Selectively short term bullish on assets

US initiatives supporting assets short term


The US decision to establish a "bad bank" was just what the doctor ordered. By lifting out 1 Trn Usd worth of "toxic assets" out of the banks balance sheets into the "bad bank", the US authorities have in effect "cleaned" their banks balancesheets. The US administration got the US senate and finance Committee to agree to 525 BN Usd out of the 900 Bn Usd fiscal package overnight


This will attract private capital towards the US banking sector since the major obstacle for investing there has been cleared. This is in line with what I wrote on the 23rd of Jan ("The Swedish Bank plan"). Banks balance sheets needs to be swiped clean in order for the lending to get going again.
It is also in line with an article the IMF put on their homepage on the 26 Jan. http://www.imf.org/external/pubs/ft/survey/so/2009/NEW012609A.htm

I am buying US banks Citigroup and Bank of America via options.

The assetmarkets will be supported near term. However, I believe stockmarket correlations on this move have been way too high globally as measures by authorities in the US are not reflected in Europe.

Germany still firmly resists the creation of a "bad Bank" for "toxic assets". This and the fact that profiscal and monetary measures are lagging the US dramatically both in terms of the number of proactive initiatives as well as in size. This makes a huge difference to me and, I would imagine, to the markets as well. So far no sign of it though.

I will be looking for reasons to go short banks in Europe as soon as the market realises the "good US story" does not apply to the gloomy European one.
Relatively speaking, creditlosses are still waiting to be realised in Europe.

In the US, the bank share holders have already paid their price - not in Europe. CEE countries will weigh very heavily around Europes credit neck, not to mention the massive internal European credit problems - still unresolved. European banks heavily exposed towards CEE countries, especially the ones with fixed currency regimes and heavy foreign currency exposure, will be the ones I will prefer to sell once this rally dwindles.

With an increased yield focus in FX short term I am still long Eur/Usd as US bond yield differentials have moved 60 plus BP in favour of the Euro. With the US "bad bank" initiative the need for Usd positive repatriation flows have temporarily abated. (This will weaken as a factor for buying Usd overtime anyway, focus will be on other variables.) I am still Usd bullish overall. This is just a short term tactical trade.



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.