* 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.
21 December 2009
27 November 2009
Neighbour bailout for Dubai around the corner? Either way, continued volatility is the conclusion.
* 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,,,
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 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.
26 November 2009
Eur/Usd in Dec; repatriation flows to kick in - watch out in the new year.
* 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.
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.
29 September 2009
European creditplug remains, expect a stronger Euro towards the end of the year, near term it looks soft though.
* 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.
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.
25 September 2009
Sterli´n is a falli´n
* 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.
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.
24 September 2009
The toiletshaped recovery
* 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.
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.
17 September 2009
The Irish bank bailout; getting rid of the Irish creditplug. Taxpayers buying bad assets at inflated prices. May the bubble not burst.
* 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.
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.
* 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.
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.
15 September 2009
Awaiting the Pittsburg G20 - walking a tightrope.
* 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.
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.
11 September 2009
The bearmarket rally is clearly not over. Assetpumping to fill the creditgap. Weaker Usd. Stronger Jpy.
* 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.
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.
10 September 2009
Post G20; Policymakers sliding further into bubble pumping?
* 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.
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.
07 September 2009
Time to sell commodities ex Gold, China bubble demand about to deflate. Financials should be weighed on.
* 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.
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.
02 September 2009
The fresh liquidity has stopped coming in. China to become a drag, not a boost. The bearmarket rally is over.
* 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.
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.
01 September 2009
Declining Chinese credit supply to drag Shanghai, commodities lower
*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.
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.
27 August 2009
Is the bear market rally complete? Important variables are arguing this could be the case. Will we have to wait til October though?
*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.
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.
26 August 2009
Time to close those short Jpy positions - even if the assetmarket rally continues. Heres why.
* 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.
- 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.
24 August 2009
Strong European indicators likely to continue short term, but creditgrowth is struggling and likely to slow from here.
*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.
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.
20 August 2009
Shortterm bullish assetmarkets - still wary of September
* 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.
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.
19 August 2009
Euforia slowly evaporating - watchout for the hangover
* 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.
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.
18 August 2009
TIC data and the USD; the market is short the Usd.
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.
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.
17 August 2009
Wild month of July - set to continue?
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.
- 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.
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.
03 July 2009
NFP; Early fall?
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
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.
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
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.
20 June 2009
Vacation time
* 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.
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.
10 June 2009
Current marketconditions (ex Latvia); follow the flow.
* 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.
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.
09 June 2009
Latvia; Starving themselves to recovery - wheres the upside?
* 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.
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.
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