitivity based analysis, it doesnt look good either. Conclusion anyone?
There is currently no real portfolio diversification in owning various assets. Anyone thinking so might be facing some quite straining scenarios going forward. Assetmanagers should be cautious. They should be using instruments to protect themselves. There should actually be room for a new breed of assetmanagers out there. The old "fire and forget, buy - and hold em" assetmanagers have had some great twenty years, but those days are now most likely over.

* New positions and position changes
Im getting ready to take some shortterm profits in FX and commodities.

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

No G20 deal this weekend was no surprise, Nov 11-12 is where the chance lies. Will we see more drunk driving til then? Use options.

2010-10-25T11:34:00.006+01:00

* Implied and realised assetvolatilities are set to rise - no matter the Nov G20 outcome.

Depending on the outcome, the speed of the rise will vary. In any case, global liquidity has seen its top this time around. Global liquidity to get reduced going forward.

Im using options instead of underlying.

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

This weekends G20 meeting = a stronger Usd.

2010-10-21T09:03:00.003+01:00

* Big short Usd bets are about to go wrong

The FED is not going to devalue the Usd via a QE2 "shock and awe" approach, rather it will be pragmatic, based on a meeting by meeting approach with no commitments for any longer term approach. The bondbuying seems to be estimated to become about 100bn Usd at the time. This is way lower than the market has priced in.

There will be no "currencywar". China is preparing measures to reduce creditgrowth and inflation as well developing domestic demand and reduce leverage. This will require a stronger currency, higher interest rates and less bank lending, reducing credit further. It is necessary to stop the Chinese realestate market spiralling totally out of control. Or has it already? Over the last three months realestate prices in the most attractive locations have alledgedly risen by 40%! From an already very much inflated level. Anyone hearing the sound a bubble popping?

Both this weekends G20 meeting and the upcoming EU heads of state meeting the weekend after will both work in favour of a stronger Usd.

This will also have a negative effect on Gold, Copper and Oil - a few other overcrowded trades . The weaker Usd, continued strong Chinese growth, weak currency and a continued strong growth of global imbalances have been important variables driving these trades.

Well, time to take profit and reverse.

* This weekends G20 meeting

The probability for an agreement between US and China has, according to the best guesstimates out there, increased from 40% pre the Chinese rate hike to 60% post it. In either case, the signals seen so far, (with China basically handing over the printing press weapon to the US by hiking their rates and increasing their own sterilizationcost at the same time as the US has scaled back their QE approach to a pragmatic - meeting by meeting one instead of "shock and awe"), indicates there will be no "currency war" (silly name).

So, from here on, global rebalancing and deleveraging could be the name of the game. This means lower growth in the Western hemisphere and increased risk for ditto in the Eastern one.

In any case, its the right riskmanagement path and it is way better than the very high risk alternative of continued global imbalance building and then disaster - scenario.

* Assetliability ratios to go lower again - credit multipliers to drop and ditto for profitability.

We have likely seen the global liquidity peak this time around - time to review leverage set ups as implied and realised volatilities are set to rise

*Emerging markets - yet another overcrowded trade. This one is running the risk of turning the "holy grail" into "holy sxxt!"

Emerging market inflows are now back at the record levels at the end of 2007, beginning of 2008. Theres a big difference between now and then though - initial liquidity. While liquidity at the time was very good, it is the reverse now - despite the low volatility circumstances.
Once vol starts pumping up, liquidity will be nowhere to be found. In emerging markets this is normalprocedure, but there are always various levels for illiquidity and this time around such a scenario is running the risk of being the worst nightmare for naive investors and speculators.

Trust me, so far I have always been on the "right side" on any emerging market crisis, you do not want to be on the wrong side of it,,,,, This time around the exitdoor might get clogged up altogether.

Perhaps not today, or tommorrow, but the signs are building.

* Positions and positionchanges
No changes

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Chinese rate hike; CNY appreciationpace to increase, US QE to decrease - and so does global liquidity

2010-10-20T12:32:00.007+01:00

* Eye of the storm - not for much longer?
China hiking rates - positive from a macro rebalancing point of view - but not from a shortterm liquidity and global growth point of view. As Ive mentioned earlier; globalrebalancing = global deleveraging.

As the cost and volume of the Chinese currency reserves have accelerated drastically, so has the exposure and the entailing risks. The cost of sterilization is sure to increase as the humongous currencyreserves have been allowed to accumulate over time, pushing inflation higher in the process. So far, the sterilization measures have not been adequate as only part of the currencyreserves have been sterilized. As imported inflation from commodities etc has also increased, a stronger currency is just what the doctor ordered.

The cost of sterilisation will now increases with the latest rate hike, (I believe this is just the beginning ), the Chinese authorities are likely to have concluded that it is in their best interest to increase the pace of Yuan strengthening. There are obvious risks to Chinese growth in this process. The authorities will have to walk a tight rope, but I doubt they have much choice. Fingers crossed.

This also means its time for liquidity drunk market participants to sober up - fast.

* What will happen from here?
Asian currencies to continue strengthening against the USD as they get dragged along by the CNY. The Usd to strengthen against everything else.
Gold and other supercrowded commodities to suffer. This will also be a structural phenomenon and not just shortterm. See global rebalancing above for explanation.

I also have a few other very interesting trades to get into from here, but Ill save those til later.

I would like to point out that Emergingmarkets in general are also supercrowded trades and would be looking for signs these are about to reverse. Liquidity is low and will not increase on any such development,,,,,,,,

*Positions and positionchanges
-Long GLL ETF (leveraged short Gold).
-Long SOIL ETF (leveraged short Oil).
-Long SCOP ETF (Short Copper).
- Short Aud/Usd
- Took profit on short Eur/Cad

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

The ECB is playing liars poker - low yields to remain.

2010-10-19T12:45:00.006+01:00

* The ECB is playing liars poker. Jawboning about "normalisation" of the yield curve.
The audience here is supposed to be the EU commission. Sending a clear ECB message that they will NOT agree in substituting ECB monetary policy for fiscal policy in order to finance and save the PIIGS.
Meanwhile, markets have literally believed in the ECB talk, pushing yields higher.
However, as the realisation sinks in that this is just - talk, yields will come lower and so will the Eur. Besides, a stronger Eur is NOT what the eurozone needs right now. In fact, for Eurozone stability reasons, it is necessary for the Eur to weaken. A strong Eur will wreak havoc.

On top of this, this weeks ZEW and IFO numbers are likely to show a Germany topping out and turning down, which will really cause angst among politicians and policymakers. Expect some political jawboning for a weaker Eur nearterm.

* China - best and worst case scenario
Running into the G2o meeting it might be worthwhile pointing out the obvious fact that China is running a nonconvertible, semifixed currency regime, which is NOT in line with open, free markets. These facts themselves have caused severe disruptions to the world economy cet.par.

A best case scenario, both for China and the rest of the world, would be for China to let its currency float. This will infer economic global pain, a lot of it. However, letting the China bubble grow further would not only infer economic pain but could also mean a new level of armed conflicts, beyond control. You choose; rebalancing today with upfront pain, or fingers crossed with upfront pleasure for extreme pain tommorrow?

What do you choose?
Humans normally pick the latter, while riskmanagement states the former.
You decide.

In any case, we are in for some very rough and turbulent times. Rollercoasterstyle. But as any rollercoasterrider knows, its on the way down the scary stuff starts and it always ends the same way; down at the bottom where we started. Question is; where is that?

* All in all
Shortterm we are in for a pre G20 correction in assetmarkets.
Beyond that, set up for BIG trouble continues. Big questionmark is whether there will be an agreement in the near future on rebalancing or not. Without it, assetmarkets will remain positive, til we sail out into the storm again.

* Positions and positionchanges
- Short Eur/Usd, Gbp/Usd, Eur/Jpy, Eur/Cad and Gbp/Jpy since last Friday.
- Monitoring equity indicies, gold, silver, copper, steel and oil for signs of a correction lower.

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Assetrally - Usd sinking - the eye of the storm

2010-10-14T08:49:00.007+01:00

* Global tradeimbalances are expanding at an ever increasing pace.
As these imbalances continue to grow, the global setbackrisks are as well.
I believe we are currently in the eye of the storm.

These tensions should not be able to continue for any stretched period of time.
Why not then?

1) As the world is competing ever more fiercely for exports, the realisation that fixed or semifixed currencies are creating big domestic as well as international risks will become evident.
The Chinese argument that a stronger Renminbi will risk their economy is similar to accept an even greater sensitivity in the future as their surpluses accumulate. "When in trouble, double". Not the way to go.

2) Global fierce competition for exports will lead to trade tensions, which will lead to trade restrictions and tariffs. This will reduce global trade and hence, global GDP. The risk for armed conflicts will increase drastically. Especially as higher soft commodity prices will correlate with the weaker Usd. Noone wants risking major armed conflicts at this stage.

3) As the US currency depreciates, the risk for a suddenloss of confidence in the US currency increases, especially as the US deficits and debt continues to build and yields are close to nothing.
Should this happen, any country sitting with huge currency reserves - especially the fixed or semifixed currency regimes, China being one of them, would suffer massively. The extent of Chinese Fx reserves would mean the government would have to raise taxes or debt to compensate for the FX losses. Essentially, China would fall apart, given the extent of leverage, misallocations of investments, bank exposures to realestate markets and corporate projects and corruption. And if China falls,,,,,,, fill in the blanks please. US doesnt want it, and neither does China.

Better then to try and control this global deleveraging and rebalancing process by making a G20 agreement. Unfortunately I believe the probabaility for that is quite low since politicians only have one strategy - the ruin strategy; "when in trouble double".
Hopefully, riskappetite will adjust downwards as trade tensions increase on the back of a G20 "no deal".

Short term, I believe the market has overpriced the US QE and we will see a moderation towards QE from Bernanke tommorrow, as positioning for the G20 meeting begins. If the US softened their QE easing approach, probabilities would at least increase that China would agree to let the Renminbi appreciate at a slightly faster pace. Although a deal would still be slim, at least both parties are probabaly willing to try making one.

* Short term conclusions, outlook for the Usd, (and currently high correlated commodities);
With US QE pricing overdone, IMM positioning ditto, my expectation of increased riskaversion no matter the outcome of the G20 (G20 deal = drastically lower Eur/Usd, no deal would = further trade tensions - reduced risk appetite - lower Eur/Usd. Also, long term US interest rates would rise drastically on a deal due to China buying less US bonds as their FX reserves would grow at a slower pace. Long term US interestrates would rise much less so on a no deal. In any case, higher implied asset volatilites are to be expected.

* We are currently in the eye of the storm - enjoy it while it lasts
Have your stormgear handy.
This is the time to prepare for what's to come, while making as much as possible out of the current environment. This period should be treasured since commonsense will dictate that massive reallocations could be around the corner in order to rebalance the world economy and deleverage it. It is important to remember that rebalancing of the world economy will mean deleveraging it. That process will be very harsh indeed.

* New positions and position changes
- Stopped out of my short Eur/Usd position
- Stopped out of my short Gbp/Usd position
- Took profit on my short Eur/Jpy position
- Stopped out of my short ETF equity index positions and reversed

I will go short Eur/Usd, Eur/Jpy and Gbp/Usd pre the Ben Bernanke speech tommorrow, expecting a moderation of the QE approach in line with pre G20 positioning. I will use options in order to get cost efficient leverage and costcontrol. On top of it I expect implied volatilities to increase from here.

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Lets play,,,,, the weakest link

2010-09-23T13:07:00.006+01:00

* "The weakest link" was a gameshow running in the UK quite a few years back. A quite harsh program voting out the contestants percieved to be the "weakest links" in a group.
This can now be applied to the Eurozone, but with a different twist. We already know who the weakest links are; the PIIGS countries. However, they are currently supported by the Eurozone
rescue fund, the EFSF (The European Financial Stability Facility).
At the european head of state meeting in October, a proposal will be made to upgrade the rescue fund to a permanent tool.
The EU commission has already suggested that the EFSF should be made permanent.

What about the weakest link theme?
Well, if this proposal gets a green light, the implications are quite substantial for Eurozone surplus and deficit countries. The deficit countries are essentially written a blank check. This obviously includes a substantial moral dilemma and much increased risks of being abused.
As financiers, the surplus countries are at risk of getting massively increased bills. At some point this will become too much. If they cave in, the Eurozone implodes. Hence, in this context, the surplus countries will come under massive pressure. Amongst the surplus countries, the most important is Germany. All in all -the weakest link is,,,,,Germany.

Currently, the market doesnt care about these consequences, but prefer to focus on the inner EMU yield pick up play due to the "successful" peripheral bond auctions- and the EU commission proposal of making the EFSF permanent. Strenghtening the Eur in the process.

However, expect Germany to be on collision course with the Eurozone deficitcountries as they obviously has no interest whatsoever to migrate the peripheral countire's debt burden to Germany. I expect implied volatilities for eurozone assets to pick up in the run up to this meeting. The outlier risk is for a drastically weaker Eur.

*The Peripheral bond rally - enjoy it while it lasts, but take your profits in time for the European heads of state meeting.
With the EU commission proposal of making the EFSF permanent, the peripheral high yielders will be perceived as very attractive, reminiscent of a "free lunch". A word of caution will be in place.
The bets are increased and hence the risks are rising in the Eurozone game. The perception that governments and centralbanks will be able to sort out a growing mountain of debt may hold as long as a good cashflow/high growth remains. This assumption is very uncertain in itself. Add to that the necessity for growth to increase further in order to service the rising debt and it is not very difficult to imagine a situation where this spirals out of control.
Especially if the anchor funding entity of them all, Germany - balks.

* New positions and position changes
I view the recent Eur rally as overdone and have taken profit. I see Equity markets vulnerable for a pullback.

- Took profit and reversed position on Eur/Usd.
- Took profit and reversed position on Gbp/Usd.
- Took profit and reversed position on Eur/Jpy.
- Went long on various bearish Equity ETF;s.

As always good luck.

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Reversing Eur/Usd ,Gbp/Usd

2010-09-03T13:33:00.003+01:00

* I am reversing Eur/Usd and Gbp/Usd into long positions
Closing short Gbp/Chf and going long Eur/Jpy.

More later.
As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Taking partial profit

2010-08-25T16:51:00.005+01:00

* The swift moves in the markets this week seems somewhat overdone - for now.
Im taking partial profit.
I believe well see more of these bearish developments ahead , but there is a good chance of an assetbullish reaction first.

*Open positions and positionchanges
- Took profit on my short Gbp/Jpy
- Took profit on my long Usd/Zar
- Took profit on my short Aud/Usd
- Took profit on my short Aud/Jpy
- New position; Short Gbp/Chf

Never got hold of short position on the Australian ASX 200 index. Bought ETF;s on short European indexes instead. Took profit there as well.

Still short Eur/Usd and Gbp/Usd.

* Other
Getting a view on deflation - stagflation - inflation.
More on these subjects in a later posting.

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

CNY reval to the (temporary) rescue or not?

2010-08-16T12:18:00.004+01:00

* CNY reval is on the agenda again. From a Chinese perspective it might become a necessity as steps are taken to try and manage this leveraged economy.

On that note, got some info re counterfeiting in China. Alledgedly, if one deducted Chinese growth stemming from counterfeiting, the annual GDP growth would be zero. If one applied "green accounting" all current GDP Chinese growth would be erased as well. So, all in all, deducting these two variables, the remaining net Chinese GDP growth would be negative.
Add to this a highly leveraged, centralised and very corrupt regime and a cowboy style economy you end up with,,,, Russia in the nineties? Only, the variance in livingstandards in China is even greater than in Russia back then, hence the risk of socialtensions and massive political turbulence is higher in China.

What Im trying to say is; In the "short" run the Chinese economy is overvalued and overexposed.

*Oh yes, the Chinese reval.
Well, although there are some bearish winds blowing again, a CNY reval should actually be good for riskappetite. This would definitely disturb the AUD case shortterm. Especially since the AUD would likely be one of the currencies benefitting most from such an event.
Ill return on this issue later on.

* Was a bit quick in going short CBA and Westpac - its just not doable. These stocks are stilll under a shortingban. Wonder why,,,,,, Oh well, Ill try the index instead then - if possible!

* New positions and positionchanges
No changes.

* Other
- Still trying to add a short Australian equity position - well see.
- Pondering the deflation vs inflation, stagflation outlook. Been a deflation "fan" but am currently reassessing.
- CNY revaluation timing. Not good for AUD bears when it happens. Stay posted.
- JPY intervention; Not before 80 in Usd/Jpy. Stay posted.

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

The Australian housingbubble - will it bring down CBA and Westpac?

2010-08-11T07:55:00.002+01:00

* I havent really noticed much publicity when it comes to the Australian housing bubble.
However, Ive had a look at it and its very,very scary. As always, its a matter of timing, but I believe were getting there before long. Hence, I am selling the Aud as well as the Australian banks CBA and Westpac (they hold 50% of the Australian mortgagemarket). The loan to equity ratio is so high that a 6% writedown of mortgages would wipe out these banks equity. When this housing market heads south, a 6% writedown will be a best case scenario,,,,

Ive got some quite compelling research on the subject. If you´re interested in obtaining it, send me a mail.

* Yesterdays FED comments post the FOMC decision provided a minimum QE outcome.
It is doubtful this will match the high expectations that were build up pre FOMC. The impetus from this for assets should be a weakening one.

* New positions and positionchanges
- Added to my short Aud position
- Looking for the best ETF;s to short CBA, Westpac or ASX 200

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Time to change positions

2010-08-10T10:53:00.002+01:00

* Its been a great bull ride since June in Equities, Eur, Aud and Oil, not to mention Wheat (ahhh, what a rocket).
However, I feel now is the time to reverse these positions - again.
Why? Well, to me the weaker Usd was a temporary retrieve in any case. The Usd is coming back soon due to a leveling of positions and the markets overpricing of QE is US vs recovery in Europe. Hence , I believe we will see a relative shift in long term rates favouring the Usd.
I am going long the Usd.

* The China syndrome - soon in Australia?
Australia is to suffer on the back of continued Chinese tightening as well as continued weakening Chinese assetmarkets. According to research, Chinese GDP growth is 100% due to the domestic industry of making fake brands. At least that makes me quite worried. Top it off with a very centralised structure, high leverage, insane capital allocation and you have the recipe for a real bubble burst with a bang. On the positive side; Basel 3 will likely mean an increased allocation from banks into reserve currencies such as the Aud. Short term, however, Im a seller of Aud.

* Equities still in a range - but its about to move lower within it.
Equities will still be looking good from a capital allocation model point of view, but short term I believe the market has gotten ahead of itself. Europe is not out of the woods - not by far.
I am going short European Equity indexes.

* While Oil may very well be in short supply going forward, the Gulf issue is overplayed and so is the demand for now. Im going short Brent Oil.

* The Wheat panic rocket is falling back to Earth - ish. Beware of setbacks.
However, with the recent move and the Russian wheat export stop and bad harvests already discounted by the market and a very, very swift move higher. I am at least looking for a correction lower before we get a top out test of the former high. Caution warranted though. Proper strict riskmanagement should be applied, as always.

* SouthAfrica - the Worldcup is over and the shine has faded. Whats left? A corrupt government, trying to silence the press in order to make room for murky deals and yet more corruption. This country was meant to set an example for the rest of Africa, leading openness,transparency, education, social responsibility and growth. Now its heading the other way. Mandelas legacy is fading fast. On top of it, neither the World Cup, nor the Olympic games are rarely an economic success for the hosting country, rather the opposite. I doubt it will be different for South Africa.
I am buying Usd/Zar.

* Positions and position changes
- Took profit on my long Eur/Usd position, reversed.
- Sold Gbp/Usd.
- Took profit on my long Aud/Usd position, reversed.
- Sold Gbp/Jpy.
- Took profit on my long GLL ETF (short gold).
- Took profit on my long LOIL ETF (Long Brent Oil).
- Went long SOIL ETF (Short Brent Oil).
- Long Bear ETFS on European Equity indexes
- Long Usd/Zar

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Change of plans, short term, things seems to be looking up.

2010-06-10T10:39:00.002+01:00

* Spanish bond auction went well, positive numbers overnight from Japan, Australia and China

This means increased global rebalancing potential as European countries are getting increased possibilities for exports, as asian fiscal policies are turning more domestic. With asia and parts of the emerging world requiring tighter monetary policies. With Europe in delevraging mood due to sinking domestic conditions, this export potential will help.
The Eur will still have to weaken substantially, even below parity, to test all time lows. However, now does not seem to the time for it. Also, the Eur/Usd move lower has to take place during semicontrolled conditions in order to avoid European banks and general asset markets falling.

With the Eur moneymarket curve flattening, Portugal and Spain successfully issuing 3 year bonds. Should the ECB extend its liquidity terms today, I expect OIS spreads to narrow further, dragging high yield and assetmarkets higher. BOE will remain soft.

Equity markets remain at a low value compared to expected profits for 2010. A short term Equity move higher would therefore be in line with a positive ECB outcome.

*Positions and positions changes; Change of plans
My change of heart from yesterday is based on markettiming issues as well as the comments above. Main scenario remains, however, I choose to participate in this shortterm development/correction.

- Took profit on my short Eur/Usd, position reversed.
- Took profit on my short Gbp/Usd
- Took profit on my short Aud/Usd, position reversed.
- Took S/L on my long Usd/Jpy
- Took profit on my long equity index put options
- Took profit on my long bank put options.
- Long GLL ETF (short Gold)
- Long LOIL ETF (Long Brent Oil)

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

BP vols skyrocketing to 130%, sell Gold

2010-06-09T22:33:00.004+01:00

* A lot of talk whether BP will make it or not, strategic chapter 11 in the US, etc. Comparisons with Lehman seems misplaced to me. However, the political pressure is immense.

This will have repercussions on the assetmarkets. The risk is that all offshore drilling will be banned. Norway is alledgedly contemplating such a ban as well. This would drive Oil north, of course. On the other hand, Gold seems like a classic crowded trade, and the current violent moves might push margin accounts to consolidate, selling gold in the process.

* Positions
- Short Aud/Usd
- Short Eur/Usd
- Short Gbp/Usd
- Long Usd/Jpy
- Short European Equityindexes, European banks via options
- Long GLL ETF (short Gold)
- Long LOIL ETF (Long Oil)

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

China, already on the ropes, getting hit by European slump, dragging Aud with it.

2010-05-20T21:48:00.003+01:00

* Equity markets continue dropping
Eur bid! Looks like a classic shortsqueeze although intervention rumours are floating around. Personally, I dont believe the latter. It would probably be one of the most silly things ECB could do. It would give a green light for a Eur collapse. Rather I believe Eur shorts are covering as risklimits are cut and losses forces consolidation. I prefer to view Eur/Usd at 1.25 as a sell.

* A vicious circle
Euro area deflation pushing down European demand, as Chinas main export market, this pulls down Chinese exports. As China is the biggest exportdestination for Australia, this drags down Australias exports. AUD is/was a crowded long trade for all the wrong reasons. Hence, we are now watching both a washout as well as a fundamental shift in the approach to the AUD.
It will have further to fall.

Further, with European banks under strain, this will reduce liquidity, same thing in China due to tightening measures and falling asset classes. Liquidity driven trades will now suffer.
Carry traders get carried out.

*With leverage further increased, we are now in a situation with very high stakes. Any missstep by politicians or centralbankers will be magnified due to leverage. Remember, there is no riskmanager or riskmanagement in this equation. No stoplosses. May the force be with them.
It seems it would be time for a shortsqueeze, but,,,,,?

* New trades and positionchanges
- Took profit on my long GLD
- Took profit on my long VXX ETF
- Took profit on my long QID ETF
- Stopped out my short Eur/Usd and Gbp/Usd spotpositions
- Sold Aud/Usd
- Bought Equity puts on equity indices and banks

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Talk of German shortban - there goes the upside correction, down again,

2010-05-18T20:20:00.003+01:00

* When will they ever learn?
German authorities are alledgedly looking to apply a short ban on government debt, and major financials; banks and insurers. An act of desperation.
Thought European authorities learnt something during the latest fire emergency in 2008/2009.
Apparently not. Read my lips; banning shortselling does NOT stop assetmarkets from caving in.
Repeat and write down 10 times on the blackboard please.

This is actually becoming quite silly. If Germany, Europes hope, is coming up with these kind of silly ideas, who knows whats next. This does not bode well. All bets are off re my correction expectations. The Eur/Usd blip higher to the high 1.24;s most likely WAS the Eur/Usd correction. This could also drag the equity markets down with it.
Whats next, intervention?

I tell ya, they've got it coming,,,,, This is not looking good at all. Actually, Europe is following the kamikaze actionplan to the letter. This will all end in tears. Authorities have no plan B. This is it. This is a onewaytrip downnnnnnn. But hey, add another package, it will probably help,,,,,, right.
Markets are coming to the conclusion that current plan is not working and that the people in charge have no clue what they have done so far.

* Humans have a hard time managing huge leverage.
Now , the leverage levels might have been managable earlier on, but now we are quickly moving to very extreme levels. To think that politicians and centralbankers will be able to manage from here I do not believe is realistic, unfortunately.

*Equity analysts need to think twice.
Corporate earnings and data have come in strong, balance sheets look quite good. So far so good.
However, basic economic theory will tell you that this is merely the mirror image of the monetary stimulus that was created by governments and centralbanks.

If a government runs a deficit other agents will do well.
If you inject the corresponding deficit amount into the economy it will surely help.
However, as tight fiscal policies are introduced and stimulus is withdrawn, the economy will slow and corporate results will get hit.

* "Noone" expects the equity lows from 2009 to be challenged again.
However, if European authorities do not think twice and shift their policies to more common sense ones, I believe we will.

* New positions
- Ive bought puts on Eur/Usd, Gbp/Usd, Eur/Jpy and Gbp/Jpy on the back of this.
- Ive bought VXX ETF;s
- Ive bought QID ETF;s

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Markets trading on the breakup of the Euro -fine, but its NOT happening now

2010-05-17T10:18:00.003+01:00

* Immediate concerns for a complete Euro collapse will be replaced by a more nuanced view, splitting up the current very high Eur/Usd vs Equity correlation.

* Short Eur/Usd is an overcrowded trade, time for a squeeze towards 1.25/1.26. Something to sell into.
Equities are also due for a correction higher to the tone of 5%, at least. Also something to sell into. However, from there

* New positions and positionchanges

- I have sold shortdated equity index puts at very elevated vol levels.

- I have bought June index calls at quite decent vol levels. Looking for a correction/squeeze higher.

- I have bought Eur Calls on Eur/Usd, Eur/Jpy.

- I have taken profit on my short Eur/Usd, Eur/Jpy positions.

- I have taken profit on my long SOIL ETF

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

The Euro; A whiff of ERM 1992,,, ECB not independent anymore

2010-05-11T08:13:00.010+01:00

* Euro already suffering from rescueefforts post shortcovering - Euro set to weaken further.

1.23 first stop on the road to parity. Politicians are low on communicationskills, understanding, or both. "They" believe they are supporting the Euro with the latest humungous package. In reality, theyve just undermined it - exposing it to a collapse.

Why?

Lets see;
- Lost independence by the ECB, now also an administrator for the EU commission

- The ECB is buying junk bonds - diluting the creditquality of their portfolio and thus, the Euro.

- No Euro country apart from Finland is currently sticking to the Maastricht criteria.

- ECB and politicians is trying to bailout their own economies and bond markets in order to "save" the Euro. In essence conducting intervention. Intervention has historically never succeeded when Macrofundamentals have been pointing the wrong way, and yes - they are.

- Increase of the supply of Eur as the ECB buys its "own" bonds as those flows will later be nonsterilised.

- Madoff, ECB,,,,, This seems almost like a Ponzi scheme. Only the first appliers will get funds from the "common" fund. Then the coffers will be empty.

- Lack of trust for the Eur from centralbanks globally as governing rules set to ensure stability and value are changed without notice.

- For the last 10 years, centralbanks across the globe have been diversifying their FX reserves into Eur. I doubt those programmes will continue as before. Eur to suffer.

* It seems likely there will be a constitutional court hearing in Germany re the legality of Germany bailing out other Euro countries. This will likely be announced by the end of this week. This have the potential to shake the markets substantially in the case of non approval (not likely) from the German constitutional court. Even the hearing itself could make markets uncomfortable.

* Heads up; Since Greece and the rest of the PIIGS is nothing else than the Baltics and Latvia magnified by 20 and more, Im looking for the Baltic story to come back on the agenda. Banks to suffer in that case.

- LIBOR, has moved from 80 to 110 over the last months. Any moves higher should be monitored.

* What happens when Trillions of Euro sovereign debt is added to already indebted countries simoultaneously with extremely tight fiscal policy at the same time as Asia is struggling with inflation ,tightening monetary and fiscal policies, stimulating domestic demand instead of exports, reducing currencyreserves in the process?

Well, the long answer; Asian currencies will strengthen, G7 currencies will weaken. ; Asian countries will generate growth, exporting inflation, G7 countries will experience deflation(Eurozone). US struggling. Whats the short answer?; Stagflation. No growth with inflation.

* Whats the scope from here?

Towards the end of this week, I expect consolidation with an upward bias in equities, commodities. The euro to remain heavy. By the end of the week, more bearishness in equities, commodities(except gold) due to the expected German Constitutional Court announcement of hearing re Germany legality as paying part of the bailout package (38%).

- Eur to continue suffering, you just aint seen nothi´n yet.

-I am short Eur/Usd, Eur/Jpy. For a test of 1.25 and 116.

- Oil to continue suffering, I am long SOIL ETF.

- I am long GLD options (ETF). I will look to go long "new" gold though; Silver, Platinum. Gold is "old" Gold, owned by the centralbanks,,, - not that good.

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

The ECB balance sheet is set to swell. China, Asia to reduce global liquidity

2010-05-09T20:35:00.003+01:00

* The G7 finance ministers set to expand emergencyfund by 60 Bln Euro.

Perhaps this will consolidate markets somewhat nearterm, but I have a feeling more drastic measures will be needed to stop marketconcerns re the rest of the PIIGS countries.

- Perhaps a "massive" (pick a huge number) swap line from the FED to secure liquidity via the ECB to the PIIGS countries.

- Direct bond buying by the ECB.

Neither will sound good to the ECB, but the second will sound worst.

In either case, I feel fairly confident the ECB balance sheet will swell substantailly before long.

Diluting its portfolio with junk bond paper.

Both factors will sink the Eur substantially.

At the same time, Asian centralbanks are reducing the size of their currencyreserves as they are switching from exportoriented policies to domestically demand led ones. Tightening liquidity in the process ( China leading the way here, and yes, are they overleveraged or what? Same old, same old.)

I expect this liquidity factor to push up riskpremiums on assets globally regardless of what happens in Europe. Lets just hope the G7 finance ministers can get this situation under control to start with. I somehow doubt it. Although I can definitely see short term consolidation measures having shortterm effects.

* So far, the 2008 crisis has not really been RISKmanaged at all, just managed.

Liquidity has been poured over the leverage problems in the private sector and debt has then been transferred to the public one. Hoping it would be forgotten there. In essence, the stakes have been RAISED substantially, instead of lowered. The financialbubble in 2008 may have burst, but it has NOT been deleveraged,. Just transformed and increased, keeping fingers crossed for positive growth (the leverage would then generate superior growth). With negative growth,,,,, well lets not go there.

So far things have been looking quite good; rallying assetclasses, and market values slowly but surely approaching book values on various balance sheets, sinking implied volatilities int pre crisis territory. This, would in turn unclog the liquidity plug. Getting credit flowing and then - yes - growth going. Well, no more. Now it seems we might have a problem getting there,,,,, I expect money velocity to slow down further.

The Banks thought they were on safe ground, but they might soon get wet feet again,,,,

Just as some of them shouted out loud they didnt need any government support any longer,,,,, Oh well,,

* CEE to suffer hard if G7 liquidity measures fail to work

Usd liquidity and CHF liquidity dried up last week and this situation will just get worse if the G7 "liquidity rescue operation" fails to work.

*Whats the scope from here then?

- Well, I took profit on most of my equity puts on Friday, buying calls, anticipating urgent liquidity measures taken over the weekend.

- I have taken profit on most of my short Eur positions. Bought Eur calls.

- I have taken profit on my long
SOIL ETF.

Ive kept some limited exposure for continued weakness, just in case markets reject the measures taken alltogether and we'd spin into some kind of "black monday" scenario.

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Goldman and Volcanoes

2010-04-19T09:36:00.002+01:00

* Goldman under fire from SEC for selling CDO;s without disclosing who structured it - in this case the -now famous hedgefundmanager John Paulson.
Politics, politics,,, well, so what else is new?
Question is whether this really holds water.
Alledgedly Goldman invested alongside it and lost 90m Usd on it - excluding their 15m Usd fee.
Legally Goldman was not obliged to disclose John Paulson in the offering . End of story.
From a populistic and political point of view, however, Goldman might still be viewed as guilty.
In any case, this means the door is open for more financial regulation.

* The Volcano impact
Well, apart from threatening to lower European GDP and world trade ditto plus some heavy impacts on certain industries and business models, it seems certain to generate the favourite European political answer to any economic problem these days; yet more subsidies.
Its interesting to note that so far sovereign debt within the OECD equals 50% of OECD savings and global sovereign debt equals 25% of global savings,,,, Higher yields, anyone?

It would be interesting to hear the riskmanagementplan from various countries, on how to handle the tremendous sovereign leverage currently at hand. Politicians in Brussels may well believe they are in the process of saving the Euro area, but there is an unquantified risk that may very well be substantial, that they actually are in the process of sinking it instead.

With the sovereign debt mountain growing and growing, perhaps it would just be prudent if a Volcano popped the bubble in time. The Icelandic bigger sister Volcano Katla, might just do this, if it too comes to life. Unfortunately, we might now be beyond the point of control due to the leverage situation. Hence, the fall out (pardon the punt) could be very scary indeed. Til then, low rates means low volatility and a continuation of already inflated assetprices. And then?

*Positions
- After having pushed through 1,3530, theres been some noice. Given the background macro scenario and the fact that we pushed below 1,3530 again, I am now short Eur/Usd, looking for 1,30.

- After Equities pushed through on the topside, I went long. I have now reversed to short. Looking for 2-5% retracement in this current low volatility environment.

- Short European airlines via options

- Short GLD ETF via options

- Short Oil via long SOIL ETF

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Eur/Usd consolidating post Greece announcement; 1.3530 should cap it.

2010-03-26T09:01:00.002Z

* Eur/Usd has moved higher since yesterday
I took profit on my short Eur/Usd position as spot broke through 1.3350.
Alledgedly there are real money on the bids today. Whether that is an indication that we will see a correction higher or not well have to see. A consolidation/correction might very well take place here but any move higher should be capped in the 1.3530 area or Ill reevaluate. Til then 1.30 will remain my near term target. I will be looking to reenter short Eur/Usd positions.

* Equities correcting lower; take profit/squeeze friday?
Not to me. Equities looks toppish and should cave in before long. Im running short equity positions on US and European indexes, spiced with some shorts on weak banks, looking for a 10% move nearterm. Ill stop out and reevaluate if indexes push above their highs from yesterday.

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Greece;"Old" Plan "B" is launched, lower Eur, Equities to follow.

2010-03-25T20:55:00.003Z

* German profile on Greece rescue plan increasing pressure on the Euro
Focus now on yield curves; with yet more European peripheral deflationary pressure unleashed and US yield curve steepening, the scene is set for a lower Eur/Usd still.

It seems the EU rescue plan for Greece is a copy of a German proposal presented three weeks ago. And as such, it is not really "new". Anyhow, the proposal is short on detail and will certainly mean severe hardship for the citizens of Greece. They are about to share the Latvian people´s experience. Question is, will the Greece citizens handle the hardship in a similar way? I doubt it. To me, civil unrest risks are higher in Greece.

EU politicians are hardly united, but more importantly, the ECB is voicing quite strong objections against any IMF led resue plan, emphasising an EU led solution. Markets will want more details on the proposal, translated into concrete action. I does not seem we will get it for the time being.

* Eur/Usd to go lower still
With a steepening US yield curve and longer end long term correlation to break up with the European ditto and Europe facing yet another wave of deflation initiated by Greece and upcoming fiscal budgetary measures for the other southern European PIIGS countries represented by Spain and Portugal, Eur/Usd should be heading lower still. The 1.30 level is within striking distance.

* Eur/Usd, US yield and equities
There has been a breakup there for a while now. However, I believe equities will play catch up. Ie equities will soon go lower. US yields will be important to watch as any move by the 10 year bond above 4% - 4.25% is likely to make many institutional investors consider scaling back on their equity holdings. With equity vols at close to pre crisis low levels, long equity puts seems an interesting proposition. The timing seems to be right. Famous last,,,,

* Usd/Jpy going higher
Japanese institutional flows to seek higher yields abroad post fiscal year end as Japan is going back to QE. Besides, majority of outflows during this fiscal year has been currency hedged by Japanese institutions, buying Jpy in the process. Going forward, due to the Japanese QE and the Usd strength, the FX hedging ratio may well be lower, meaning less Jpy buying.
The important 91 level in Usd/Jpy has broken to the topside. I go for a continuation towards the high nineties.

As usual, good luck.

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Low rates, low vol - what more can assetmarkets ask for?

2010-03-19T16:15:00.004Z

* CB;s are clinging to QE, but the correlation in long duration bonds between Us and Europe is likely to break up, generating increased assetvolatility in the process.

We are entering a new phase where many western countries will find themselves in a situation where synthetically low rates is increasingly making a workable exitplan very difficult.
My guess is that Centralbanks will wait too long before they raise rates, risking stagflation to develop pre raising. Once they do raise they will be unnecessesarily far behind the curve, generating a swift and drastic rate rise once the trigger is pulled.

* Whats happening next then?
Greece still in focus, and may remain there for a while still, as the Greece April and May refinancing is rapidly approaching. Otherwise, it seems the headline frequency would indicate it is a bit overdone.

Nearterm I am positioned for lower equitymarkets, banksectors and Eur/Usd, weaker Zar and Try.

* The Swedish bullcase
The increased focus on sovereign debt has served Sweden well, since Swedish finances, from a relative perspective is doing quite well. A word of caution is warranted here however.
1) This is now a clear consensus trade by every category of the market.
2) Europe and Sweden has not cleaned up their toxic assets in the same way US has. Sweden and their baltic assets being a case in point. Swedbank still has baltic assets valued at very weird levels; Swedbank lost 11Bn SEK last year, they have baltic goodwill valued at 12 Bn SEK.
This equates to the board expecting a 6%-7% annual growth for the Baltic assets for the next 30 years!
Now, thats a crystalball for you.

The Baltics is still an unstable asset area no matter what the banks say,

3) Sweden is one of the few countries where the vast majority of household loans are floating shortterm rates. and loanvolumes are still rising sharply,,,,,,, Should/when the Riksbank be forced to sharp interestrate rise,,,,

Well see,,,,

Anyway, short term I expect weaker SEK assets.

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Chinese tightening fears and the Greek´s fiscal problems

2010-01-21T14:03:00.002Z

* Chinese tighteningfears and Greek budget issues are currently weighing on equities

The Chinese tighteningfears may be well placed, but the Chinese numbers seem to indicate that inflation is no big issue as of yet. Question is if one can trust the numbers.

Same goes for the Greek fiscal numbers. There is an obvious market risk with the Greek CDS rate climbing higher. Countries with similar or worse problems might get under the market´s spotlight, increasing market volatility. A few CEE countries are still suffering from overleveraging in hard currencies. The Baltics are still in dire straits, with Latvia still a case in point. It seems there is a discrepancy between the market pricing of assetrisk vs the current macro realities.

* If 2009 was the year for Centralbank conformity, will 2010 become the year of Centralbank differentiation?

Although the Western world is still in a world of deflation, Asia is not. Liquidity is abundant. Capital is not. Asia will likely increasingly focus on domestic demand and less on exports. Hiking interestrates in the process, sucking in hot money. To prevent hot money inflows, regualory measures will have to be taken in order to disincentivise these flows.

A net effect will still be stronger Asian currencies, increasing the speed of global rebalancing.
This will increase the pressure for a stronger CNY, and thus a ditto USD.

Macrowise this should weigh on equities, especially if China starts exporting inflation, increasing the impetus for higher global rates.

On a positive note, this should also mean increased margins for Western exportcompanies with solid finances and an Asian distribution.

* New positions and position changes
- Took profit on my Long Eur/Usd position.
- Short Eur/Usd
- Long R/R on various banks with exposure to the Baltics and the CEE.

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Government debt - the ignored risk.

2010-01-04T10:19:00.005Z

* Although markets have recently been reminded of the dangers of too high government debt, it is not really viewed as a major risk.

To some extent, this makes logical sense. After all, last year governments and centralbankers coordinated their efforts in taking on debt on a massive scale and it worked, right?
It sure did. For the markets. Shortterm. From here though, there is not a lot of room to take on more government debt. Rather the opposite. The build up has been massive. Still though, the private sector is struggling with high unemployment, low growth, weak corporate balancesheets and a still highly leveraged household sector as well as a mixed realestate world, where some realestatemarkets have not really adjusted as of yet.

To top it off, the creditplug is still in place.

On the positive side, the patient is out of the hospital, but still high on drugs. Whether everything actually works as it should it far from certain. However, the patient viewed as if this is the case.

Against this background, I am focusing on macro fundamentals to get it right. I suggest will likewise have a sovereign theme to start off the year.

Hence, NOK and CAD should be preferred, GBP, EUR, JPY, ZAR and NZD should not. Although in the ZAR and NZD case, the yield factor will likely be counterproductive to such position in a low volatility environment.

China´s and India´s PMI rises to 56.6 and 55.6 respectively will support the stockmarkets. However, this will also drive expectations of Asian rate rises. This in turn will affect US rate hike expectations. Which in turn will generate expectations of a stronger USD in order to compensate for undervalued Asian ones. This could tip the stockmarket lower,,,,,,,

* The US ISM number should be under scrutiny today. A strong one will likely drive US yields higher still, dragging the Usd with it. I view the last two weeks low correlation between the USD and equities as temporary due to year end flows. A strong Usd from here should weigh on equities.

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Happy new year and decade

2010-01-03T23:11:00.004Z

* A new calendar year, a new decade
If leverage up was the theme for the last decade, it certainly still hangs around as a theme going into the new one. With centralbanks keeping rates artificially low it is bound to continue.
Question is for how long.

Sovereign risk is definitely high up on the agenda and will likely play an important part in the macro world from here. As the creditplug remains, this is still a big risk ..factor to be reconned with.

The vanilla household realestate market are is not really viewed as a big risk factor for creditlosses in the northern European countries, but it is likely underestimated.

* Initial assetviews on 2010

- Stronger Usd via a flatter US yieldcurve and an increased volatility for US yields, shift in Asian investment patterns from exports to domestic investments, contributing to global rebalancing.
Short term the most recent Usd strength looks a bit stretched. Shortterm I am selling Usd, looking to go long it once the correction is completed.

- Weaker equity indicies, especially in Europe, Euro related sovereign problems will remain, as will ditto creditplugs, creditlosses, high unemployment.

- Strong asian demand for soft commodities keeping them well supported, not so for other dittos.

- Increased pressure on "pegged" currencies due the global rebalancing process.

- Emerging market currencies increasingly vulnerable due to risk of higher global rates and a stronger Usd, disruptions to the "global recovery" story.

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Greekrelated pre xmas Usd power - sign of what to come?

2009-12-21T20:16:00.004Z

* Economic divergence within the Eurozone weighing on the Euro.
Although getting close to oversold by now, Eur/Usd has probably topped out this time around.

* Heavy snow and minus 9C means real winter for Xmas for a change.
I love it. Been intermittent writing for a while now.
Been quite busy and regrettably I have had to make the choice to scale down on the writing. However, Im aiming to increase the frequency. Ill revert tommorrow.

As ususal - good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Neighbour bailout for Dubai around the corner? Either way, continued volatility is the conclusion.

2009-11-27T10:15:00.003Z

* Dubai world bailout in the offing?

Markets should be in for some good volatility near term as the question of Dubai World will reach a conclusion. Since bailouts are all the rage these days, I have to hold that as the most likely outcome.

If not, well then we should see further pressure on Usd and Gbp funded assets.
Since the Usd has taken over the role as the worlds premier funding currency ahead of the Jpy, albeit with fierce competition from several other currencies in the low yielder category, I guess most assetclasses should be affected under such a scenario.

*Dubai and the Turkey connection - is there one?
Unless my recollection is incorrect, I believe a not irrelevant part of Turkey funding flows stems from this area. Please doublecheck me on it though. The Usd/Try spot reaction yesterday seemed to indicate something out of the ordinary anyway. With skepticism arising re the current governments intentions to initiate and follow an IMF led program, the TRY is increasingly vulnerable. Perhaps not in Dec, but in the New Year.

*Other fixed currency regimes favoured by the markets hot money should pay attention to the Dubai situation

China being a case in point. Fixed exchangerates, undervalued currencies, hot money flooding in as a consequense, hefty misallocation of capital, leading increasing degree of loony investments as a consequence. It happened in Dubai, it is happening in China - for sure.
The scale of the Chinese misallocation process is of course gigantic.
Hopefully it will not unravel nearterm,,,

* New positions and positionchanges

- Took profit on half of the equity index puts sold yesterday, sold equity index calls today.

- Took profit on my SKF ETF on the US open

- Took profit on my long Eur/Sek

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Eur/Usd in Dec; repatriation flows to kick in - watch out in the new year.

2009-11-26T11:51:00.005Z

* With the European credit plug firmly in place - the Euro economy does not look promising

PIIGS countries - say no more.
Portugal, Italy, Ireland, Greece and Spain,,,,,, Were they not Euro members, their CDS´s would remind you more of Ukraine and the Baltics than anything else.
These countries are all in deep trouble and the cavalry (credit) is not seen anywhere.
The German Landesbanken are all in dire straits as well.

Hence, I believe we are likely to see a repeat of last year with regards to Eur/Usd, a massive repatriation surge in December as net foreign assets are trimmed down in favour of balance sheet restoration and a "change of plans" for business strategies. Ie increasingly domestically focused.
Once the new years out the way however,,,, helmets on. High risk for sharply lower Eur and ditto equity markets.

Due to the fixed exchangerate, deflationary forces in fex Greece will push local creditspreads straight up, generating defaults and writedowns of banks loanbooks. Greece and other EMU countries in a similar situation have created their problems in a very similar way as Argentina and the Baltics did; too high domestic consumption, nonproductive investment, leverage and debt against too low investment into the supplyside of the economy.

* The ECB is signalling an end to the quantitative easing.
Apparently, they are concerned that "there may be too much liquidity in the system" hmmmm,,, really? Well, of course there is, but I thought that was part of "the plan". Or is there no plan? Well, with one year money supply growth falling from 14% to almost zilch in a year, it would seem too early to withdraw any quantitative easing.

However, I guess the ECB is looking at the misallocation effects beyond the assetmarkets. Greece is currently building up a fiscal deficit stretching imagination. Explaining why the Greek CDS is now at 195 ish points, = at par with Turkey´s CDS. Difference is, as mentioned earlier, were it not for the Euro, that Greek CDS would be 3 - 4 times higher,,,

European corporate balancesheets are still weakish, industrial production sluggish and the creditplug still firmly in place. Conclusion; ECB is walking a tight rope. If they follow through on this I will be looking to dump European assets; Equities; bankstocks, any other corporate with high debt and weak cashflow, weak balancesheet the Euro etc.

With Europe and the rest of the world heavily on steroids, why stop now? Better late than never, maybe. ECB is caught between a rock and a hard place, whatever they choose there will be difficulties.

* The Dubai world
On top of this we have the "Dubai world" problems. This will have repercussions on the UK and US realestate markets as capital is consolidated. As if the Gbp needed more trouble,,,, Noone should be surprised that the excessive project in Dubai is in dire straits, but this is obviously not good news. It will not help credit, cyclical currencies or corporates.

* Weaker Usd = higher assetmarkets still?
I doubt it. If we talk fiscal consolidation and add Dubai on top of it there is risk of choppy markets. Volatility should increase. This xmas might be a good one to be long vol in order to get nice presents from Santa. If we see fiscal consolidation from investors a weaker Usd will mean a weaker equity market as well.

* New positions and position changes

- Short Equity index Calls for Dec, closed them today for a quick profit. Sold puts. Looking to resell Calls, close puts on any rebound higher. Obviously looking for one.¨

- Long Eur/Usd

- Long Eur/Gbp

- Long SKF ETF

- Long XACT BEAR ETF

- Long Eur/Sek

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

European creditplug remains, expect a stronger Euro towards the end of the year, near term it looks soft though.

2009-09-29T09:44:00.011+01:00

* European financial sector repatriation a theme towards the end of the year
European creditgrowth has imploded over the last six months, hence, net external assets are likely to decline.
Meanwhile, financialmarkets yieldhunting is growing as steep yieldcurves and lower volatilities forces funds into assetmarkets in order to generate any return whatsoever. Highest yield wins, (currently) no matter (almost) what. Quality of the asset currently seems to be of second order importance.

To some extent it is understandable. The Centralbanks liquiditygates remains open. (With RBA the current exception, sending signals of a ratehike this fall.) Centralbankers are acutely aware of that the current rise in assetmarkets is a function of Centralbank liquidityflooding.
The Centralbankers current one (and only) plan for now is for this flooding to float crappy assets too, bringing collateral and balancesheet relief to the financial sector in the process.

Since March, US investors have stopped repatriating assets and has since seeked higher yielding investments away from the Usd. 9.5 Trn Usd still remains on the US sidelines yielding zilch. Hence, continued outflows are to be expected.

* Assetmarkets and Eur/Usd to benefit towards the end of the year
With the German election over, I expect the Landesbanken consolidation to shift up a gear or two. The seven Landesbanken will likely be consolidated into two or three only. This means consolidation of assets and a likely refocus on domestic biz only. Hence I expect some selling and repatriation of foreign assets, benefitting the Euro towards the end of the year.

This, combined with shaky European financial balancesheets and US investors shifting assets abroad, spells a higher repatriationled Eur/Usd theme towards the year end. Higher assetmarkets and continued yieldhunting should follow. As Ive mentioned in previous notes though, the JPY should remain strong "no matter what". Not for the USD and the GBP though, as these are the new funding currencies of the world.

To top it off, the ERBD has asked for a 10BN Usd increase from its member states, funds to be spend on the CEE economies. This equals an increase of ERBD;s equity by 50%. More handouts.

*Risks on the rise - but they will likely be allowed to build for a while still
Near term threats could cause some turbulence
The current developments are obviously increasing financial risks. Especially as consensus is increasingly viewing this as a sustainable recovery. Equityvaluations are quite high (not a problem if one believes the sustainable recovery theme,) China´s 60th revolution celebration on 1 Oct could be the startingpoint for a tighter creditpolicy. This is obviously something to monitor.

Once this fairytale turns on its head, the velocity might surprise a few.

* New positions and positionchanges
- Took profit on my long Gbp/Usd puts.
- Took profit on my long Gbp/Jpy puts.
- Took profit on my long Nok/Sek spot.
- Stopped out of my long Eur/Chf spot, Eur calls expired OTM
- Stopped out my remaining long Usd/Zar spot.
- Stopped out of my long ETF SKF

Currently no positions

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Sterli´n is a falli´n

2009-09-25T10:26:00.003+01:00

* GBP is currently the premier punchingbag amongst currencies

Why?
- UK interestrate expectations are heading lower, the yield vs Gbp/Usd correlation looks set to increase again.
- BOE Governor King does not seem the least concerned about the recent Gbp weakness, neither should he. A weaker Gbp will be a crucial part of the BOE strategy going forward, as domestic consumption is set to fall further while corporate balancesheets will remain weak, despite the pumping up of assetmarkets. Exports will be crucial.

Being first in the game of competitive devaluations could be an advantage. However, international friction should be on the rise.

* New positions and positionchanges
- Took profit on my short Gbp/Nok after 3%.
- Took half profit on my long Usd/Zar
- Added to my long Nok/Sek

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

The toiletshaped recovery

2009-09-24T21:30:00.004+01:00

* Will the recovery be in the form of a L, V, W, I or a Nike swoosh sign? Lets add the toiletshaped recovery to the list.

Assetprices had better stay pumped, bringing relief to fragile balancesheets or this "recovery" will be flushed down the toilet. This is a real and present danger. Important to remember in the midst of the tallyho- party - drunkedness.

Many assetclasses now seem to indicate a move lower. Im putting some positions on that way.
G20 this weekend and expectations are set for a continuation of the asset rally next week. Im buying front end vol. The Chinese 60th revolution anniversary is set for 1st October. Post it a probability for a decrease in Chinese efforts to pumpmarkets should increase. Im buying front end vol.

* G20 in Pittsburg
US; Increase banks capitalratios. Makes sense. If authorities control bank`s leverage, they will control payouts as well.
Europe; global legislation re bonuses. Smoke and mirrors.

Only reason European finance ministers cant follow in the footsteps of the US suggestion;
The shape of the European banks. So far they have done way less in terms of refinancing and the remaining financing need remains about twice as high for the European financial sector.

The European financial system would not be able to cope with higher capitalratios, simple as that, and the finance ministers are acutely aware of it.

European banks wont have to write off their meat - and potato- bad loans to households and corporates til those loans are defined as nonperforming loans. US banks have already done substantial writeoffs as subprime and related markets went down the drain. To a certain
extent they had to. These were traded financial instruments. The European financial sector did not have this exposure, hence, not alot of writeoffs.

Exposures are on a gigantic scale still, although meat and potato. If you cook meat and potato with high enough leverage, it eventually runs the risk of turning into something very toxic.

Meanwhile European politicians are helping out by moving the goalposts during the game by vastly increasing the timespan before a bad loan has to be classified as a non performing loan and assets have to be written off.

Austria being the latest case in point.

This is one big game of liar`s poker, lets hope unemployment comes down soon and that real growth kicks in once the global stock refill is completed. Theres not much ammo left for policymakers at this stage.

* The remaining strategy
Only remaining global policymaker strategy is this; pump those assetmarkets further and higher by keeping quantitative easing in place. This will bring balancesheetrelief to the financialsectors that need it (households too). This will release the liquidity plug. How to handle the following velocity of the monetary base? By tightening like crazy. With unemployment still rife. Good luck.

On the other hand, economies could just fall into recession again. Hmmm,,,,,

The European bonus regulation talk is merely opportunistic chatter. Wouldnt hold my breath on that one leading anywere. As is, unfortunately, standard procedure when it comes to European initiatives on the international scene. Pick your subject.

* Position changes and new positions
- Deltahedged my long Gbp/Usd puts as spot crossed the strike.
- Bought lower delta Gbp/Usd puts.
- Bought Usd/Zar spot
- Bought Usd/Pln spot
- Sold Gbp/Nok spot
- Bought Nok/Sek spot
- Bought SKF ETF

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

The Irish bank bailout; getting rid of the Irish creditplug. Taxpayers buying bad assets at inflated prices. May the bubble not burst.

2009-09-17T08:22:00.009+01:00

* Irish bank stocks are rallying this morning as Irish taxpayers buy their bad debts above market value. No wonder the stocks are rallying. Will Ireland become the first stagflation country? I believe so.

Well, that certainly flushed the Irish creditplug out of the monetary system. Back to happy days and lending again. The circulation of the monetary base is now likely to accelerate sharply from a frozen state. Irish inflation should increase on the back of it with growth sorely lagging behind. This could become the first stagflation experiment. Tensions to rise within the Eurozone as other countries are tempted to follow suit. Path of least resistance, a path frought with dangers.

The bubble is still getting pumped up. Lets just hope is doesnt burst.

As usual, good luck,

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Risky assets; Buy ém all - yield and leverage rules, at least til the Pittsburg G20. Expect profittaking ahead of it though.

2009-09-17T07:11:00.007+01:00

* CHF - time for some SNB intervention?

Regular SNB meeting today. With the Swiss TWI at the high end of the last six month range and the current market speculative long CHF positioning at the ditto for the last four years, variables are certainly in line for a successful round of intervention.

Even without intervention, a squeeze looks increasingly likely. In any case, I have ventured long both in cash and via options in Eur/Chf.

*Risky assets are continuing to move higher, driven by yields and leverage due to low yields.
The misallocation in process is massive. Til further notice, this is the game in town. However, many of these assets are increasingly looking crowded and overbought, increasing the risks for squeezes from here. especially as the Pittsburg G20 is approaching.

*New positions and positionchanges
- T/P on my long NCC stock, the realestatedeveloper, after a 5% move in 3 days.
- Bought Eur/Chf spot and Eur Calls/Chf puts

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Awaiting the Pittsburg G20 - walking a tightrope.

2009-09-15T09:52:00.003+01:00

* How will the policymakers balance this one?

So, inflating assets to bring balancesheetrelief for the financialsector is the "thing". Sounds to me like this globalposition will need extremely close monitoring and riskmanagement. Problem is, there are essentially no efficient riskmanagement measures at this stage. Misallocations and "total" (state plus private) debt is simply too high. There is a limit as to how much can be offloaded to taxholders. That limit cant be too far off.

* Walking the tightrope
Simply put. If the measures succeed, assetmarkets will continue to rise. Once assetprices brings relief to the balancesheets, the creditplug becomes unstuck.

Once the credit plug becomes unstuck, monetary policy will have to become tight in order to dampen inflation. This will drag assetmarkets lower. Stagflation will become a problem to be solved. In past history, stagflationenvironments have been fought by tight monetary policy and lax fiscal ditto. Consumers purchasingpower will suffer heavily and governments tax revenues ditto.

If the measures do not succeed and economies roll back into recession, there will not be much ammo left to utilise. Then bad assets/debt will come back to bite hard, plunging equities below the 2008 November lows.

Right now we are in a sweet (temporary) spot. Very good balance will be required from here. The probability for success is very much dependent on emerging markets growth.

Markets, Corporates and households are currently trying to utilise (whenever available) as much credit as they can for investments, production, exports and consumption. Investors might join the rally, but I suggest they should be wary of believing the story. Currently, the consensusview is that we have seen the bottom.

* New positions and positionchanges
- Bought NCC stock, the realestatebuilder
- Took profit on my short Usd/Jpy spot

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

The bearmarket rally is clearly not over. Assetpumping to fill the creditgap. Weaker Usd. Stronger Jpy.

2009-09-11T10:56:00.004+01:00

* Quick feet. The Usd funding currency is being utilised to the max. Jpy just one of many.
The Usd bullishness has evaporated. Low rates are set to remain low amongst G20 countries for the foreseeable future. With creditmarkets still malfunctioning, this is yet another (quite risky) way of getting credit flowing again. Rising assetprices will eventually have that effect.
Enjoy the ride. This is one giant misallocation that businesses and households will take advantage of. Performing the massive missallocation process. Corporates and households with the best riskmanagement strategies will still be standing once the credittightening starts.

*Latam flows are accelerating, weighing on the Usd.
As Em flows are accelerating, this will be weighing on the "soon to be new global funding currency No1", the Usd. Assetinvestors should be quite pleased as it will spur commodities and equities further.

* The Chinese situation
The PM has made it clear that the fiscal and monetary accomodation will remain in place for the foreseeable future due to the vulnerability of the current economic rebound. Meanwhile, Chinese banks continue to lend. However,the fundamental trade flows remain in dire straits, with exports lagging. Since Chinese exports, in contrast to European ones, never got steroids injected via state supported export finance, the Chinese export numbers are likely more reliable than the European ones. This indicates a still quite gloomy global trade picture.

*How long will "happy days" last?
Tough call of course. As long as Centralbanks offer quantitative easing or economies fall back into recession. In the end I guess the Emerging markets will have to step up to the plate and deliver superior growth soonish. If they cant, who should then finance these funny money?

As inflated assetmarkets finally reaches the level where assetrelief becomes great enough to ease the strain on financial institutions balancesheets, the ensuing unplugging of the creditplug will start the tightening process. Then assetprices will suffer. More on that at another time.

For now, assetbuyers should love this environment with equities and bondmarkets rallying simultaneously.
As long as the creditplug remains, equities will rally. Whether the unplugging or the fallback into recession comes first we will see, but either way, it should at least be a couple of months before we know. Meanwhile, the pumping may continue.

* New positions and position changes
- Took profit on my long Eur/Nok spot position
- Took profit on my long Eur/Sek spot position
- Sold Usd/Jpy spot

As usual, good luck

Comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Post G20; Policymakers sliding further into bubble pumping?

2009-09-10T12:08:00.006+01:00

* Post the G20 meeting "happy days" sentiment has expanded

The Usd is weaker, even triggering the upper 1.4450 barrier of the Chinese originated Double No Touch in Eur/Usd earlier in the week. I was positioned for a stronger Usd, weaker commodity currencies (Aud) and financial currencies (Gbp)via options and the timing for this was clearly wrong.

Although the financials in equitymarket have remained subdued post the G20 meeting, the current sentiment has remained focused on the almost global centralbank commitment to keep the quantitative easing programme in place til a recovery is secured. Criteria for an exit being an improving credit multiplier effects as well as lower unemployment.

Unfortunately, I wouldnt hold my breath on those variables improving drastically any time soon.

*Policymakers still with guns blazing, but the ammo is running out
Unorthodox measures still rules as conventional policy tools have been exhausted.
With near zero interestrates and creditmarkets not able to function properly, assetmarkets are left to fill the void.

Assetmarkets are used by policymakers to provide monetary stimulus via frontloading the assetmarketrally, generating financial market optimism and increased riskappetite globally.
This in turn is generating asset and balancesheet relief to banks and corporates.

*Now, what about sustainability (trendy environmentrelated word these days) in the financial context?
Well, the bubble could theoretically last long enough to bring along yet another burst of growth, but the risks will also grow exponentially. Especially as the misallocation factor into assets at this stage of the cycle risks becoming very high.

However it will become increasingly diffult to maintain the current rosy outlook given the optimistic scenarios that are currently priced into the assetmarkets. Currently, negative news regarding the current creditsituation is transformed into positive news via expectations of further stimulus measures.

While the markets might very well be correct in the assumption that policymakers are caught with their backs against the wall, this is likely not something to build long term bullish scenarios on.

I believe this situation is unsustainable regarding the pricing of the market. The G20 related positive impact from the promise of extended quantitative easing is likely to wane going forward.

*Be wary of commodity currencypositioning
Barring the extreme positioning of the carry trade boom in 2007, the CFTC data shows commodity currencypositioning is the highest for at least six years. Hence, ignoring negative news due to the extension of the QE programmes should become incresingly difficult.

*Positions and positionchanges
- Bought Eur/Usd spot
- Bought Gbp/Usd spot
- Bought Gbp/Jpy spot
- Bought Aud/Usd spot
- Bought Aud/Jpy spot
- Bought Eur/Sek spot
- Bought Eur/Nok spot

Eur/Sek and Eur/Nok are short term spot positions
The rest are deltapositions related to my long (fading) gamma
Near term I will focus on gamma trading.

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Time to sell commodities ex Gold, China bubble demand about to deflate. Financials should be weighed on.

2009-09-07T09:04:00.006+01:00

* Barring the European regulation consensus, G20 left a cozy feeling which markets will enjoy today.
However, the financial regulatory aspect will not be something European shareholders of financials should enjoy that much. In fact, this should weigh on European financials for now. Better then, to shift to gold related stocks.

* New positions and position changes
None

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

The fresh liquidity has stopped coming in. China to become a drag, not a boost. The bearmarket rally is over.

2009-09-02T09:32:00.008+01:00

* Good news is being brushed off by the markets. Sentiment is turning.
Positive German data is getting brushed off. The market is increasingly focusing on finding negative pieces in the news.

* Chinas August credit supply has slowed down to CNY 250BN, equivalent of a decline by more than 60% compared to H1.
The commodity price correction seems to have to go further down since inventories are still at too high levels. Another argument for lower commodity prices is the very large speculative part in the commodity related financial instruments.

Higher inflation expectations has often been used as the incentive for this trade, but as the global output gap becomes evident, these trades will have to be reduced, generating increased volatility and violent stoploss related moves as speculative interests clears the deck.
On top of it, the market is long commodity currencies, short Jpy, short Usd,,,,,, go figure.

I am long Aud/Usd puts, Aud/Jpy puts, long Usd/Cad calls.

* The G20 is starting, with calls for regulation of renumeration - heavy for financials
Yet a reason to be short banks. The still lingering monster fundamental bad loans and asset issue aside, this is really bad news for banks, should it go through. France, Germany and likely UK seems to be running with this ball. If decided, the US might pay attention.

The aim for politicians will be to control the riskprofile of the financial industry. If they can control the renumeration, they can control incentives and hence the riskprofile of the financial industry. This will obviously have repercussions for the financing of any business model based on high leverage funding from commercialbanks. Expect lower earnings for longer as well as higher creditlosses for the financial industry. The insurance industry will also get a much harder time.

Shareholders will balk at this idea as earningsgeneration will become much reduced due to lower leverage. This will be visible especially in times of low volatility.

I am short banks via SEB puts.
I am short US banks via long ETF SKF Calls.

*Australia heading south - China being the marker.
Australian Q2 GDP came in at 0.6% vs 0.2% expected, way better than expected.
This generated a small bounce in the Aud/Usd, however, Australian data will not be the driver for the Aud here. China will. Further, theres market speculation re an early rate hike in Australia, but same thing there. Chinese developments will determine this, hence, I expect no Australian rate hike, it could actually become a cut! Australian domestic data is not the driver for Australias monetary policy for the time being.

This is not only the case for Australia. It will become applicable to most China dependent commodities, currencies and equities.

* New positions and position changes
-Took profit on my long Eur/Sek
-Took profit on my long Eur/Nok
-Took profit on my long Eur/Huf

- Bought Usd/Cad call
- Added to my long Gbp/Jpy put
- Added to my long Gbp/Usd put

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Declining Chinese credit supply to drag Shanghai, commodities lower

2009-09-01T09:36:00.009+01:00

*Brent Oil seems to be heading lower, commodity currencies should suffer as well.
This could put the natural gas - oil spread in play, buying natural gas, selling oil. Physical raw material demand is slowing, (Dry Freight Index, gas prices) speculative positions should be at risk.

* US bond yields remain offered, despite strong incoming data. Reason? Official accounts are putting cash back into the yield curve.

* Jpy volatility set to increase.
With the change of the Japanese government, leading to a less interventionist driven MOF/BOJ, there is some talk that the "Usd/Jpy put", will dissappear. Underlying Jpy strength should remain a theme. With heavy positioning on the other side from leveraged accounts as well as Japanese retail, watch out (or profit) from a swift increase in volatility as these accounts try to push the market but run the risk of getting stopped out in a violent fashion.
The main reason being a refocusing towards domestic demand from export demand. In essence a shift from Corporates towards households.

* Position and position changes
-Closed my long Usd/Chf
- Closed my long SAS Airline stock
- Opened long Eur/Huf
- Opened long Eur/Sek

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Is the bear market rally complete? Important variables are arguing this could be the case. Will we have to wait til October though?

2009-08-27T10:38:00.004+01:00

*Extensive stimulus packages, record monetary easing, huge wealth transfer from the public sector to the private sector, all globally, has had its stimulative effects on the economy.

Not that it has actually cured the patient, but rather been soothening the pain. No promises what tommorrow brings though, as the cause of the problem has not really been dealt with.
The "sweep it under the rug" policy is still the all governing policy.

* Whats the problem then?
Sentiment indicators globally with both consumers and producers are improving, exports have been rising and corporates have delivered "good" results, relatively speaking. On top of it, the housing markets globally seem to be recovering somewhat, especially in the US and the UK, two very important markets from this aspect.

Well, my main concern is still the fact that so far in history, there has never been an economic recovery without serious credit expansion. With all the massive fiscal spending and monetary stimulus, we should have seen a credit multiplying effect kick in by now, but we are not.

The main reason for this lack of creditmultiplying effect being the still huge amount of debt saddling the financial system via bad assets and bad loans. Financial institutions are still accumulating reserves for upcoming credit losses, not pushing and multiplying the liquidity via lending(=leverage) into the economy via production etc.

* Weak corporate balance sheets
Corporates in general have weak balance sheets and ditto cashflows in an environment of still relatively tight credit. Corporates have gone through the phase of frantic costcutting and are now in the process of restructuring.

This will provide beneficial effects further down the line, but profits will suffer in the meantime as those costcuttings were mostly oneoffs and sales are not really recovering as unemployment levels globally looks set to remain at high levels for the foreseeable future.

* Equity markets riding on excessive liquidity, pricing in too high expectations
Meanwhile, the equitymarkets are pricing in a steep recovery where exit strategies from quantitative easing and growth related inflation concerns are in focus. Excessive liquidity is driving this process via mainly an institutional investor allocation frenzy.

While the world is still trying to adjust its massive output gap, it would seem to me deflation concerns will still linger, and equity markets will have to adjust their growth and profit expectations downwards.

Remember, a depression was avoided via drugs, not by sorting out the bad debt and loan issue. Therefore, to me it would seem more likely than not that the underlying problem comes back to haunt capitalmarkets.

* Why the decline of the Baltic freight index provides important information.
Signs of physical demand can be seen in freightrates or in commodities that are difficult to store (difficult to speculate). Over the last five weeks, the Baltic freight index has declined from 3520 to 2470. At the same time, commodity related equities, commodity currencies and commodities have continued their upward journey.

The rationale being that the price move lower has been due to increased freight capacity. Well, this does not seem to fit in with the decline of recent weeks as shipbuildings have been stopped due to a lack of finance and has not increased over recent months. Worth noting is also that during the financial crisis even shipbuilding projects that had already started were stopped due to funding withdrawn.

Even if the Baltic freight index is an indicator of overcapacity in global shipping, one cant help but notice that a) The Baltic freight index has hardly recovered since 2008.
b) the global freight capacity was fully utilised in 2008.
Hence, even with a moderate increase, global demand seems to have fallen. This is not reflected in the commodity markets. Reason mainly being overliquidity and speculative flow.

* Where from here? Risks are increasing for Chinese policy changes as we approach the 1Oct Chinese 60th revolution anniversary.
This could weigh on commodities, commodity currencies and commodity related stocks. At the same time, the equity market in general should be topheavy as pricing adjustments from inflationary to deflationary outlooks are taking place.

The shift from Jpy as the worlds main funding currency into the other " top six" new funding currencies is ongoing. GBP will likely be a popular such short currency near term. The market is still overly short the USD, so I expect it to strengthen.

* New positions and positionchanges
-Long Aud/Usd puts
-Long Gbp/Usd puts
-Long Eur/Usd puts
-Long Usd/Chf
-Long Eur/Nok
-Long Gbp/Jpy puts

Sold my remaining Citigroup calls.

As usual good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Time to close those short Jpy positions - even if the assetmarket rally continues. Heres why.

2009-08-26T09:24:00.006+01:00

* Plenty of funding currencies around - leveraged accounts should diversify by shorting other low yielding currencies - buying the Jpy.

- According to the IMF, assets not held in domestic currencies amount to 8 TRN USD(16% ish of global GDP). Of those there is roughly a 1.5BN USD non domestic currency liability book which is funding higher yielding global assets. With a number of low yielding currencies such as the USD, SEK, GBP, CHF, AUD and the EUR there are appropriate alternatives. All of the above has moneymarket rates diverging less than 40 BP from the Jpy. The Usd has even 1mth LIBOR below the Jpy 1 mth LIBOR.

Liability managers targeting the lowest riskadjusted funding rate should adhere to these facts and adjust accordingly. Triggering Jpy buying.

-Japanese flows.
Japanese banks are reducing foreign claims abroad. Japanese banks foreign claims topped out during mid 2008 at 465 BN USD (7.2% of total Japanese bank assets), and have since turned decisively lower to 280 BN USD with no signs of recovering.

Why is that then? Well, with prime Japanese foreign markets turning into low yielders, the foreign attraction has waned vs domestic securities and yield curves.
The reduction of foreign bank claims and the increased investments into domestic Japanese assets means a stronger Jpy. Especially as those flows are increasingly turning into equity flows instead of bond ones. Equity flows are normally unhedged, triggering "pure" Jpy buying as assets are being reallocated into Japan.

- Market positioning
Interestingly, it seems both Japanese retail investors and leveraged accounts are short the Jpy. Should there be a move lower anytime soon, the Jpy strength will accelerate at some point, likely sub 130 in Eur/Jpy, alternatively 90 in Usd/Jpy, which in turn will trigger stops from these accounts. Implied volatility should be set to go higher, combined with a curve shifting towards an inverted slope.

- Downside risks to equity markets
While the the reallocation of funding currencies is initially likely to be a slow process, a drop in global equity markets could speed this process up. At this stage it would generate an accelerated pace of Jpy buying.

The main point here being; To get a stronger Jpy, we do not necessarily need a falling stockmarket. Although, it would, in bankers terms, be a bonus (sensitive word, that one).

The next question will of course be; which of the "new" funding currencies will get hit the most in the upcoming reallocation process?

* New positions and position changes

None. However, high probability Ill change my US equity holdings today.

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Strong European indicators likely to continue short term, but creditgrowth is struggling and likely to slow from here.

2009-08-24T09:43:00.005+01:00

*Despite strong European indicators coming in - credit growth to slip lower

For anyone in the "recovery bullmode", credit growth and multiplying effects should be the objects of focus. Without them - no recovery. Well, historically there has never been a recovery without them, anyway. Unfortunately, we are not seeing much, if any, of it.

Weak corporate balance sheets and corporate restructuring will make it difficult to generate profits in line with the equity markets expectations going forward, especially as continued bad assets on continental European banks books will make credit tight to the corporate sector. Blocking any creditmultiplying effects.

Issuing corporate debt is an alternative, but questions remains as to how much liquidity would be available there, especially as creditrisk still remains a very high priority in the financial markets.

*Institutional investors cash levels has dropped to 3.5% from 4.7% over the last four weeks. this is the lowest level since July 2008.

Equity markets volcurves have flattened and buyers of downside protection has dropped significantly. With credit dropping and US banks continuing to go bust (another four during this weekend, bringing the total to 81 this year), while European banks havent even started their clean up process, I cant help but sense a mispricing in the market.

I will mainly use options to ride this rally as well as position myself for assymetric drops.

* New positions and position changes
- Sold most of my Citigroup calls but still long 1/3.

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Shortterm bullish assetmarkets - still wary of September

2009-08-20T10:34:00.004+01:00

* PBOC ;s relaxed stance vs moneymarket rates is having an immediate effect
The Peoples Bank Of China have guided moneymarket rates higher since early July, taking rates up from 1% to 1.76%. With yields on Chinese three month treasury bills unchanged for the first week of eight it seems the Peoples Bank of China now appears relaxed. For now at least.

This has had an immediate effect on equity and commodity markets, hence moving higher.
Short term, the market has improved for assetbuyers.
Yesterdays sharp Oil move higher on the back of shrinking US Oil inventories (due to lower imports, not higher demand), seems to be indicating the Oil carry trade is not quite completed as of yet.

Conclusion; The Usd will consolidate or even weaken near term

* Jpy and the USD to switch places?
Weekly Japanese security flow data shows continued inflows into the equity market. In contrast to bond flows, equity flows are currency hedged to a much lower degree, hence, the Jpy will benefit from increased equity inflows into Japan.

As such, the inverse relationship between the Jpy and global risk appetite may be easing. Instead it seems the USD could takeover the role as the worlds premier funding currency. Whether this actually happens will depend on whether Japans net flows become equity, instead of, bond driven. Should the Japanese netflows become equity driven it would also mean the Usd would become the premier indicator of global riskaversion. This would be one reason I would expect Usd vols (along with other asset vols) to pick up this fall.

* Usd/Jpy and the US 10 year bond
With the US 10 year bond down at 3.40% yield, well below the crucial 3.47% level, Usd/Jpy should remain top heavy, despite the short term bullish environment.

* Near term bullishness vs slightly longer term bearishness
Looking for the potential of this short term bullishness to hang on for a few days. My bearish weariness to increase as we approach September.

The German election and the Chinese 60yr anniversary working as catalysts for a refocus on bad Europen bank debt as well as a reduction of loose monetary and fiscal policy.

Positioning in most assetmarkets remains onesided, with sentiment to match. Given the fundamental macrooutlook and mismatch between marketplaceoutlook, ingredients are in place for negative surprises to trigger ditto market reactions.

*New positions and position changes
- Sold my Calls on IVN
- Added to my long SAS airline stock
- Long gamma delta hedging in Eur/Jpy, Eur/Usd and Gbp/Usd

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Euforia slowly evaporating - watchout for the hangover

2009-08-19T10:17:00.003+01:00

* PBOC has incrementally channeled reporates higher.

At the beginning of last week it started to bite. Although PBOC refrained from pushing rates higher yesterday, causing a small bounce back in the Shanghai equity market in the process, today it was back down with a drop of 4%.

Chinese loan growth is expected to be tapering off in the coming months and hence, the Chinese stimulus may be viewed as neutral and no longer stimulative. Although, with Chinese stateowned corporations being "ordered" to grow, I am wary of a setback which will entail an abrupt end to the stimulus effort. Monetary tightening is definitely within my expectations framework.

Further, the underlying profitability of Chinese corporates is waning as steelproducers are reporting dismal results. The exports part of the economy does not seem to be taking place. The US consumer is holding back and it shows. The domestic Chinese market seems to be too small to make any substantial compensations. In addition, as mentioned in yesterdays blog, the Chinese multiplier effect is absent as stimulus funds are mainly used for speculation on the worlds capital markets.

* Markets
Should there be a more serious downturn, I dont expect it to come all in a straight line and with a one off fall out of bed. Rather I am wary of bullish pullbacks at this stage as technicals are getting stretched. Overall, I will be looking for good entrypoints for bearish positions from here.

*New positions and positionchanges
- Sold 40% of my long Gbp/Usd put
- Sold another 50% of my long Aud/Usd put
- Added to my long Eur/Usd put

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

TIC data and the USD; the market is short the Usd.

2009-08-18T08:58:00.004+01:00

Yesterdays TIC data indicated that the US is once again a favoured destination for long term investments as 90.3 BN Usd was reported to have flowed into long term US assets. However, there was a net outflow(short term minus long term flows) of minus 31 BN USD. This should be a good explanation to the Usd weakness back in June, at least.

Another conclusion is that the USD has once again been used extensively as the worlds premier funding currency. Providing funding for global capital markets. It seems the foreign long term flows into Usd denominated securities has been used as collateral, creating a substantial outflow of shortterm funds. On top of it, US based investors have placed funds abroad, seeking higher returns.

Conclusion; The market is short USD.
This seems to match the most recent survey numbers from 7 Aug, where only 3% of investors were bullish Usd. (Back in late March, 93% were bullish,,,,,, and only 3% were bullish equities,,,,,,)

* More
- Central banks have reduced deposit holdings with commercial banks, placing those funds with the FED instead. Custody holding have increased by 45% over the year.
Conclusion; Foreign currency reserve money is standing ready to be invested into longend US bonds

The US 10 yr bond is currently around 3.50%. 3.47% is the level for the current uptrend from April. Should this break, the Jpy will get a boost, equities will not.

*Higher volatility will hurt the carry trade as well as investing into assets, triggering a demand for USD
The VIX rose almost 15% yesterday and seems to be in the process of bottoming out to test the 35% and, 40% levels.
Conclusion; If so, this will naturally weigh on all assetclasses, but with many of these heavily onesided positioningwise, there is an apparent risk of swift reversals out of carrytrades, equities, commodities etc which will make the USD soar.

*Tight credit
The US Q2 loan officers survey indicated weakness for every major category, bar prime residential mortgages. Banks tightening creditstandards and borrowers remaining cautious being the main explanations. The corporate sectors depositholdings with commercial banks have fallen to a level not seen since 2001.
From what I understand, corporate recoveries only take place when there is credit available or there is a sound cash flow position. (Rising corporate deposit holdings with commercial banks).

* New positions and position changes
- Sold half of my long Eur/Jpy put, closed my partial delta hedge
- Sold half my long Aud/Jpy put, closed my partial delta hedge
- Sold half my long Aud/Usd put, closed my partial delta hedge
- Bought SEB puts

The combined case of fundamental macro and positioning makes a compelling case to me anyway. As usual, well see. Having said that, I am very much aware of the swift and fickle nature of the markets, especially during holiday times. Prudent instruments are recommended. Options are currently attractively priced in many assetclasses and is what I currently prefer.

As ususal, good luck.

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Wild month of July - set to continue?

2009-08-17T14:16:00.006+01:00

Back after a long summer holiday, and theres still some summer left. Thin markets, reversing moves at a swift pace. First two weeks of july were bearish , but the last two weeks were megabullish - uberbullish. Although I joined in by buying Citigroup, risks are clearly building
for a bulltrap. Market sentiment and positioning certainly looks oneway in many assetclasses.

*Other reasons for renewed assetmarket weakness

- Chinas insane creditexpansion - More than 90% of the credit provided in China for stateowned banks during the 1h went to stateowned corporates, of which 90% used their credit to speculate in equities, realestate and commodities. The Shanghai index was up 90% YTD as of last week. Since then, there has been a 15% drop lower. It is still very lofty. Commodities have also been pumped higher, although they are currently experiencing a setback. In short the Chinese creditmultipliereffect is not taking place, credit has mainly been used for speculation. This is clearly unsustainable. If theres a creditbubble anywhere in the world, it is in China.

On top it, the misallocation factor is probably at world record levels.

The Chinese centralbank is probably very aware of this. Painted into a corner, I believe they will have to start tightening before long or risk loosing economic control completely. Tightening is in the works - lets just get the 60 year revolution anniversary out of the way first. Once the credittightening starts, equities, commodities and commodity related currencies will have a rough time - big time.

- Deflation is the game - inflation is not. Too early for inflation - still. The global outputgap will soon become apparent for assetmarkets. Global backend yields are on their way down. Growth expectations are priced too high in equitymarkets and assetmarkets. This is bearish for assets, apart from backend bonds of course.

- German elections coming up - bad banks to the surface?
Risk for a renewed focus on German and European credit and bad debt issues. This has so far been ignored by the markets and swept under the rug by the authorities. Risks are increasing for a renewed focus as growth might be dissappointing.

The European banking system is is my opinion in more dire straits than the US one. Should low growth, high unemployment continue, loan losses will have to be written off on a grand scale, leaving taxpayers to pick up the tab.

However, with taxpayer reluctance building this could be a hard one to push through. Therefore, increased likelyhood of more financial institutions being allowed to go bust could be higher this time around. This is NOT priced into the market.

- The Baltic impending bankruptcy - core Europe might share a similar experience before long. Russia not feeling well either. A lower oilprice does not bode well.

Besides, with harsher conditions likely for Europes financial institutions, the European Commissions willingness to pump money into the Baltic black hole will likely wane. Not least due to domestic political consistency reasons (equal treatment of European financial institutions and countries). Overall bailoutcosts rising should also force a prioritasion where the Baltics will slide down on the list.

Net net, I am erring towards a setback before long. A classic bulltrap.

*New positions and position changes

Squared my positions and took profit as the Chinese GDP number came in as expected in July.

Current positions;

-Long Gbp/Usd puts

-Long Eur/Usd puts

-Long Eur/Jpy puts. Partially deltahedged.*

- Long Aud/Jpy puts. Partially delta hedged.

- Long Aud/Usd puts. Partially delta hedged.

- Long SKF ETF via options

- Long SAS Airlines stock

* Optiondelta hedge smaller than prescribed market delta.

Good to be back.
As usual, good luck.

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

NFP; Early fall?

2009-07-03T08:44:00.006+01:00

Hi everybody!

After a few weeks of hot weather and lazy days but not so hot markets Im back to make a few comments.
During July my commentary will be very much intermittent, especially the second half of it.
For the first half the probability of updates appearing will be higher.
Regular daily updates will resume as of Monday 17 Aug.
A warning to sensitive bulls out there; This will be a bearish daily update.

Ok, here we go;

* NFP numbers; Early fall?

Please note that I normally do not read that much into NFP numbers as they are notoriously volatile and of low extrapolation value. However, this time I do sit up and notice.
True, I did call June the last bull(!) month of the summer, however, as Ive mentioned in my last update, given the extent of liquidity being pumped into the markets due to falling vols and higher backend yields, forcing realmoney to chase the market, I didnt expect the beartrend to kick in again until August. Ive been looking for the German elections to be the starting point for a renewed focus on the status of German and European banks.
Now it seems this timeschedule might move forward.

* What´s the problem then?

Well, theres a number of problems, involving China (what "Green shoots"? Its brownshoots. The 8% growth is simply not happening there, its way lower.), The US (yesterday being a case in point. Recovery might be some way off, still.) and Europe (doing "nothing", apart from waiting for China and the US to pull them out of the ditch.)

The main focus of the latest NFP numbers to me was the 7.9% quarterly decline of hours worked.
This could of course be due to improved efficiency. But weaker economic activity is likely a heavy variable included. This is not good. Quite bearish and not boding well from here.

The increased liquidity being pumped into the market (bullish), might dampen the initial effect, but as the lower economic activity is likely to weigh on long term interest rates and VIX Vols move higher, these realmoney flows into the assetmarkets will likely subside. Once again, realmoney seems to have turned out to be a counterindicator. Time to get a grip, perhaps.These people manage your pensions!

* China, Russia, Oil and inflation expectations
Pull out a graph for the last few years on Cny/Usd vs Oil/Usd, the correlation between a strengthening Cny and a higher Oil price is quite high. Once the Cny stops strengthening the Oil price does as well. Exception being the latest bout of Oil strengthening this spring.

As the Cny strenghtened, Chinese borrowed up Usd in a grand fashion. Hey, lower rates AND a stronger local currency, what more could one ask for? However, most of these borrowed Usd seems to have gone straight into speculative plays in assetmarkets, pushing these higher.

Effectively frontrunning the Chinese economy and increasing its manufacturing costs in the process. This puts a big questionmark over the Chinese stimulus packages as so far, the only "thing" going up is Chinese stockmarkets. Shipping out of Chinese ports, etc are all down.
To me, the Chinese 8% Gdp growth is nothing more than a myth, if that. It just aint happeni´n.
This in turn does not bode well for Europe, as if Europe was not in trouble enough already,,,,,

Anyway, back to the correlation;
The latest price move higher in Oil while the CNY have been doing zilch is explained by the inflation expectations currently in the market. However, in my view these are way premature and are likely to fall down soonish as inflation reports globally come in below expectations as already witnessed in Japan and South Korea. Oil looks set for a correction lower.

The RUB seems to be in for a rough period together with the rest of the CEE, the Euro, Scandies and the Baltics. The Russian stock index is trading extremely well correlated with the Oil price, but as a turboversion of it. The RUB is following in its trail. with the Russian banking system once again in dire straits and the underlying economy weakening, I am looking for further RUB trouble soonish.

*New positions and position changes
- Long Eur/Sek Calls and spot
- Long Eur/Usd puts
- Long Gbp/Usd puts
- Long Usd/Rub
- Long Usd/Mxn
- Long Usd/Try
- Long Usd/Zar
- Long Eur/Huf
- Short Nzd/Usd
- Increased long SAS airline stock
- Increased long SKF ETF (Ultrashort US financials)
- Added to long IVN Goldmines via riskreversal

Ive got plenty more to write on the current developments but short on time. Hopefully Ill be able to write more in the next few days.
Bottomline; Im looking for assetmarkets to become increasingly bumpy as we head into the secondhalf of summer. Stay alert.

As usual, good luck

Vacation time

2009-06-20T12:51:00.003+01:00

* Been on vacation last week and ditto next week

Latest market setbacks more of a Usd story rather than the "real" bearmarket return.
Come August might be a different story. Stay tuned.

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Current marketconditions (ex Latvia); follow the flow.

2009-06-10T10:25:00.004+01:00

* Discounting the Latvia IMF loan without strings

Have to believe that Latvia will receive their IMF loan with no strings attached. Utterly irresponsible if you ask me. Further lowering the credibility of the EU especially, but also the IMF, for not standing their ground and insisting on doing the right thing - theyve been there, done that.

The IMF has had plenty of experience from scenarios like this. They should know better. They know how it will end - in tears. They bear a responsibility to stop this tragedy unfold any further. I doubt they are strong enough to do it.

In discounting the approval, I will trade accordingly. We already saw an improvement in general market sentiment yesterday. Hence, the realmoney flowtheme is still in play. Ill go with the flow.
Even better if I dont believe the story.

Disclosure; I am long Eur/Lvl FX Forwards.

* Selling the JPY as the US yieldcurve goes flatter

Japanese financial institutions and Lifers are likely to divest further into overseas bondmarkets in their hunt for yields as the US yield curve has gone flatter.We could be seeing strong datapoints going forward, creating a market consensus that "the worst is over".

This financial market rebound and inventory adjustment has to a large extent been driven by public deficit spending. Real money cash liquidity seems to be waiting on the sidelines. They might soon have to start buying assets,,,,,,,, Improved IMF funding will also add to the positive sentiment.

* With the current bullish sentiment remaining and a consensus conviction growing that "the worst is behind us", no wonder inflation is "in" again. The real issue to me is still deflation though.

Todays release of Chinas PPI (-10.4% Y/Y) and CPI (-1.4%) Y/Y seems to support that view for now.

*New positions and position changes
- Added to my long SAS stock
- Added to my long Usd/Mxn position
- Long Usd/Zar

As always, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Latvia; Starving themselves to recovery - wheres the upside?

2009-06-09T10:05:00.007+01:00

* Ever tried starving yourselves to better health? I wouldn´t recommend it.

Still, that is what the Latvian government in essence wants their population to do. While I can appreciate the Latvian government standing their ground, as an expression of determination, I dont really see the logical analysis behind as to why.

There used to be an "exitplan"; joining the Euro in a couple of years. Well, that is all fine, but then what? Live happily ever after on EU subsidies? Counting on global happy days? Counting on improved competitiveness alá extreme?

Clearly Latvia is not ready for the Euro, and by now, the likelyhood of them meeting the Maastricht criteria is extremely unlikely (but not impossible). The exitplan is very unlikely/gone.

In practise, Latvia is already in default. IMF and the EU is the heart-lung machine currently preventing it. Latvia is applying the right strategy at the wrong time. This should have been done during the good days. Not now.

* How long will the current government last?

The Latvian government has declared an agreement with their coalitionpartners and opposition that they will cut the statebudget by 500 mio Lvl per year for the next three years.

This will then have to pass the parliament, the Saema and sold to the population. The snag is that a big chunk of the cuts will hit social spending. I doubt this will be well received by a population already under pressure. With deflation running at full speed, it should not be long before the soon to be extinct private sector layoffs leads to social unrest and the fall of the current government.

Then the game will finally be up. Unfortunately, the Latvian population will then be more debt burdened (due to the IMF loans) and with potentially nothing left of the loan. Spend on defending the present FX regime and then forced to devalue. Now, thats silly. Why not take an even bigger IMF loan, float the currency and use the means to soften the blow?

That scenario would at least provide the Latvian economy with an impetus to become dynamic again, attracting investments, providing new jobs, lower the unemployment rate, generate higher GDP, etc in the process.

* Downward spiral
Latvia is currently continuing in their downward spiral of lower growth, lower taxrevenues, higher unemployment, higher social costs, etc ,etc. The responsibility now lies heavily with the current primeminister and his government.

* The IMF and the EU

My impression is that the IMF wants to see a devaluation but the EU does not. The EU seems to have a bigger say than the IMF in this case. No devaluation. I do wonder, apart from an extreme unwillingness to deleverage, whats the plan and analysis at the EU camp?

Whats the EU exitplan?
Scrapping the Maastricht criteria? Fingers crossed for a swift turn upwards in the economic cycle? What about the fact that the GDP drop could accelerate downwards swiftly in Latvias downward spiral? When does the budgetsaving demands stop? What about unemployment? Does the EU have any plan at all with this apart from avoiding contagion? Is the EU ready to sacrifice the Latvian people over it? I guess the answer is yes.
Shame on the EU then.

* The current Latvian FX regime is over.

Even if there is no IMF or EU demand for change of the currency regime in conjunction with the IMF loan, the current Latvian FX regime will most likely be over before the end of the year. At least if they want to remain a democracy. That is the bottomline.

* The IMF working on a plan B?

The market has been a little bit hot headed recently, expecting imminent devaluation. This does not seem to happen. Still, I believe the IMF especially, might be working on an alternative plan to come to grips with the current situation as they realise the current situation is nonsustainable. Unless the IMF and the EU provides Latvia with a very lax GDP budget deficit target, they should realise Latvia will miss it once again.

Disclosure; I am long Eur/Lvl FX Forwards.

* New positions and position changes
- Took profit on my long Eur/Sek
- Sold half my long SAS stock at flat as it went lower.
- Bought Eur put/Usd Call
- Bought Gbp put/Usd Call
- Bought Usd/Zar

As usual, good luck.

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

High event frequency today and tommorrow

2009-06-04T13:39:00.004+01:00

* Bank of England, ECB, NFP
Heavy agenda, cant say Im that excited though. Feels like the macro fundamentals are coming into play again, although still wary re the realmoney inflow variable.

On the back of Bernankes speech yesterday, it seems CB;S might become more cautious re their debtload again. This risk stopping the reflation trade in its tracks, dragging commodities, commodity currencies and any other currencies benefitting from higher equity markets down.
Read; AUD, SEK and GBP.

* Latvia
Although I am long Eur/Lvl Fx forwards I dont necessarily view the devaluation as a done deal - yet. The mode in the Latvian government seems to be one of stubbornness. I doubt they will change anything re their FX regime til the IMF tells them to. I believe IMF would rather avoid having to tell them,,

Anyway, this could drag on for a little while. Hopefully, for the people of Latvia´s sake, they will devalue as soon as possible. This would save them prolonged and unnecessary suffering. It will be very hard as it is anyway. Seems there will be a pressconference with members of the Latvian government and the IMF today. It should carry a "positive" message re Latvian financing from the IMF.

Hopefully , IMF will not provide the big transfer without demanding an adjustment of the Latvian exchange rate regime. No strings = mindless at this stage. At least in my view.

* The SEK
It is important to remember that in terms of productivity and competitiveness, the SEK has gained zilch since this crisis started. As most of my readers know, the recent strength is mostly due to the rebound of equity markets. Alas, not sustainable. Especially not as were heading deeper into the seasonally weak June /July.

Another interesting point is the correlation between the Baltic countries GDP growth and the value of the SEK over the last year, it is very high.
With the Baltic GDP growth sinking like a stone, the SEK is lagging. It still has ways to go down as well.

* New positions and position changes
- Took profit on my long Swedbank puts

As always, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Latvia - a trigger for a revisit of CEE turbulence and European bank system stress? SEK; trouble ahead.

2009-06-03T08:17:00.013+01:00

* Latvia devaluation risk triggering another round of CEE selloffs.

IMF now have to make the decision; letting Latvia devalue or not? The Latvian politicians will of course make the formal decision, but, in practise, it is the IMF who now decides. As Ive mentioned before, I believe the Latvians will get their IMF loan.

However, there will/should be strings attached. One string that would suit the Latvian politicians policies would be to tie the LVL to the ERMII system. IE, letting the LVL move +-15% around the existing midrate. A way to save face for the Latvian politicians. The road to the Euro,,,,,right. It will be in vain though. Most likely scenario post such an announcement would be for the LVL to immediately weaken to the 15% limit. Stay there for a brief time and then the Lvl would be forced to float freely. Sending the Lvl weakening to a total of 40%-50%. If not more,(read, The new leading indicator for Latvia; Latvian prostitution prices ).

* The SEK and the Baltics

In my view, the Swedish Riksbanks stresstest of the Swedish banks, although harsher than the analyst consensus, was too soft. Not that surprising. Not that surprising that stockmarket analysts are off either. (They are bottom up analysts, not top down. Bottom up analysts historically have underestimated future losses, writedowns and overestimated profits during downturns.) The Swedish Riksbank are cautious not to stir things up too much at this very sensitive time for the Baltics.

Going forward, in my view, the Swedish Riksbanks estimates of creditlosses are likely to be revised upwards going forward. Anyway, the SEK is likely to come under pressure again, pushing Eur/Sek towards the 11.15/11.25 area for starters. The summer months of June and July are seasonally weak SEK months during normal circumstances. Should Latvia start the Baltic devaluation chain reaction the implications for the SEK should be heavy. A test of the alltime highs for Eur/Sek at 11.7860 should not be ruled out.

This scenario should take place within the next one to two months. If not, some other solution has been found involving the IMF, injecting an even bigger package into Latvia.

* The Baltics and the CEE area
Although the CEE area in general has floating currencies generating a significant advantage compared to the Baltics in the current environment, the CEE area has similar problems when it comes to foreign hard currency debt. Main lenders; Western European banks. Full circle.
One risk would be for a refocus on the lack of deleveraging in the European area, European bad debts and the vulnerability of European banks. This in turn risks turning more attention towards the Euro area and sovereign debt.

On the other hand, chunky realmoney flows are expected to start flowing into assetmarkets as implied volatilites have shrunk significantly. Now, realmoney flows are often a counterindicator, but, those flows are also very chunky. So, short term could see continued support for financial markets. Although I doubt the CEE area will benefit very much from the realmoney flows.
Add to this the assymetric risks present and it makes sense to start planning for a "hot" end of summer.

Disclosure; I am long Eur/Lvl Fx Forwards

* New positions and position changes
- Taken profit on long Eur Call /Usd put option
- Taken profit on long Gbp Call/ Usd put option
- Long Eur/Sek

As usual, good luck

latvia

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Inflating vs deleveraging, what about the next step?

2009-06-02T08:37:00.003+01:00

* Inflating to avoid an immediate crash -inflating the crash potential in the process.

To some extent, the Latvian scenario is a case in point. An extreme case but yet so visibly similar to other governments behaviour during this crisis. Youve got liquidity problems? Increase your leverage! The leverage days should be behind us. However, the behaviour so far has during the crisis has not indicated that this is necessarily the way authorities view it. Back to good o´l leverage days alá 2006?

The world was not "normal" during 2002-2007. Still it seems markets perceive that time period as "normal circumstances" which we will soon revert to. I dont think so. Although deleveraging has not been the main theme so far this crisis, it will become a crucial factor.

Either deleverage now or live with no or very low growth for a number of years. Its basic riskmanagement. Although certain liquidity providing measures have been necessary so far, in order to avoid a complete breakdown, many measures have been misguided and overdone. This has instead increased leverage and the overall risk and cost in the process. Stakes and risks are increasing, although the general media and so called expert noice is sounding all clear. Well see.

To extend on the by now infamous analogy by the former Citigroup CEO Charles "still dancing" Prince; Ill stay at the party, but Ill be dancing close to the exit and I am making sure my helmet is within reaching distance.

* The Swedish Riksbanks "stresstests" - everything´s fine - still.

So, basically, even if theres a devaluation in Latvia, even if there are devaluations in all three Baltic countries. Even if those devaluations reach 40%-65%, even if credit losses in the Baltics reach 30%-40%. Even if the CEE and the Euro area starts crumbling due to no pull traction from China and the US 2H this year. Even if Swedish taxpayers and domestic demand gets hit hard as a consequence, with higher unemployment, lower realestateprices, etc etc due to the Baltic crisis. Even if Swedish venture capitalists go belly up, the Swedish banks will make it?

Actually, the Swedish Riksbank did not use those assumptions when they made their report.
They did not even mention any devaluation risk. They estimated creditlosses in the Baltics to 10%. In Ukraine, 30%. In Sweden,1.3%. Denmark and Norway, 1,95%. UK, 3.9%.
Poland,5% and Russia,10%.
All for the period of the next two years, 2009-2010. During the same timeperiod, Swedish bank earnings are expected to be 85% of consensus expectations.

Under the Swedish Riksbanks expectations the Swedish banks would make it. Please note that their expectations are rather conservative. Not really what I would call a stresstest anyway. Riksbank still living in the 2006 days, eh? The low volatility quant days. Well, well see how this plays out.

Swedish taxpayers should already be aware that the government backed bank programme is already having unintended consequences, as the Swedish banks "arbs" the Swedish taxpayers by borrowing at a discount from the Swedish taxpayers and lending at a premium in the Baltics. The taxpayers take on the wrong side of a digital blow out risk, for an extremely low premium/return. Hardly what I would call protecting the taxpayers capital. Especially as earnings go straight to the banks. An example of debt inflating instead of deleveraging.

Disclosure; I am long Eur/Lvl forwards

*New positions and position changes
- Long puts on Swedbank
- Long puts on SEB

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Chinese PMI relieving markets and fundmanagers chasing the market again, but the FED model points towards lower equities.

2009-06-01T09:50:00.003+01:00

* The Chinese PMI relieved markets. June starting with an equity rally.
The Chinese "wonder story" continues. However, it is interesting to notice that Chinas power consumption fell by 4% over the first five months of the year. So? Well, this variable has a high correlation with Chinas industrial output,,,,,

Chinese officials seem to have become more uncomfortable with the pace of which the Chinese banks have expanded their loan books this year. A statement was issued on Sunday demanding Chinese banks to "strengthen internal risk controls". It seems the Chinese are tightening their credit already. However , in this environment, the market choose to focus on the Chinese PMI numbers and the bullish aspect.

* Chinese PMI triggering relief rally
There were some concerns pre the Chinese PMI. However as they failed to materialise, equity markets jumped higher. Fundmanagers are seeing huge inflows of real money. Since they are only allowed to hold a certain level of cash, this generates problems for them. They have to buy stocks. Chasing the market.

* The FED model pointing towards lower equities.
The FED model compares Bondmarket PE with the Equity PE. The PE differential has moved into negative territory, suggesting higher yields will soon start weigh down on equities.

* New positions and position changes
- Bought Eur Call/Usd put
- Bought Gbp Call/Usd put

As always, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

The new leading indicator for Latvia; Latvian prostitution prices

2009-05-28T11:58:00.002+01:00

* Latvian prostitution prices fall by 67% in a year
According to a Bloomberg story, Latvian prostitution prices have fallen by 67% in the last year. http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_lynn&sid=aSRh7Cf2DTrU

Forget about house prices. The prostitution prices and infidelity websites on the internet are the leading indicators to go by according to Bloomberg. According to researchers the web traffic to infidelity websites increases during bull and bearmarket times and at market turning points. In November the traffic peaked as the assetmarkets took the biggest hit last year. No traffic increase since. In Latvia, prostitution prices are not showing any signs of turning up, according to the article.
Hence, the IMF should be on red alert together with most of Europes banking system.

* Indicator of Latvian extent of devaluation?
In order to restore competitiveness by deflation instead of an actual devaluation, achieving an equal result, the prostitution price indicator would seem to indicate that the devaluation will be more than 40%-50%. Rather 70%. Interesting if other indicators can be combined with this one in order to get a verification or not. Should have an impact when pricing LVL FX forwards if valid.

* New positions or positionchanges
No changes

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Market flush with Latvian "immediate" devaluation rumours

2009-05-28T11:20:00.002+01:00

* Latvian devaluation rumours

The Latvian devaluation rumours have been triggered by articles going back since this Monday. They have mainly touched on the subjects of Latvian politicians realising that the game is up, the Central bank governor Ilmar Rimsevics two interviews where he has suggested that vouchers would be introduced as payment for public employees. Central bank governor Ilmar R.;s statements really made me sit up and take notice.

This is exactly what happened during the Argentinian crisis, where they simply ran out of currency reserves as the ARS peg, tied to the Usd, was being defended. Patacónes, Lecops, Créditos, Argentinos and lots of other bits of pieces of scrip. In Argentina this was the beginning of the end for the fixed currency regime.
There are reasons to believe this is also the case in Latvia.

*Swedish preparations
Swedish authorities also seem to be on full alert that some "big" event is around the corner.
The Swedish Centralbank replenishing their FX reserves by 100 Bn SEK. the Swedish Finance minister and Financial market minister declaring they are "ready" for any events, including devaluation, in the Baltics.

The Swedish bank CEO of SEB, Annika Falkengren, declaring that a Baltic devaluation will not mean more creditlosses in total for SEB. I think she knows the game is up.
I still believe there might be a try with the ERMII, (+-15% around a midrate) but the real float should come not too much longer after that.

* LVL FX forward pricing - not indicating any imminent devaluation, makes the long LVL FX forward a very attractively priced digital option.

The only thing that seems a bit odd at the moment is the fact that the cost of buying FX LVL forwards have not really skyrocketed on shorter maturities (up to two months). Albeit higher, they are still to be considered as good value options.

This bit of the puzzle does make me wonder since it would make sense that the market had the absolute best information on this subject.
A bit of a turnoff for any imminent devaluation idea. However, it is still a very attractive digital option to own.

*New positions and positionchanges
None

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Get ready for volatile times in the CEE and Euro area. The Baltic area deval trigger.

2009-05-28T09:27:00.004+01:00

* The Baltic private sector on the road to extinction = Devaluation before long
This silly game has run its course and by now even the most anti deval fundamentalist politicians seems to realise that devaluation will be unavoidable. Latvia is first in line to let their currency go. Latvias economy is by now entirely dependent on the extent of foreign loans in order to keep the fixed currency regime going.

Are the citizens of Latvia really willing to take on this extra debt burden to defend a fixed currency regime bound to fall anyway? If yes, how much are they willing to take on? Global happy days are not coming back tommorrow, despite the recent months of assetmarket bullish sentiment. It will more likely take years. How much debt does that equal? To reach the Euro? And then what? Debt still has to be paid-or?

I seriously question if there is any strategy at all (apart from the Euro dream), behind the Latvian politicians clinging to the fixed exchange regime. IMF had better use all their resources and experiences they have to administrate the chaos that will follow on the back of the Baltic devaluation. The Baltic politicians IMF are talking to today are not likely to be there in a years time.

* Use IMF capital to stabilise the initial friction post deval instead
IMF should prepare a significant rescue fund for the Baltics. Let the Baltic currencies float freely. Use the rescue funds to stabilise they social consequences that will follow initially so that people will be able to have homes, and a minimum level of income in order to support their families. Negotiate with the Swedish banks and their Government in order to make realistic and quick debt writeoffs. The Swedish Government will most likely have to finance the Swedish Banks SEB and Swedbank anyway, hence they will become the main negotiating partner.

From there, the Baltic states can have a restart, getting their exports going again, generating jobs, income, social structure, stability, etc

*The Swedish government should let shareholders, bondholders in SEB and Swedbank pay the price.
Minimize the damage to Swedish taxpayers by letting the risktakers pay as much as possible. The Swedish taxpayers will pay heavily still, unfortunately.
Transfer bad bankassets to the state at marketprices. Take over ownership of Swedish banks in a transitional phase. Restart.

*Refocus on European banks bad assets = shaky CEE markets return = refocus on Euro area bad assets

Baltic devaluations risk being the trigger for CEE shakiness again. Since the Euroarea is intertwined with it via their banks balancesheets, a refocus on the state of the Euroarea is likely. Since the European banking system is in more dire straits than the US one it is not likely to be bullish for assetmarkets. Once again, there is no comprehensive and coordinated European plan to deal with a worsening scenario from here. Not good. Fingers crossed it will all just go away. With US coming to the rescue - as usual. China is also counted on. Unfortunately I doubt neither the US , nor China will come to the rescue this time around.

* New positions and position changes
- Took profit on my long Eur/Sek
- Took profit on my long Usd/Jpy option
- Took profit on my long Eur/Huf
- Increased my long Eur/Lvl forward

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Higher yields weighing on equities. Latvias new currency - the voucher

2009-05-27T12:45:00.005+01:00

* Yields are rising, weighing on equities
With sovereign and agency yields rising, the risk for equities have increased. Jumping assetprices and a perception that the systemic risks are behind us have pushed markets higher. Macro facts now risk kicking markets back into bearmarket trend mode. Libor rates have now moved higher for five days in a row, with corporate yields inching higher. If corporate spreads widen from here, the assetmarkets will likely move lower again.

*Latvia introducing scraps? Argentinian repeat?
The Latvian centralbank governor Ilmar Rimsevics have recently made at least two interviews where he suggested Latvia introduces vouchers in order to avoid a too abrupt halt of government spending. Scraps was introduced during the Argentinian crisis and was essentially the beginning of the end. The country simply ran out of currency to spend as they defended their Usd peg. It seems to me Latvia is one step closer to devaluation.

* How and when?
I believe there will be a renegotiation with the IMF in June/July where the IMF will loosen up their loan conditions. In exchange, Latvia will have to introduce the ERMII, ie letting the Lvl " float" +-15% around a midrate. The Lvl will then weaken 15% immediately. By fall there will be a free float, devaluing the Lvl by 40%-50% in total vs the Euro.

*Swedish authorities preparing for a Baltic devaluation?
The Swedish Riksbank today decided to replenish their Fx reserves by borrowing 100 BN Sek. Further, the Swedish finance minister Mr Anders Borg seems to be preparing for a big hit to the Swedish economy as well, sitting very tight on the countrys finances, warning about "very rough times" going forward.

Disclosure; I am long Eur/Lvl forwards

*New positions and positionchanges
- Took profit on my long Swedbank puts
- Added to my long Usd/Mxn position
- Long Eur/Sek
-Long Eur/Huf

As usual, good luck

Usd squeeze and garbage still flying

2009-05-25T13:20:00.003+01:00

* The downgrade of Britains creditrating immediately got the market worried re the US
We could see Eur/Usd reach the 1.45/1.47 area on a swift move, although I am looking for a pullback first. I am not looking for any move above 1.50. The market has become preoccupied with the European dilemma to the extent that positioning was simply
too onesided. A clearout is taking place and that is just what´s needed.

*Garbage is still flying -for now
Couldn´t help but notice that the Scandinavian Airline, SAS, has received bad press and heavy shareprice downgrades from practically every analyst covering it. Still, the stock remains bid. Smells like a rally brewing in that one. I have reentered this one. Light feet.

* Will June be the last assetmarket party month this summer?
I am starting to look around for opportunities to position for increased bearishness post it. Caution here is still warranted for the massive liquidity flows getting pumped into the market.

*Inflation, US collapse, Gold and Oil are the current trend subjects.
Inflation I think is too early - still. US collapse ditto. Still more concerned about the European situation should US and China not drag Europe out of the mud. There simply is no European plan. One big risk, come fall, would be that Europe starts sinking due to the US and China running out of steam. CEE and the Baltics weighing heavily as well.

Gold looks like it will retest 970 USD again, (almost there already at 955). Will it break 1000 USD? Neutral on Oil.

* New positions and position changes
- Long SAS, the airline stock
- Bought Eur/Usd puts for a correction lower

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Asian capital moving into assetmarkets - but Japanese capital stays increasingly at home

2009-05-18T18:18:00.004+01:00

* Sovereign Asian funds diversifying into assetmarkets
Singapores Temasek announced on Friday that they are moving funds into assetmarkets, mainly commodities. Overnight China´s 80 BN Usd pensionfund announced they are moving 8 BN Usd into private equity funds.

This makes a continued bullish sentiment all the more likely as this bearmarket rally is liquidity driven and liquidity is ample. With important funds setting the example by moving out of bonds and into risky assets, more are bound to follow.

Next to get "long enough" are the real money accounts. Chasing the market further. Valuations and earnings are most likely way overestimated at this point in time, but the market needs to get long before we will see it come crashing down to earth.

I do believe there is a technical short term case for a market setback, but I will not be looking for any substantial moves lower at this point in time in any "normal" distributed markets. Digital ones are a different thing,,,,,

* The Strong Jpy and other assetclasses - correlation breakdown
The correlation between the JPY and assetmarkets has broken down since early March, when the stock market bear rally started. The Jpy is actually as strong or stronger vs the Eur and the Usd now. It seems one plausible reason is the change of behaviour by the Japanese bond investors. Japans foreign currency investments are mostly bond driven.

With the introduction of QE in more foreign countries, undermining the long term bondvalue, it seems the Japanese bondinvestors have turned increasingly inwards. I believe the structural strength of the JPY is therefore likely to continue for the next few months. In 1998, post the LTCM, as liquidity was forced fed to the market , affecting bonds, the JPY strengthened during the fall. Although the JPY strengthening at that time was extremely viscious, dropping USD/JPY from 134 to 111 in 48 hours.,I do not believe this is what we will be witnessing this time around, unless modellers and correlation traders oversell the JPY on the back of rebounding assetmarkets of course,,,,,

*New positions and position changes
- Took profit and squared the remaining half of my long Usd/Zar position
- Dipped my toes, went long Usd/Mxn

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Green shoots? Brown shoots?

2009-05-15T11:36:00.005+01:00

Happy friday,

* Markets still trading with a bullish undertone - for now

The "Green shoots" consensus will likely be severely tested before long. Especially with China´s latest inflation data showing China back in deflation. However, there are some positives; Koran expects the Korean economy to make a U shaped recovery and the Indonesian current account is back in surplus. For now this should provide an indication as to increased investment flows into these countries, indicating their currencies strengthening as well.

* The Baltics, its not just an economic issue - its a geopolitical one as well
With Russia keen on securing their Russian minorities wellbeing in neighbouring countries, this is an issue that should not be ignored going forward. With the Baltic states economies imploding at an accelerated pace and the IMF paying and applauding the Baltic states to continue down this cul de sac, this will enivetably lead to social upheaval.

This will be an ideal environment for an opportunistic neighbour to intervene. Finns, Swedes, Poles and others should be very wary. This has all the ingredients to become an issue way bigger than anyone is currently expecting.

* What to do then?
I suggest abandoning the Ostrich approach and start dealing with the issues at hand here. Correcting them as need be. This is my suggestion for a straightforward solution;

1) Secure funding for the Baltic states via the IMF, the Worldbank, the EBDR, the EU and the neighbouring Scandinavian countries. This funding should be big enough to be able to cope with the massive social effects that will come in the wake of a 40%-50% currency devaluation.

The Swedish finance minister Mr Anders Borg is technically correct when he declares the fixed exchange rate a sovereign decision for the Baltic governments. However, it is quickly becoming an international question. Why? The Baltics states are more or less depending on IMF sponsored funding. Thats why.

The Baltic governments dont know what to do from here, hence, they continue down the dead end street.
The Baltic states private sectors are becoming extinct. They need advice - now.

2) Float their currencies. Lets face it. The Euro can wait. This is not the time. Later perhaps.

3) Manage the Baltic afterchocks.

4) Support and assist the local private sectors. Get exports going again, - jobs - tax revenues, consumption - investment - growth.

This is doable now. The sooner, the lower the overall cost. To wait and postpone will surely make this very costly.

Disclosure: I am long Eur/Lvl forwards, Swedbank puts.

* New positions and positionchanges
None

Have a great weekend
As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Germanys bad bank plan, The Baltics and analysts - are they for real?

2009-05-14T08:44:00.003+01:00

* The German bad bank plan

A week or so ago, in another market sentiment world, this plan would probably have been applauded. However, if, as I believe, market sentiment over the summer will shift towards an increased focus on the debt dilemma in Europe, the German bad bank plan will likely not be appreciated by the marketplace. Admittedly, there was a proper intital attempt from the Germans to offload toxic assets from Landesbanken and commercial banks to a government owned "bad bank".

However, since this suggestion was based on making the transfers at marketprices it failed. Reason being that the vast majority of German banks would simply have been, you´ve guessed it, - insolvent.
The discrepancy between booked value and market value was simply too big.

Back to the drawing board again. New suggestion. Plan B - sweeping it all under the rug, almost. The new bad bank plan also includes a state owned "bad bank". German banks will transfer their toxic assets to the "bad bank" at 90% of their booked value. They will then pay a yearly fee (out of their dividends, not their profits), with the purpose of building up a cushion for potential future losses.

The "bad assets" vehicle will not be marked to market and will not be settled with the banks til the end of the instruments maturity. The "bad bank" will be financed via government guaranteed "toxic" bonds. Taxpayers - you like? I wouldnt. Anyway, in my view, this strategy is based on the, these days, global government standard response - the Ostrich method. Slogans; "If you cant see it - it isnt there", "Out of sight - out of mind".

Europe is counting on the US and Asia dragging Europe out of the mud soonish. There sure does not seem to be any European plan as how to do anything about it themselves, so far. Well, Im not sure the US and Asia are sound and healthy enough to pull it off this time around. If not, Europe will be in for a very, very tough period ahead.

With the German bad bank plan lacking mark to market ingredients, it becomes a static approach, with no riskmanagement taking place. This means the German taxpayers are potentially faced with a 1 Trn (likely to be less) Usd bomb detonating at some point in the future. Clearly, the "fingers crossed" riskmanagement approach rules over there.

German CDS spreads should widen on the back of this plan. To top it off Germany is facing an estimated 350 BN Eur shortfall in tax revenues til 2013. Hence, an increase of the budget deficit or a reduction of expenditure will be the outcome. I would guess the first alternative is the most likely from a political point of view. In either case, it will not assist in any recovery.

* Analysts are analysing the "worst case" scenario for the Baltics - or are they?

There seems to be one big factor missing when analysts are coming up with a "worst case" scenario for the Swedish banks credit losses in the Baltics. The level for Swedish creditlosses during the crisis in the early nineties is often referred to as a benchmark for creditlosses also in the Baltics. To me this is grossly misleading and a vast underestimate of the real risks for creditlosses in the Baltics.

The Swedish credit stock during the beginning of the nineties was almost entirely in local currency. In the Baltics, hard currency loans account for 60%-80% of the outstanding loan stock!Thus, a devaluation will have a devastating impact on creditlosses.

During the Asian crises in the late nineties, creditlosses reached levels of 40% - 50% in countries suffering devaluations and with a large share of hard currency loans in their loanstocks. This is a classic macro development. Fixed exchange rate regimes drastically increases the risks for overleveraging, overconsumption and misallocating investments. "Arbitraging" by borrowing in foreign currencies with lower rates, in the belief that the fixed currency regime will stay on just as the politicians has promised.

It is a downward spiral that at first appears as an upward one. This time is no different. The Baltics will hit Sweden´s taxpayers hard, you´ve better believe it. Hopefully politicians will make sure the bank shareholders and debt owners will pay their due price as well.
15%-20% creditlosses is not a "worst case" scenario. 40% - 50% I believe is more like it, based on a 40% - 50% devaluation across the board of the Baltic currencies. Social upheaval not included.

Disclosure; Long Eur/Lvl Forwards, Long Swedbank puts.

* New positions and position changes
- Took profit on my long Eur/Pln

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Garbage getting adjusted

2009-05-13T22:05:00.004+01:00

* Bears in da house

I dont expect more than 10-15% down for equity markets (already down 5% ish over the last two days). Not if the stressedout institutional investors get to have their say. Many probably missed the rally and it makes more personal sense for them to go long than not. (Most are marked against benchmarks - so its all relative, not absolute.) I expect this to dampen the bearish momentum. Likewise, this move lower seems quite anticipated.

Anyway, in a few months at the latest, we should see the megabear trend reassert itself.
A Baltic devaluation would of course alter this scenario. The Baltic fixed exchange rate regimes are becoming ludicrous. Especially as the GDP;s are falling like leaves. Latvias budget deficit in relationship to the Latvian GDP is now expected by external analysts to reach 15% - 18%. The level with IMF was 5%,,,,, Fogettabt it!
Disclosure; I am long Eur/Lvl forwards.

* Im bearish assets short term
Looking for at least a few days of bearishness. In certain assets, a bit more. Commodity assets are looking weak as well near term.

* New positions and position changes
- The long Ultrashort Us Financials ETF I initiated and described yesterday was described with an incorrect name. It is called SKF.
- Added to my long SKF ETF.
- Bought Eur/Pln
- Took profit on my long Eur/Sek
- Took profit on my long Eur/Huf
- Took profit on my long Eur/Nok
- Took profit on half my long Usd/Zar, looking to add again on dips
- Bought puts on Swedbank, the Swedish Bank with huge exposure to the Baltics

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Reality flashback?

2009-05-12T07:50:00.004+01:00

In a bit of a hurry this morning due to travelling arrangements. Will be updating as per normal tommorrow again.

# Shortterm it seems we are in for a correction in riskappetite and risky assets
I am looking for it to last more than one day at least,,,,, Quite a few risky assets that are severely overbought; equities, currencies, creditspreads too tight, bond yields too high, commodities too high(apart from gold perhaps).

# New positions and position changes
- Taken profit on long Eur/Usd
- Taken profit on long Gbp/Usd
- Long ETF Ultrashort Us Financials ETF
- Long Eur/Nok

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Baltics and CEE back on the radarscreen before long?

2009-05-11T14:15:00.009+01:00

* Latvia 1Q GDP dropped 18% - get ready for further drops.
In the midst of the bearmarket rally it might be a sobering reminder that all might not be happy hunky dory days after all. With the Latvian GDP down 18% for the 1Q and harder times still ahead for this country, this number will most likely continue to be grinding, if not dropping, downwards.

What surprised me was that unemployment was still "only" at 11%. With the private sector heading for near extinction, I expect this number to skyrocket to above 20% within the next 6 months. (I guess the IMF money can create loads of public sector jobs for a while, but,,,) In any case, the Latvian authorities had better keep this number under control in order to avoid social upheaval. At 25%-30% unemployment rate, the foundations of Latvia as a democratically functioning country will likely be sliding.

The IMF has yet to make a decision on whether they will grant Latvia the next installment payment of 1.6 Bn Eur due in June. It supposedly hangs on whether Latvia can bring their budget deficit to 5% of GDP. The last estimate from the Latvian government themselves was -7.7%.

With GDP sinking like a stone I guess the risk is for the deficit in terms of share of the GDP to increase further. In other words, Latvia will not be able to fulfill the IMF criteria, not now and not later in the year. As Ive mentioned before, I dont think it will have a material impact on the IMF payment schedule anyway. Latvia will get their money, or else the country will swiftly become insolvent.

What I do wonder though, is if there will be strings attached. One would be to let go of their fixed currency regime. This would be, ehhmm, sensible, to say the least. For IMF to assist in upholding Latvias fixed currency regime despite the local economic realities and the surrounding economic environment can simply not be motivated on economically sane grounds.

The British writer Will Self launched the "Quantitative theory of insanity". According to this one there is a fixed portion of sanity in the world at any one time. As one group becomes more sane, another group becomes more insane. Well, it seems to me the people in charge of the Latvia fixed exchange rate policy surely has not become more sane. The question is; who has then?

Disclosure; I am long Eur/Lvl forwards.

*New positions and position changes
None

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

NFP day - asymmetric risks

2009-05-08T11:27:00.006+01:00

* NFP again - probabilities still in favour of higher assetprices and increased riskappetite
Markets will initially react proportionally more positive to a somewhat "better number compared to a somewhat "worse" number. Institutional investors continue to force this market higher. iTraxx Europe and the iTraxx Crossover index are currently rallying too, pre the NFP, indicating market sentiment.

*Despite the bullish environment; Some bearish signs. Too early?

-The Nasdaq continues to lag the rest of the Equity market, just like it did in the fall of 2008. Its been going on for a week now. The SOX index have turned bearish. The SOX index was one of the first indicators that went bullish as the équity market turned upwards in March.

- The SKF ETF Ultrashort financials for US financial stocks seems to be bottoming out.
- The VIX index yesterday saw strong buying interest for MAY 40 Calls. Although quite short maturitywise, it was a while ago since there was good buying interest of VIX calls.

- ZAR, HUF, SEK looks to be topping out from their recent rallies, to turn weaker again. Normally followers of Equity markets.

-Gold looks to be bottoming out and have recently started to inch higher.
Although these signs might be premature, I will monitor them closely going forward.

*US Bank stresstests are over - as expected; no stress, apart from institutional investor buying panic. A continuation of the US financials rally?

According to GS, these stresstests were valid and prudent. While I do recognise the resources within the GS, I have to disagree. The US banks stresstests were not done properly, in my book.

They were way too soft and thus will likely not have that much value. The US government never really had any choice as to the outcome of these stresstests. Besides, they were leaked well in advance to "test the waters". Looking for market reaction. Since it seemed ok, no new measures were needed. Now, this could cause a further rally in US financials as the US markets open today. I will be watching the likes of Citigroup, Bank of America and Keycorp as they could be in for a continuation rally. Well see.

* I am Bearish the ZAR
One currency I am bearish on right here and now though, is the ZAR.
Apart from the Southafrican currency (ZAR) looking severely overbought and about to go weaker, there is also the issue of the SARB potentially increasing their FX reserves by buying USD in the Fx market. Usd/Zar has moved from 10.70 to 8.27 since March. During this drop, SARB;s currency reserves remains unchanged. It might be time to replenish these reserves for the SARB, while the market is not negative towards it.

(SARB is currently quite, 50% ish, underweight compared to their EM peers Mexico, Turkey and Brazil). There is also uncertainty as to whether the Finance minister Trevor Manuel will stay in place during the new Zuma administration. Speculations have suggested he will be appointed as head of a planning commission with at least equal, if not more, importance.

However, with the new president elect Zuma announcing his new cabinet this weekend. The Finance Minister post uncertainty remains. This will keep the ZAR Fxmarket on its toes as the current/former Finance Minister Trevor Manuel has been perceived by the market as a guarantor of financial stability, order and prudence. I am long Usd/Zar.

* What else?
Got a number of optionalities lined up. In the process of timing them. Will revert.

*Position changes and new positions
- Long Usd/Zar
- Long Eur/Sek
- Long Eur/Huf

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Garbage rules - forget about the (non) stress tests

2009-05-07T11:23:00.006+01:00

* The (non) stress test; No stress - no sweat, apart for institutional investors. Buying panic.

With most of the so called stress test well known in advance this too should pass without any sweat. Besides, the market does not seem to have been positioned for a moderate outcome.

This combined with a continuation of better than expected macro numbers and institutional investors lagging retail when it comes to asset buying, it would seem we are set for further asset buying short term. Especially as further asset moves higher combined with a further fall in volatilities and narrowing corporate bond spreads seems to be the biggest pain trade for benchmarking institutional investors.

* Increasing riskappetite remains for now - weaker Usd
China has started to reduce its demand for Usd denominated assets and suggested a change in its currency reserve policy stance. Official Chinese GDP rates are currently at 8%. Combined it would seem China is in the process of further promoting its domestic demand. This should help any countries with specifically strong trade relationships with China, such as Australia and the Aud. The Usd will suffer, especially against Latam and Asia as US corporates "exports" Usd. Europe should not be the main beneficiary since the Eurozone economy is still very much debt burdened.

* IMF revised their CEE debt numbers - providing further boost to risk appetite
With the IMF revising debt numbers from previously released CEE debt reports downwards, this region have received a further boost. How long will it last for? In this environment it could continue from here as further institutional equity and bond investments are encouraged by the news. However, in the near term it seems HUF might be close to a temporary base vs the Euro in the low 270;s.

*New positions and position changes
- Sold my SAS Airline stock after 20% profit in two days. Looking to reenter on dips below 4.00, alt chase it on a break of 5.00.
- Long Eur/Usd and Gbp/Usd via options
- Sold LOIL, the leveraged Crude oil ETF, after 25% profit in a week. Looking to reenter on dips sub 4.00 alt chase on a break above 4.60.

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

The riskappetite continues to increase - inventory build up and exportfinance driven export demand the main drivers

2009-05-06T13:08:00.006+01:00

Ive had to prioritise house building and a few other agendas recently which resulted in no update yesterday. Hopefully youve managed to survive anyhow.

* Markets are increasingly declaring this downturn over
I beg to differ. This downturn is by no means over. It has been injected with the equivalent of financial steroids, (ie, yet more debt) in order to keep it going for a limited amount of time. Unfortunately, this steroids supply will run out (unless governments, treasuries and centralbanks decide they will monetize their debt by printing money to buy it themselves).

Having said that, this is not the time to go against this market, at least not in the underlying. Options is a different issue, depending on how they are utilised.

*How to trade the market from here then?
Well, with an increasingly liquidity driven market, also crap rises with the tide. It must have escaped noone that the biggest junk assets that fulfilled any or all of the following criteria;heavily leveraged, heavily indebted, negative or weak cashflow, underlying market heading straight into the ground, have been the ones that by far have risen the most over the past month or so.
Long garbage has worked very well lately. It could very well continue to work nearterm.

Main drivers of this recent rally has mainly been shortsqueezing combined with underinvested institutional investors scrambling to get equities on board.
With global inventories at their lowest level since 1974, inventory build ups and export finance led exports are further driving underlying business improvements.

The climbing of this "wall of worry" seems to continue and short risky assets will likely still be the biggest pain trade - mainly due to the institutional investors. I am myself long garbage in the form of SAS, the Scandinavian Airline stock. So far, so good,,, Perhaps I should mention going for junk is by no means my main objective. Market price timing and optionality are the real variables. Although while earlier I might have shied away from outright garbage, currently I am not. Playing the momentum and market sentiment - not the story.

* Looking for optionalities
From a trading perspective it is interesting to note the "optionalities" present in the marketplace.
What do I mean by that then?
Assets or indexes with an extremely low probability of going to zero. Example; The ETF LOIL (ETFS Leveraged Crude Oil - Beta two). Underlying price is option premiumlike with a huge upside potential. Maturity; Unlimited. Probability of underlying going to zero; very unlikely.
I am long LOIL.
There are others on the radar that I am monitoring. Stay posted.

*How long will this bearmarketrally last for? (Yes - I still call it bearmarket rally)
I could see it running for one to two months more perhaps, but not longer than that.
By then garbage assets should be well overpriced, institutional investors have gotten their longs in and be fully invested. Inventories will be full again and export led finance will have filled international demand. Thus, market data will likely weaken again.

*The bad debt issue will return
Add to this the coming market realisation and focus on the fact that European banks are due to raise 600 BN Usd this year compared with 275 BN Usd for US banks. All according to the IMF and all til 2010. There is another vast difference between the US and European banks funding situation, namely the fact that the US banks are able to convert preferred stock to common stock and thereby improving their capitalratios(and becoming government owned in the process). European banks do not have this possibility which may increase their capital need beyond the 600 BN USD announced by the IMF.

As have already been announced by BAFIN, the German bank regulator, estimates that the current Toxic assets present on German banks balance sheets amounts to over 1 TRN Usd.

*Risk loving markets near term; Shaky USD?
This near term bullish and risk loving environment should not be beneficial for the USD. 6.7 TRN Usd is aimed for investments outside of the US. Hence, a push for higher yields abroad will benefit local currencies, leaving the USD softish. However, this should reverse in the 2H of this year in line with the reasons presented above.

*New positions
- Long SAS, the Scandinavian Airline
- Long LOIL the leveraged crude Oil ETF

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

IMF buying marketshare, should be careful about frivioulus spending

2009-04-28T10:25:00.003+01:00

* The IMF program has already deteriorated from strict support with firm strings attached, to anything goes - you´ll get your money anyway

One has to ask oneself; What is the IMF doing? Trying to fund fixed currency regimes? I thought the purpose was to stabilise countries and help them over a bumpy transitionperiod when under financial distress. Well, to get some kind of bang for the buck the IMF would be wise to start by demanding a floating currency. This fundamental piece has been ignored so far.

*Ukraine
Ukraine remains a case in point. The government signed strict terms in order to get their 16 Bn Usd IMF "loan". Once it was signed they did not cut spending as agreed, their banks were in worse shape than initially declared and the probability of the agreed fiscal program being launched was very low. So what does the IMF do? They just pay out the 16 Bn Usd anyway. Those 16 Bn Usd have now been used to bail out the 7 biggest local banks. Nothing left. More local banks in line and, of course, the country´s economy is still in shambles. Oh, Ukraine have not floated their currency either, which IMF recommended.

*Latvia sinking
Next case is Latvia and the rest of the Baltics. They are all sinking like stones in the Baltic sea and still havent reached bottom. The obvious and no brainer first step is to let go of their fixed currency regimes. However, local prestige mixed with a Swedish bank lobbied Swedish finance minister and government has blocked this first step so far. Instead IMF is burning global taxpayer cash to fund the fixed currency regimes. Swedish taxpayers are doing the same and they havent catched on as of yet.

* The IMF ATM machine

IMF negotiated an agreement with Latvia under which the Latvian government agreed to set a budget which limited the Latvian budget deficit to 5% of GDP. Once an attempt was made to get this through the local parliament, the Primeminister was relieved of his duties by the Latvian president due to protests from the population.

The new Government then promptly declared that they would not honour the agreement and that Latvia would be bankrupt by June without the June IMF payment.
It was added that the Latvian budget deficit would amount to 7.7% of the GDP.
So far this year , the Latvian government has spend twice as much as they should in order to meet the IMF criteria. They will now have to make budget cuts of up to 40 % in an environment of swiftly dwindling tax revenues as the private sector implodes.

What is the probability of that working in a kryptonite deflation environment which grows exponentially due to a fixed currency regime? Low, lower, zilch?
Latvia havent recieved the March 200 Mln Eur payment so far, but it now seems they will receive a 1.6 Bn Eur payment for June from the IMF, despite Latvia not fulfilling the most important IMF criteria of all. With Russia around the corner soon looking for IMF money it might be wise to slow down on the burnrate somewhat, or at least link the payouts with a float of their currencies. This bearmarket is by no means over and Europe and the CEE is next in turn to get hit hard.This time should be wisely spend to prepare and plan for what has a high risk of happening - not to mindlessly throw money around. Its time to limit the IMF ATM.

As usual, good luck

The tragic part of it is that the local populations of all these countries with fixed currency regimes will pay a very hefty price for politicians prestige and foreign banks unwillingness to take their losses. The fixed currency regimes will be let go - the question is how much the local populations will have to suffer before there is a float. Risks of social unrest have risen dramatically and will continue to do so over the next few months.

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

A test for marketsentiment

2009-04-27T22:47:00.005+01:00

* A slew of negative news to test the current bullish market sentiment and bearmarket rally induced risk appetite.

So far the markets have dealt quite well with a batch of bad news;
- The new swineflue epidemic.
- The "leaked" "topsecret" report of the 1Trn Usd worth of toxic debt in Germanbanks.( should not come as too much of a surprise.) However, looking at the liquidity and relatively low riskpremium of the German debt market, it might just not be fully discounted.

*WHO upgraded the swineflu epidemic to 4 or 5 from 3.

In case you didnt know, 5 or 6 means pandemic, a "widespread human infection", which is the highest stage on the WHO alert scale.
According to previous calculations in October by the Worldbank, a flu pandemic is estimated cost 3 Trn Usd, take the lives of 70 Mln people and cut 5% off the global GDP. Not exactly what the doctor ordered. Pardon the punt. Expect increased focus and continued negative newsflow on the swineflu story near term. It should not help riskappetite. The recent very positivemarket sentiment will obviously be tested.

*The precarious situation of the European banking situation still outside the current market focus.
Going forward, there should also be increased focus/awareness on the European banking toxic debt situation as well as the European states capacity to handle it. Although the German GSI badbank plan might be a very effective way of sweeping everything under the rug and significantly improve shortterm risk appetite, there seems to be several obstacles in he way.
Over the next two weeks, more details will come out on any substantial obstacles to this plan.

The mere fact that the German landesbanken are regionalbanks backed up by their respective region could drag it out.
The Euroregion is under severe strain. So far the German Euro engine have fared relatively well, it had better stay that way,,,,

*Positionchanges
- Dipped my toes in long oil ETF;s,

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

The German GSI bad bank plan - the new deal

2009-04-23T07:23:00.006+01:00

* The German GSI bad bank plan is potentially a huge deal

After the first German bad bank plan collapsed once the authorities realised that any mark to market of German banks bad assets would make the vast majority insolvent, they have been swift to launch yet another suggestion. This one looks much better from a market risk appetite point of view.

The German bad bank plan - the GSI (Government sponsored institution), if approved, could be the missing piece to really get riskappetite going shortterm.
Basically, this is how it would work; German banks will transfer bad/Toxic assets to a German Government/taxpayer owned "Bad bank". These tranfers would be done at book value. Basically emptying the German banks of toxic assets without having to take any immediate losses.

*No mark to market
This solution means there would be no mark to market of the German bank´s toxic assets whatsoever during the remaining lifetime of these assets, apart from the book value they were transferred at.

Once the toxic assets matured, the German banks would have to pay/(receive) the difference between the booked and the realised value to the German government. During the remaining lifetime of the toxic assets, the German banks would be required to put aside further capital along the way for their toxic assets.

However in this scenario they would be able to match the cost of capital put aside vs their positive net cash flow, resulting in a netting effect over time. Steep yield curves, wider spreads and highermargins have set the stage for it. Just like the governments and the banks wants it. Unless the Government required capital set aside by the banks would be "too high", this should immediately remove the credit plug and credit multiplier plug from the system, creating a swift upswing in economic activity.

*Financing
To finance it, the German treasury would issue government backed bonds on the "bad bank" toxic assets á la Brady bond style. History shows this has a high success probability.

CDS spreads would widen both for Germany and for the Euro area, which could pose a shortterm and longterm problem. The removal of credit and multiplier plugs from the credit system would however increase the probability of generating much longed for growth, although a steroid generated such, with potentially horrible sideeffects. However, I doubt many politicians would care for those sideeffects today.
The impact on shortterm market sentiment could be hugely positive, if approved.

*Drawbacks;
-No active riskmanagement whatsoever
-Increased risk for taxpayers due to no riskmanagement.
-German bank shareholders do not get hit.
-High risk of further misallocations, increasing the overall risks
-Increased risks of misallocated investments leading to yet another "bubble" growth
-Increased risks of high inflation
- Increased risks of yet another , much bigger economic disaster

* I like the idea of getting the credit and multiplier plugs out of the way -but handle with care, this sweep under the rug is not what the doctor ordered
As readers already know, I am in favour of dealing with the underlying problem. Although I recognise the shortterm positive effects, the problems are not really dealt with, just swept under the rug, financed by yet more financial institutions hunting down "high" government backed yields.

Question is if anyone will properly be able to value these toxic assets for what they really are, garbage. The yields will most likely be way lower than they should to compensate for any real risks. However, the perception of a government guarantee will probably keep them relatively low.
It begs the question; Would the German Government be even close to cover all this government guaranteed debt, should it mature worthless? I have to guess most of it would be categorised as having junk bonds / subprime status?

*Changing the market rules
This procedure is changing the market rules with risk and reward becoming out of whack.
Taxpayers, (as usual) will be bearing the brunt of the risks (the Brady bond set up better work). At the same time this "Brady bond" set up will suck in a lot of riskcapital available, hampering other businesses in much need in the process.

However, with the liquidity and multiplier plugs removed, they might very well be able to get new capital from - the banks. Full circle.

* Synthethically "clean" banks to be bought
If this plan goes through, I guess I would have to buy these "clean" banks. Basically everything I would be looking to sell now. Why not? If shareholders have gotten their risk extremely subsidised by taxpayers in an "under the rug" scheme. Shareholders stand to benefit - big time. I will definitely monitor any further development closely.

*Position changes
- No changes

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

IMF sends a message to the ECB - quantitative easing

2009-04-22T08:44:00.008+01:00

*IMF sends a message

IMF has released their report on potential future asset writedowns by financial institutions.
The global total expected is 4.1 Trn Usd, with US financial institutions to write down 2.7 Trn Usd (up from 2.2 Trn Usd) and 1.2 Trn Usd for European banks.

In addition, the IMF suggests European banks equity requirements will generate capital needs to raise 600 Bln Usd in capital while the US banks will need to raise a further 275Bln Usd. So far US banks have written down 1.3 trn Usd while European banks have taken 906 Bn Usd of losses.

Since the outbreak of the crisis in Q4 2007, US based banks have raised their capitalbase by 650 Bn Usd (Excluding TARP and other government sponsored programmes) while the European ones have raised 385 BN Usd.

Given the much larger projected asset writedowns for US banks (2.7 Trn Usd) vs European banks (1.2Trn Usd), the much higher remaining need for capital raising for European Banks (600 Bn Usd) vs US banks (275 Bn Usd) might sound surprising.
Well, when the crisis hit, European banks employed a higher leverage than US banks, 50% higher.

*IMF capital ratio assumptions tilted towards the soft side, balancesheets will have to shrink
IMF seems quite soft in their assumptions, possibly not to scare the living daylights out of the investors.
The capital injection neeeds are based on the Tangible Common Asset (TCE) to Tangible Equity (TE) ratio being 4%, which is moderate and the level prevailing before the crisis. IMF mentions that if a more decent 6% capital ratio would be applied, capital requirements would be higher, although IMF refrained from presenting those numbers. This is most likely not unintentional,,,,,

The IMF capital need projections were made under the assumption that the balance sheet size of the banks will remain the same. In practise, balancesheets will have to shrink. This threatens to be a severe test to the European banking system.

* European credit multiplier to be lower than the US one - quantitative easing next for the ECB
With European banks having higher leverage than their US counterparts, the Europen credit multiplier will be much lower than the US one.

This will have a major impact on monetary and fiscal policysettings. If the ECB havent got it by this stage, they soon will. The stage is set for the ECB to apply quantitative easing, pronto.
This should weigh on the CEE and Euro currencies.

*Some debt info outside the IMF report to consider in the process of shrinking balancesheets

While US banks holds assets corresponding to 85% of the US GDP, European banks hold assets that corresponds to 330% of the Eurozones GDP. As we know by now, some individual countries in the Eurozone are way higher on an individual basis, where Ireland has racked up debt corresponding to 11 times their GDP.

Further on, when it comes to bad debt, the US subprime debt under the worst case scenario will correspond to 8% of the US GDP, while potentially troubled loans from Eastern Europe and Asia held by European banks corresponds to 33% of the Eurozones GDP.

As long as the expected US recovery takes place in the 2H of this year and the China engine dont falter, this might not become a massive problem. But if either one should go wrong, what we have seen so far will in retrospect most likely look like a walk in the park.

*Position changes
- Added further to my long VIX calls
- Bought a leveraged bear ETF on US financial stocks
- Bought puts on Gold
- Bought more calls on IVN
- Took profit on half my short PLN, SEK and ZAR positions
- Took profit and closed my short TRY and HUF position

Trading environment remains choppy and will most likely remain so til trends reassert themselves. At the moment the increased riskappetite seems quitestrong. It remains to be seen whether it is a topping out phase we are currently witnessing.

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Market talk; Leaked SEC "stress test report" behind todays bearish sentiment

2009-04-20T13:45:00.007+01:00

* Sentiment change?
As usual, this market talk provides more info about market positioning than anything else.
Finally, it seems " we are all long equities " - again. Risks are increasing that the market will turn bearish before long. We will soon find out. Read the article behind the fuzz here; http://turnerradionetwork.blogspot.com/

I do not have any clue as to the reliability of this info. However, if it is correct, the US banking system is in dire straits indeed. So what else is new? Readers will be well aware of my view of the US scamster plan. It might provide a respite, but that is most likely all it will. One should expect the European banking system to be in an even worse spot.
I guess the high implied vols on European bank´s puts are about to go even higher

*Position changes
I have added to my long VIX calls.

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

CEE leading equities lower

2009-04-20T11:00:00.005+01:00

Busy week last week. Prioritised other activities over updating the blog. Unfortunately have a feeling it will happen again. At least til the building project is all done and dusted. Pardon the punt. On Thursday evening my oldest managed to injure his arm while jumping trampolines. Result; Fracture. Spend all of Friday in hospital. In the end, everything went well and arm will be as good as new after 3weeks of fixation. Thanks for asking.

* Switching places
Over the last week or so, the CEE currencies have gone weaker while the equity markets have continued higher. Towards the end of last week, other currencies joined in. FX leading equities. "Normally" it is the other way around. Quants are having a difficult time. According to Barclays, only one out of eighty quant market neutral funds have made money since 9 March. Most likely not the first - or last time the quant models will be ending up in trouble. There should have been plenty of practise from the last two years. More practise opportunities to come.

*Change of quant environment
Basically, the explosive growth of quantmodels came during a period of exceptionally low volatility. Cross assetmarket volatility was then the lowest for 20 years, probably much more. No wonder correlations stabilised as leverage increased and implied vols fell to extreme lows. Quant based trading models were all the rage and became quite hyped.

Well, perhaps since this is no longer the case to the same extent, there might be a more balanced approach to it from here. Quant models are here to stay, but the instruction manual should be read first. In it it should clearly state in which environments they are to be used, since "all weather" models do not (?) exist. The vast majority of quant models are made for low volatility environments. There will now be a swift production of high volatility environment ones. Just keep them in their right environment and dont go fundamentalist on any of them.

* Awaiting further developments
Dipped my toes in buying bank puts. However, was looking to buy more but was turned off by the massive implied volatility levels. Seems a few large institutions have realised they can hedge their longs by buying puts. In any case, the implieds are very high and I guess there will be a few longs out there that will not hedge themselves via puts due to this fact. Should increase momentum on the downside when we head that way again.

* The German bank plan - a non starter
The German "toxic asset" banking plan seems to be falling apart due to the realisation that offloading "toxic assets" from the German banks into specially designed"bad assets" banks will make the German banks insolvent in the process.
As the German government is doing its utmost to protect the taxpayers (or at least that was the initial intention), they have realised it will not work. I guess eventually they will have to follow the US concept and make the monstrous wealth transfer from taxpayers to German banks and bad debt buyers. I hope not. If any government money gets involved, boards should be switched. The banks stockholders and bondholders should pay. Keep the bad assets in the original banks, start anew with the good assets. Credit will flow, private capitalisation will be 100%. Unfortunately it is more likely the fudging and investor and taxpayer scam will be the concept here as well.

* Position changes
-Long MS Call expired OTM.
- Remaining Gold puts expired OTM.
-Short PLN, HUF, TRY, ZAR, SEK.
-Increased my long Eur/Lvl fwd .
-Dipped my toes in buying bank puts with exposure to the CEE, Baltics.
- Bought Gbp puts/ Usd Calls.

As always, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Equities; are we all long yet? - How much longer will the bearmarket rally last?

2009-04-14T22:01:00.004+01:00

Hope all of you had a great Easter. Back from Easter skiing. Cant complain about the weather, sunny and 12C in the shadow and loads of snow. Nice, very nice.

* Asset bulls rule - for how much longer?

So, apart from seeing a few sharp stop moves around this Easter weekend, it seems the market sentiment has continued to focus on the bullish asset theme. How much longer will it last for?

Well, the US bankreports should continue to do well since the US authorities seems to have asked the bankers themselves what rules they want. As I mentioned last week, the upcoming better than expected bank results are very much a fudge product. Investors beware. However, market positioning and thus sentiment has fit very well into this. Resulting in short term gain for long term pain. One does not have to believe the story to capitalise from it. Or, actually, one should not believe the story if one is to capitalise from it. Take that profit, son.

The US bankreports still seems like a bull factor. At least during and immediately post the US banking reports. The GS results that were announced post US equity markets close yesterday were way better than expected. I expect more "better than expected" announcements.

*Clouds on the horizon - are they heading our way?
However, I can spot a few clouds on the horizon from here. If they head our way, the day at the beach could quickly turn into a rather unpleasant hurricane.

I am starting to check where the exits are. I want to make sure I leave the party in time.
What clouds am I talking about then? Well, apologies for being a party pooper but the macro situation is still quite dire - globally. No fudging of asset values in the world is going to change that fact. The US government can help banks pretend the market wants to pay loads for their assets, but if nobody wants or can afford to buy it from here and onwards the writedowns will have to come. Especially as defaults kick in.

There will be severe unpleasantness further down the road. Even if the toxic asset market do recover it is most likely due to yet increased leveraging. We all know how that will end. Taxpayers (at least the US ones - for now) will then also be even more debt ridden. Conclusion; Stop this. Mark to market. No fudging.

*The Baltics and the CEE
The Baltics and the CEE situation has yet to play out. Unfortunately, I dont expect it to be pretty. Latvia released March´s unemployment rate today; 10.7%. The highest in 11 years. No surprise there. Apart from it being so - low.

Unfortunately I expect the Latvian unemployment rate to grow exponentially worse from here. The private sector shutdown gathers momentum. The devaluation timing on this one is purely political. Therefore I choose the unemployment rate as the main domestic economic indicator for political pressure build up.At between 20%-30% unemployment rate I expect the fixed exchange rate lid to blow. When will this be the case? 3Q?

Current budget negotiations in order to make the self imposed cost cuts do not seem to go that well. I put a question mark over whether they will succeed. These were the terms agreed with the IMF. It is not out of the question that IMF steps up the pressure and demands a devaluation in exchange for further IMF funds, should Latvia not meet the agreed budget cost cuts in order to achieve the stipulated 5% of GDP budget deficit. With the kryptonite like deflation in Latvia, the current economic situation is simply unsustainable. As long as the LVL is not allowed to float the downwardspiral will just continue. What we dont want is for Latvia and the rest of the Baltics to turn socially unstable. The risks are increasing as the stakes are raised in this -" I -dont - want- to -take- my- stop" foolish game the Latvian government is now playing (along with many other governments around the world). I am still long Eur/Lvl via outright.

*Position changes
Still monitoring Oil closely.
-My Eur/Usd, Gbp/Usd, Gbp/Chf and Eur/Chf long gamma positions have all expired. Net, net not much result on those.
- Long Call on Morgan Stanley for their report tommorrow.

As always, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.

Rallying for all the wrong reasons - beware of Easter profittaking

2009-04-07T08:06:00.010+01:00

The Easter break is here with all kids home from school. Spend yesterday with my kids as well as trying to sort out house builder issues. Will go Easter skiing tommorrow. The blogupdates will then resume on the 14th of April.

* The already "old" IMF suggestion of Euroisation of the CEE area
The IMF report calling for the Euroisation of the CEE countries was written a month ago. It is very interesting in that it provides some insight as to how desperate the IMF must have been at that point in time. It seems they were very much so. Introducing the Euro to hardcurrency debt, weak economic infrastructure countries, some of which currently apply fixed exchange rate regimes, will not be a solution.

- Most local currencies would have to devalue pre entry to the Euro anyway - then what? Locked into yet another fixed currency exchange rate regime. Admittedly with a floating currency, but not adaptable to any specific countrys fundamentals. The economic infrastructure issues and high leverage debt would not go away post an Euro entry.
-It would most likely seal the fate of the Euro as the eurozone is halfsinking as it is, already full with overleveraged, and massive amounts of toxic assets. Bringing on whole countries ready to sink will not help keeping the Euro ship afloat,,,,
- Admittedly, many of the CEE toxic loans will hit western european banks anyway since they have provided the credit. However, including the CEE into the Eurozone would just make things even worse.

Besides, I strongly doubt the ECB will change their mind and allow it. Post G20, the initial feelgood factor is strong enough to make this a non issue - for now. Have a feeling it will resurface before long though, as the European crisis has just begun. It will take a massive manipulation, fudging and fraud to postpone that development.

* As I mentioned on 3 April, I am joining the bullish herd - for the wrong reasons
Risks are building up with governments now increasingly applying the Martingale system. Drastically increasing the systematic risks, betting the economic turn will soon take place. It must, or else,,, For now, the market likes it - a lot. A classic, sharp, bearmarket rally.
Short term gain - long term pain.

*What is the US Treasury doing? Increasing the risks.
Lets look back. What has been the consensus on what created this mess in the first place? Too much leverage, repackaging "toxic" assets and selling them off to third parties, with the taxpayers taking the final risk.

So, any new measures from the governments surely must include some deleveraging, mark to market and accounting stringency directives? Ehhh, no. Instead, the US government has instead made sure the upcoming auctions of "toxic" assets will be leveraged directly by the taxpayers in order for the prices bid at the auction getting closer to the fudged, out of bounds asset valuations on the US banks balancesheets.

Investors not being approved for US taxpayerfinancing at the upcoming Geithner auctions have made clear they will not participate since they will not be able to get taxpayerfinanced leverage. The approved bidders have made clear that with the six times leverage from taxpayers, they will be able to bid three times higher than they otherwise would have. With the adjusted US FASB rules, the US banks will be able to adjust the 1Q results accordingly. Expect very good 1Q results from the US banks, especially on the writedownside. Its all government approved accounting "fraud" though. Hopefully investors will not be fooled.

The big risk is that Europe will follow and do something similar.
It is all one big gamble on the economies turning up. Then the fudging could continue, hampering growth in the process. If it doesnt, sooner or later losses will have to be realised. Problem is, by then, they would have grown into monstrous proportions. Especially if one looks at the difference between accounted and real value, ie book value vs market value.

Which brings me back to why the financial institutions problems got so much worse in the first place; lack of mark to market procedures; lack of riskmanagement procedures. Without mark to market procedures, it becomes quite difficult to generate the most efficient riskmanagement structure.

Admittedly, this was all approved by controlling authorities. this, however, it is not really an excuse for the financial institutions. Look at GS, they imposed the mark to market approach themselves, and they have by far had the most efficient riskmanagement of their toxic assets. They simply got rid of them as they started souring. Why didnt other institutions do the same thing then?

Well, some were probably unaware of what was taking place, as it did not show up in their results. Others identified it, but were prohibited by their management to sell as the discrepancy between booked value and market price would have caused severe losses. By definition, the riskmanagement strategy post it would have been a "fingers crossed" strategy.

The logic conclusion is that most of the current boards of financial institutions with great loss incurring assets on their books should go. As long as they stay put, it will be quite hard to get an efficient solution to the current "toxic" and bad asset dilemma. This is applicable globally.

*Beware of pre Easter profittaking
With the fierce bull run up to Easter, I expect some pre Easter profittaking to take place.
I have tried to find something more to buy, but have decided to stay on the sidelines, since I doubt this is the time and the place. Besides, 1Q results are coming up, and it will be interesting to see how they fall out, and, especially, how the market reacts to these results. Re US banks, I expect very good results. Especially with the FASB fudging now solidly in place and applicable to 1Q results. I am keeping a close eye on Brent Oil and a basket of US banks.

*Gold below important support levels
My Gold bear case seems to be about to take place with the Gold price moving below important support levels. Next stop should be in the 840/860 area, looking for the 810 level within the next week and a half. I expect choppy price action with rally attempts along the way.

*Position changes
-I have taken profit on my remaining part of Ivanhoe Goldmines, IVN. The whole position is now replaced with Call options, protecting profits.
-I am still long gamma in my other positions, looking for some sharp stop loss movements pre Easter.
- I have taken profit on one third of my short Gold options position, locking in profit.

As usual, good luck

The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.