* Quick feet - position changes
I have already taken profit on my long Usd/Try, Eur/Pln, Eur/Huf and Eur/Sek positions. Looking to reinstate the positions again on any end of month currency strength. I have added to my long Eur/Usd gamma, long Nzd puts/Usd calls as well as added to my long Eur/Chf gamma by buying more Eur Calls/Chf puts.
With month end in process and the calendar full of events, I will remain light on my feet in order to capitalise on quick changes. The markets are still thin and nervous - please mind the gap(s). Pardon the punt.
*Was covert Jpy "intervention" taking place overnight via institutional investors?
With the heavy Jpy selling by Japanese institutonal investors it would not seem an unlikely proposition. With the Japanese fiscal year ending today, a weak Jpy is necessary to avoid foreign currency asset writedowns. This seems now to have been achieved. As I have pointed out in earlier daily pieces, a weaker Jpy was more likely towards this fiscal year end rather than the usual seasonal Jpy strength.
The Jpy development in April should be very important for several reasons, will the fierce Jpy outflows continue or will the Japanese plans to attract capital for domestic investments work? Equity markets and others should pay attention as the outcome will likely affect the volatility level as well as direction of assetmarkets. On top of what was mentioned on yesterdays daily in terms of measures to bring Japanese capital back to Japan, Japanese authorities are now alledgedly considering a 12 Trn Jpy stimulus package. 131 in Eur/Jpy is an important level and potential carry traders should watch that level. Correlation break ups have also hit the Jpy and portfolio flows are now the most important variable for Jpy direction.
*SNB and quantitative easing going forward
SNB are battling the fundamentals in their quest for a quantitative easing policy.
If the SNB is serious about their commitment to quantitative easing, it will have to continue to involve weakening their currency, the CHF, due to the shortcomings of the Chf bondmarket, liquiditywise. With the Swiss rates already at rockbottom and the KOF still at record lows, additional stimulus measures are likely to be considered. As a not irrelevant spinoff, a weaker Chf will likely at least somewhat decrease loanlosses from the CEE countries. I am positioned for a weaker Chf.
*G20
There are hardly any positive expectations left for the G20 meeting by now. Any expectations that the G20 will be able to achieve anything at all are very low. On the positive side, any non negative surprises or outcomes might even be a positive to the market.
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.
31 March 2009
30 March 2009
Who wants to be the safe haven currency of the world? - Noone
* FX intervention risks are increasing for CHF and JPY this week.
The Japanese authorities are planning to establish an investmentfund designed to acquire properties held by real estate investment trusts, REIT;s. It will be financed by raising capital from the public and private sectors. If implemented, this will create an investment opportunity within Japan that could partially reverse the hefty outflows already seen including the accelerated ones expected past the fiscal year end.
Furtheron, the Japanese governments is also considering a tax incentive to bring back some of the 17 Trn Jpy overseas profits from Japanese companies.
This should all be short term Jpy supportive.
On the other hand, with the latest bout of Jpy strength into the Japanese fiscal year end, Japanese lifers and insurance companies should be suffering currencylosses. So much, infact, that the risk of Japanese intervention has risen quite substantially for the next 24 hours.
A set up for Jpy volatility in other words. I am long Eur/Jpy gamma.
The SNB has a somewhat different situation,but it will also lead to an increased FX intervention risk. With the Swiss bondmarkets not being deep enough for quantitative easing, the SNB will have to continue to use the FX market in order to maintain it. With the CHF strengthening on the back of increased riskaversion and a battle against fundamentals, the SNB will have to intervene before long. This, too, should create increased FX volatility near term. I am long Eur/Chf gamma.
*Bank of Norway following in the footsteps of the SNB?
Risk is increasing that the Bank of Norway will follow in the footpath of the SNB. Quantitative easing definitely seems to be on the Norwegian agenda and since the Norwegian bondmarket is too small to apply it, it will have to involve FX if quantitative easing is to be applied.
With the NOK increasingly being nominated the safe haven currency of choice for many Fx positions, it is increasingly becoming a burden. Thus, although the long Nok/Sek position squeeze is already in motion, one should not rule out Fx intervention to weaken the NOK. Although, I do believe that would be a mistake. In any case, I am winding down my remaining long Nok/Sek position and will monitor this one closely from here.
* Eur/Usd set to weaken further
The ECB meeting this Thursday may reveal an ECB considering quantitative easing in practise and not just in theory. The G 20 should not expect any massive fiscal stimulus measues from the Eurozone. The revelation of the 9 BN Eur bailout of the Spanish bank Caja Castilla La Mancha is yet another sign that the European banking crunch has just started. This was the first major Spanish bank rescue in 16 years.
Alledgedly, Caja Castilla represents only 1% of the Spanish financial system. However, if this 1% requires a 9Bn Euro bailout, I cant help but think how much will be needed in total before the Spanish bailoutstory has played out? Further, how much can the already hard pressured Spanish budget really afford? Or more correctly, how big will their deficit become? How much can Spain handle? How much can the Eurozone handle?
Lets keep our fingers crossed the Latin American economies keep on doing relatively well,,,,, One should of course remember that Spain is only one of a large number of countries in the Eurozone and within the EU that is in serious financial trouble. Yet, the ECB is pretending it is not happening. Additionally, the European commission is up for reelection as is the European parliament. The risk for yet another European action paralysis is evident. Facing the current challenge it is illtimed, to say the least. The risk that the European banking crisis will supersede the American one is increasing.
I am long Eur/Usd puts, gamma.
* I have bought bank puts on European banks with Baltic and CEE exposure again
I expect the bankpressure to increase as I expect another refocus to take place on the European front. The impression I am getting is that the banks stuck in countries with fixed exchange rate systems do not realise how serious the situation will actually become for them. Instead my impression is many bank CEO;s are behaving like Ostriches, keeping their fingers crossed everything will sort itself out. Well, it will not.
The phrase "we remain committed to these markets for the long term" and "these are our homemarkets" seems to be the mantras. I cant really blame them though. With no riskmanagement due to the gross mismatch between balancesheet and market values the only choice is to declare insolvency or deliver platitudes as per above.
I read an interview with one of them over the weekend. Unfortunately he made it abundantly clear he had absolutely no clue what he was talking about. A lot of what came out was hastily compiled platitudes from other bankstaff which he had been forced fed. It does not bode well for what is to come. I am long bank puts with exposure to the Baltics and CEE countries.
*New positions apart from the above
- Long strangles on the VIX
- Long Eur/Huf, Eur/Pln, Usd/Try, Usd/Rub, Eur/Sek (Already taken partial profits on these but still long)
As always, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
The Japanese authorities are planning to establish an investmentfund designed to acquire properties held by real estate investment trusts, REIT;s. It will be financed by raising capital from the public and private sectors. If implemented, this will create an investment opportunity within Japan that could partially reverse the hefty outflows already seen including the accelerated ones expected past the fiscal year end.
Furtheron, the Japanese governments is also considering a tax incentive to bring back some of the 17 Trn Jpy overseas profits from Japanese companies.
This should all be short term Jpy supportive.
On the other hand, with the latest bout of Jpy strength into the Japanese fiscal year end, Japanese lifers and insurance companies should be suffering currencylosses. So much, infact, that the risk of Japanese intervention has risen quite substantially for the next 24 hours.
A set up for Jpy volatility in other words. I am long Eur/Jpy gamma.
The SNB has a somewhat different situation,but it will also lead to an increased FX intervention risk. With the Swiss bondmarkets not being deep enough for quantitative easing, the SNB will have to continue to use the FX market in order to maintain it. With the CHF strengthening on the back of increased riskaversion and a battle against fundamentals, the SNB will have to intervene before long. This, too, should create increased FX volatility near term. I am long Eur/Chf gamma.
*Bank of Norway following in the footsteps of the SNB?
Risk is increasing that the Bank of Norway will follow in the footpath of the SNB. Quantitative easing definitely seems to be on the Norwegian agenda and since the Norwegian bondmarket is too small to apply it, it will have to involve FX if quantitative easing is to be applied.
With the NOK increasingly being nominated the safe haven currency of choice for many Fx positions, it is increasingly becoming a burden. Thus, although the long Nok/Sek position squeeze is already in motion, one should not rule out Fx intervention to weaken the NOK. Although, I do believe that would be a mistake. In any case, I am winding down my remaining long Nok/Sek position and will monitor this one closely from here.
* Eur/Usd set to weaken further
The ECB meeting this Thursday may reveal an ECB considering quantitative easing in practise and not just in theory. The G 20 should not expect any massive fiscal stimulus measues from the Eurozone. The revelation of the 9 BN Eur bailout of the Spanish bank Caja Castilla La Mancha is yet another sign that the European banking crunch has just started. This was the first major Spanish bank rescue in 16 years.
Alledgedly, Caja Castilla represents only 1% of the Spanish financial system. However, if this 1% requires a 9Bn Euro bailout, I cant help but think how much will be needed in total before the Spanish bailoutstory has played out? Further, how much can the already hard pressured Spanish budget really afford? Or more correctly, how big will their deficit become? How much can Spain handle? How much can the Eurozone handle?
Lets keep our fingers crossed the Latin American economies keep on doing relatively well,,,,, One should of course remember that Spain is only one of a large number of countries in the Eurozone and within the EU that is in serious financial trouble. Yet, the ECB is pretending it is not happening. Additionally, the European commission is up for reelection as is the European parliament. The risk for yet another European action paralysis is evident. Facing the current challenge it is illtimed, to say the least. The risk that the European banking crisis will supersede the American one is increasing.
I am long Eur/Usd puts, gamma.
* I have bought bank puts on European banks with Baltic and CEE exposure again
I expect the bankpressure to increase as I expect another refocus to take place on the European front. The impression I am getting is that the banks stuck in countries with fixed exchange rate systems do not realise how serious the situation will actually become for them. Instead my impression is many bank CEO;s are behaving like Ostriches, keeping their fingers crossed everything will sort itself out. Well, it will not.
The phrase "we remain committed to these markets for the long term" and "these are our homemarkets" seems to be the mantras. I cant really blame them though. With no riskmanagement due to the gross mismatch between balancesheet and market values the only choice is to declare insolvency or deliver platitudes as per above.
I read an interview with one of them over the weekend. Unfortunately he made it abundantly clear he had absolutely no clue what he was talking about. A lot of what came out was hastily compiled platitudes from other bankstaff which he had been forced fed. It does not bode well for what is to come. I am long bank puts with exposure to the Baltics and CEE countries.
*New positions apart from the above
- Long strangles on the VIX
- Long Eur/Huf, Eur/Pln, Usd/Try, Usd/Rub, Eur/Sek (Already taken partial profits on these but still long)
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.
27 March 2009
US Corporate debt not joining the equity rally - be aware
* US senior bank debt at its widest since the Lehman collapse
Looking at the underlying assets the US banks hold, I note the following;
- Corporate defaults are surging; The S&P by March 20th had recorded 47 defaults globally, which is three times the default level for the same time period in 2008.
- Leveraged loans as measured by the LCDX index remains close to it all time lows at 74% of nominal.
- Commercial mortgagebacked securities has rallied sharply over the last week which of course is positive.
According to a Deutsche Bank calculation, the USD investment grade corporate bonds were pricing in a five -year default rate with a 40% probability assuming average recovery rates. As a reference; the worst five - year investment grade default rate since 1970 is 2.4%, with the average at 0.9%,,
*"Dirt cheap" corporate debt - money is being pumped in, but no rally - not good
With investmentgrade debt absurdely cheap and investors pumping money in - where is the rally? Stock market bulls should sit up and pay attention - this is not a good sign. Main reason this bond rally is not taking off is the lack of demand for financial debt.
Demand is mainly for nonfinancial debt where buyers are met with a wall of supply. Borrowers are bypassing the banking system which in turn prevents the spreads from tightening. Financial debt guaranteed by governments are still finding buyers, but it is hardly a vote of confidence.
Assetbacked securities and leveraged loans still remain unloved. Without a sustained improvement in credit markets the risks to the current bearmarket rally will increase.
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.
Looking at the underlying assets the US banks hold, I note the following;
- Corporate defaults are surging; The S&P by March 20th had recorded 47 defaults globally, which is three times the default level for the same time period in 2008.
- Leveraged loans as measured by the LCDX index remains close to it all time lows at 74% of nominal.
- Commercial mortgagebacked securities has rallied sharply over the last week which of course is positive.
According to a Deutsche Bank calculation, the USD investment grade corporate bonds were pricing in a five -year default rate with a 40% probability assuming average recovery rates. As a reference; the worst five - year investment grade default rate since 1970 is 2.4%, with the average at 0.9%,,
*"Dirt cheap" corporate debt - money is being pumped in, but no rally - not good
With investmentgrade debt absurdely cheap and investors pumping money in - where is the rally? Stock market bulls should sit up and pay attention - this is not a good sign. Main reason this bond rally is not taking off is the lack of demand for financial debt.
Demand is mainly for nonfinancial debt where buyers are met with a wall of supply. Borrowers are bypassing the banking system which in turn prevents the spreads from tightening. Financial debt guaranteed by governments are still finding buyers, but it is hardly a vote of confidence.
Assetbacked securities and leveraged loans still remain unloved. Without a sustained improvement in credit markets the risks to the current bearmarket rally will increase.
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.
26 March 2009
Riskaversion continues lower - opportunity or trendchange?
*Overview
What has happened over the last few weeks?
Massive US stimulus launches and G20 like meetings has generated hope for a change and solution to improvements in housing, growth, toxic assets and the liquidity plug.
Markets have had very bearish expectations both on economic numbers and corporate news. Any number or news in line with already bearish expectations has been a positive, any positive number or news has been megabullish. The China growth story has been brushed off and relaunched further enhancing the positive market sentiment. In short; the market consensus has been negative. It was time for a position squeeze and a bearmarketrally, which is what we have seen. The market still seem quite hesitant to this latest bullrally which could indicate it still has legs.
In addition, there has been quite alot of liquidity related depression of assets, which are now bouncing. Equity valuations are up on the radarscreen again.
Even carry aspects are coming alive with yielders gaining together with commodity and riskaversion hit currencies. CEE currencies has after an initial rally been consolidating for the last week.
*Where from here?
With higher stocks and lower implied volatilites comes carry plays and increased asset correlations. This creates opportunities for bullish asset plays. Commodities could very well continue higher from here.
I am still quite wary of the Baltics and the impact it will have on the rest of the CEE countries, the Scandinavian and western European banks. In a pressconference today the Latvian PM made clear that the IMF supports a devaluation while the Latvian government, Centralbank and the European Commission does not. The pressconference was given in conjunction with the Latvian - IMF renegotiation of the budget deficit in relationship to the GDP. Latvia wants to change the agreed maximum from 5%, to a 7% budget deficit of GDP. It will probably be quite difficult to get the IMF to agree to those new terms.
I believe the IMF would rather, as mentioned above, see a float if there are to be any concessions. Question is; Will the the EU step in to add the necessary cash to Latvia if the IMF refuses? Anyway, the Swedish, Norwegian and Danish governments/taxpayers should make sure they dont waste any more cash than they have already done. It is simply not worth it.
It will become difficult to solve the US banksituation with the Geithner plan. Partly due to flaws in the plan itself (see earlier posts), but also because of the increasing risk that the US Congress will not be forthcoming. Latest suggestion in the US congress is that any company buying 1BN Usd or more worth of "toxic assets" will automatically be subject to US state bonus regulations.
Besides, the Baltics and the CEE and western European banking insolvency issues have yet to play out in Europe.
When it comes to China, I would be very careful in reading too much into it. True, there are massive infrastucture projects being launched in China which I am all for and think is great. That is definitely a positive. However, I dont think we have seen even a fraction of Chinas misallocation and banking problems come to the surface yet. The key for China will be whether the surplus will be able to finance the coming credit losses and domestic spending without selling assets abroad; read the US).
*The inflation scare
I do agree there is a high risk of inflation becoming a massive issue at some point in time - but not now. One thing at a time. To me it seems way premature to play the inflation theme at this point in time. The timing is simply off. Admittedly, I have been long oil myself, but NOT due to any inflation scare. The main issue is still deflation, despite the recent US and European numbers. Over the last few weeks there has been plenty of position squaring and triggering of stops. I believe this too, could continue until trends are resumed again. I will stay nimble til then.
*Positioning
-I was caught long puts on European banks with exposure vs the Baltics and the CEE as the market went sharply higher. Luckily I went long a basket of US bank stocks against it, since I wanted to keep the digital exposure while benefitting from the US bank plan.
-I am still long the puts but have closed my long basket of US bank stocks.
-I closed my short positions on the CEE currencies and am closely monitoring them from here, looking for a reentry. I am still long Eur/Lvl.
-I am still short Gold via options and am currently reevaluating the position as momentum is waning. I still believe the market consensus is way too bullish and with 43% of long Gold positions stemming from the GLD ETF contract, it seems like it would be ripe for a clearout.
-I am still long the IVN Goldminer stock. The stock has moved favourably since my position inception but I am in it for way more than that. The mining approval they are awaiting from the Mongolian parliament would, if approved, clear the way for the worlds biggest Gold and Coppermine field. The parliament is set to reconvene on this issue in early April. With the Mongolian government currently strapped for cash relying on the IMF for funding, the IMF has alledgedly advised them to sort out the mining approval. Further on, Rio Tinto bought a stake in IVN last fall and if the there is a mining approval, there will most likely be speculation on whether Rio Tinto will make a bid for the whole company.
-I took profit on half of my long position in Nok/Sek in the high 1.27;s. Post the Nok rate announcement there has been quite a squeeze in Nok/Sek and I am monitoring the remaining position closely.
-I have taken profit on my long Oil position.
- I am short US long bonds via options
Volatility has calmed down substantially and many assets are currently ranging or correcting. I will await further opportunities from here. One thing is for sure - there will be more of them. In all kinds of shape and forms.
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.
What has happened over the last few weeks?
Massive US stimulus launches and G20 like meetings has generated hope for a change and solution to improvements in housing, growth, toxic assets and the liquidity plug.
Markets have had very bearish expectations both on economic numbers and corporate news. Any number or news in line with already bearish expectations has been a positive, any positive number or news has been megabullish. The China growth story has been brushed off and relaunched further enhancing the positive market sentiment. In short; the market consensus has been negative. It was time for a position squeeze and a bearmarketrally, which is what we have seen. The market still seem quite hesitant to this latest bullrally which could indicate it still has legs.
In addition, there has been quite alot of liquidity related depression of assets, which are now bouncing. Equity valuations are up on the radarscreen again.
Even carry aspects are coming alive with yielders gaining together with commodity and riskaversion hit currencies. CEE currencies has after an initial rally been consolidating for the last week.
*Where from here?
With higher stocks and lower implied volatilites comes carry plays and increased asset correlations. This creates opportunities for bullish asset plays. Commodities could very well continue higher from here.
I am still quite wary of the Baltics and the impact it will have on the rest of the CEE countries, the Scandinavian and western European banks. In a pressconference today the Latvian PM made clear that the IMF supports a devaluation while the Latvian government, Centralbank and the European Commission does not. The pressconference was given in conjunction with the Latvian - IMF renegotiation of the budget deficit in relationship to the GDP. Latvia wants to change the agreed maximum from 5%, to a 7% budget deficit of GDP. It will probably be quite difficult to get the IMF to agree to those new terms.
I believe the IMF would rather, as mentioned above, see a float if there are to be any concessions. Question is; Will the the EU step in to add the necessary cash to Latvia if the IMF refuses? Anyway, the Swedish, Norwegian and Danish governments/taxpayers should make sure they dont waste any more cash than they have already done. It is simply not worth it.
It will become difficult to solve the US banksituation with the Geithner plan. Partly due to flaws in the plan itself (see earlier posts), but also because of the increasing risk that the US Congress will not be forthcoming. Latest suggestion in the US congress is that any company buying 1BN Usd or more worth of "toxic assets" will automatically be subject to US state bonus regulations.
Besides, the Baltics and the CEE and western European banking insolvency issues have yet to play out in Europe.
When it comes to China, I would be very careful in reading too much into it. True, there are massive infrastucture projects being launched in China which I am all for and think is great. That is definitely a positive. However, I dont think we have seen even a fraction of Chinas misallocation and banking problems come to the surface yet. The key for China will be whether the surplus will be able to finance the coming credit losses and domestic spending without selling assets abroad; read the US).
*The inflation scare
I do agree there is a high risk of inflation becoming a massive issue at some point in time - but not now. One thing at a time. To me it seems way premature to play the inflation theme at this point in time. The timing is simply off. Admittedly, I have been long oil myself, but NOT due to any inflation scare. The main issue is still deflation, despite the recent US and European numbers. Over the last few weeks there has been plenty of position squaring and triggering of stops. I believe this too, could continue until trends are resumed again. I will stay nimble til then.
*Positioning
-I was caught long puts on European banks with exposure vs the Baltics and the CEE as the market went sharply higher. Luckily I went long a basket of US bank stocks against it, since I wanted to keep the digital exposure while benefitting from the US bank plan.
-I am still long the puts but have closed my long basket of US bank stocks.
-I closed my short positions on the CEE currencies and am closely monitoring them from here, looking for a reentry. I am still long Eur/Lvl.
-I am still short Gold via options and am currently reevaluating the position as momentum is waning. I still believe the market consensus is way too bullish and with 43% of long Gold positions stemming from the GLD ETF contract, it seems like it would be ripe for a clearout.
-I am still long the IVN Goldminer stock. The stock has moved favourably since my position inception but I am in it for way more than that. The mining approval they are awaiting from the Mongolian parliament would, if approved, clear the way for the worlds biggest Gold and Coppermine field. The parliament is set to reconvene on this issue in early April. With the Mongolian government currently strapped for cash relying on the IMF for funding, the IMF has alledgedly advised them to sort out the mining approval. Further on, Rio Tinto bought a stake in IVN last fall and if the there is a mining approval, there will most likely be speculation on whether Rio Tinto will make a bid for the whole company.
-I took profit on half of my long position in Nok/Sek in the high 1.27;s. Post the Nok rate announcement there has been quite a squeeze in Nok/Sek and I am monitoring the remaining position closely.
-I have taken profit on my long Oil position.
- I am short US long bonds via options
Volatility has calmed down substantially and many assets are currently ranging or correcting. I will await further opportunities from here. One thing is for sure - there will be more of them. In all kinds of shape and forms.
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.
24 March 2009
US taxpayers, the Geithner plan and quantitative easing vs banks lack of mark to market of balance sheet assets
* First off
Lets make this clear; The market is always right and markets are inefficient. The only thing that matter in the marketplace is what the market does. Timing is everything. Sounds contradictory?Bottom line; respect the price action, it will always provide information in itself. However, the key is identifying that information and interpreting it. For instance, is the market rallying because the Mr Geithners plan is a good plan or is there something else driving it?
For the time being, I believe the market is rallying for other reasons. I will not spend time elaborating why, apart from the mechanics of a bear market rally. Now, with this made crystal clear, back to the fundamental dilemma that the Geithner plan is trying to sort out.
*What would be the quickest and easiest way to get lending for banks with "toxic assets" going again?
Answer; Get rid of the "toxic" assets. If not possible, mark them to market.
Its as simple as that. However, there are some, eehhumm, drawback(s); Many banks with these "toxic" assets have big discrepancies between balance sheet and market values. This will make banks become insolvent in the mark to market process. Dissolving themselves while creating the solution so to speak.
This goes for the vast majority of banks globally which are burdened by "toxic" or bad assets. According to Credit Suisse, only 15% of US banks have their assets marked to market.
*Minimizing the taxpayer injury
The question then becomes how to make taxpayers taking as small a hit as possible.
This involves lettings shareholders loose the value of their capital invested, it would further involve bondholders of banks doing the same. Depositors and contracts made with other banks, corporates and other financial instituions would have to be honoured though, not create havoc.
This way, at least some money would be saved for taxpayers. Post this I would propose the "new bank" model, (I have mentioned this one in earlier pieces), where good assets would be lifted out from the "old" bank into a "new" one. The remaining debts and "toxic assets" would be left in the "old" one. Taxpayers would then hold it til it would be possible to offload any or all of it to the market at a point in the future deemed "appropriate". Meanwhile, the "new" bank would be completely refinanced by private capital/investors. This would most likely be no problem. I would certainly want to be a shareholder in a bank with no bad loans or assets. It is per definition a moneymaker.
*The Geithner plan means a higher risk for increased costs without solving the underlying problem
In my view, the Geithner plan is a much costlier version for the taxpayers. It is cost inefficient and it burdens the taxpayer too much vs the banks. Most important of all;
1) It still does not come to grips with the underlying issue; the overvaluation of US banks balancesheet assets. As long as they remain overvalued, lending will NOT start again.
2) Banks management will still be in control of the (non riskmanagement) of their balance sheet. They will be driven by other incentives than the state when it comes to "come clean", thus postponing lending and a revival for the economy.
3) The risk with Mr Geithners plan is that banks will simply not sell the most "toxic" assets on their balance sheet if bids are "too low". (Meaning the discrepancy between their balance sheet and the market price offered would incure "too big" losses.) Hence, the most "toxic" assets will remain on their balance sheets, effectively clogging up new lending.
One way would be for the US treasury to force banks marking their assets to market values achieved via the auctions. I very much doubt this will happen since then the US treasury and Mr Geithner would have presented a completely different plan in the first place. Mr Geithner and the US treasury must be very aware that banks are insolvent if their balancesheets assets are marked to market.
4) The Geithner plan wants private investors buy "toxic" assets, with the US taxpayers sorting out the private investors financing. (Up to six times when it comes to "legacy loans"(!), "legacy securities" is only financed 1;1 by the US taxpayers). Taxpayer leveraging finance in a deleveraging world. It does not make sense to me.
*High risk solution creates high risks for the US - and the world
Quantitative easing is another inefficient way of trying to get to grips with this problem instead of attacking the root of it.
It follows the same pattern as the Geithner plan. Increase leverage further in order to roll losses forward and smoothen it out over time. Not good and I dont like it. Quantitative easing has never worked from a historical perspective and is not likely to work well now either, especially since we know exactly where the problem lies.
*Deleveraging in an orderly fashion is the key -because deleveraging should and must take place
One risk from here is that the US exports an easing of monetary conditions, creating further misallocations of capital, not completing the necessary deleveraging process set in motion.
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.
Lets make this clear; The market is always right and markets are inefficient. The only thing that matter in the marketplace is what the market does. Timing is everything. Sounds contradictory?Bottom line; respect the price action, it will always provide information in itself. However, the key is identifying that information and interpreting it. For instance, is the market rallying because the Mr Geithners plan is a good plan or is there something else driving it?
For the time being, I believe the market is rallying for other reasons. I will not spend time elaborating why, apart from the mechanics of a bear market rally. Now, with this made crystal clear, back to the fundamental dilemma that the Geithner plan is trying to sort out.
*What would be the quickest and easiest way to get lending for banks with "toxic assets" going again?
Answer; Get rid of the "toxic" assets. If not possible, mark them to market.
Its as simple as that. However, there are some, eehhumm, drawback(s); Many banks with these "toxic" assets have big discrepancies between balance sheet and market values. This will make banks become insolvent in the mark to market process. Dissolving themselves while creating the solution so to speak.
This goes for the vast majority of banks globally which are burdened by "toxic" or bad assets. According to Credit Suisse, only 15% of US banks have their assets marked to market.
*Minimizing the taxpayer injury
The question then becomes how to make taxpayers taking as small a hit as possible.
This involves lettings shareholders loose the value of their capital invested, it would further involve bondholders of banks doing the same. Depositors and contracts made with other banks, corporates and other financial instituions would have to be honoured though, not create havoc.
This way, at least some money would be saved for taxpayers. Post this I would propose the "new bank" model, (I have mentioned this one in earlier pieces), where good assets would be lifted out from the "old" bank into a "new" one. The remaining debts and "toxic assets" would be left in the "old" one. Taxpayers would then hold it til it would be possible to offload any or all of it to the market at a point in the future deemed "appropriate". Meanwhile, the "new" bank would be completely refinanced by private capital/investors. This would most likely be no problem. I would certainly want to be a shareholder in a bank with no bad loans or assets. It is per definition a moneymaker.
*The Geithner plan means a higher risk for increased costs without solving the underlying problem
In my view, the Geithner plan is a much costlier version for the taxpayers. It is cost inefficient and it burdens the taxpayer too much vs the banks. Most important of all;
1) It still does not come to grips with the underlying issue; the overvaluation of US banks balancesheet assets. As long as they remain overvalued, lending will NOT start again.
2) Banks management will still be in control of the (non riskmanagement) of their balance sheet. They will be driven by other incentives than the state when it comes to "come clean", thus postponing lending and a revival for the economy.
3) The risk with Mr Geithners plan is that banks will simply not sell the most "toxic" assets on their balance sheet if bids are "too low". (Meaning the discrepancy between their balance sheet and the market price offered would incure "too big" losses.) Hence, the most "toxic" assets will remain on their balance sheets, effectively clogging up new lending.
One way would be for the US treasury to force banks marking their assets to market values achieved via the auctions. I very much doubt this will happen since then the US treasury and Mr Geithner would have presented a completely different plan in the first place. Mr Geithner and the US treasury must be very aware that banks are insolvent if their balancesheets assets are marked to market.
4) The Geithner plan wants private investors buy "toxic" assets, with the US taxpayers sorting out the private investors financing. (Up to six times when it comes to "legacy loans"(!), "legacy securities" is only financed 1;1 by the US taxpayers). Taxpayer leveraging finance in a deleveraging world. It does not make sense to me.
*High risk solution creates high risks for the US - and the world
Quantitative easing is another inefficient way of trying to get to grips with this problem instead of attacking the root of it.
It follows the same pattern as the Geithner plan. Increase leverage further in order to roll losses forward and smoothen it out over time. Not good and I dont like it. Quantitative easing has never worked from a historical perspective and is not likely to work well now either, especially since we know exactly where the problem lies.
*Deleveraging in an orderly fashion is the key -because deleveraging should and must take place
One risk from here is that the US exports an easing of monetary conditions, creating further misallocations of capital, not completing the necessary deleveraging process set in motion.
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.
23 March 2009
Mr Geithner presenting the details - and the markets like it. I am not sure I do.
*The new plan to bring relief to "toxic assets" - will it work?
It depends on the purpose.
-If the purpose is to get "toxic assets" off the US banks balance sheets, it seems it could run into difficulties as only the banks truly "desperate" for capital might come forward. The bidding process for the private sector seems to be structured in such a way that the private investor will pay for a little bit over 7% of the initial investment no matter what they bid. With yield levels already very low, this would be an additional reason for private investors to be cautious in bidding for assets on offer. I doubt whether this will then help US banks to get recapitalised. However, it will establish a market price level. I would guess this would be the primary purpose.
-If the purpose is to force US banks to mark to market their balance sheet assets, it might be quite efficient as market prices will get established. However, the risk is high that this will trigger further¨recapitalisation needs, adding further supply to the market. With many influencal heavyweights in favour of no mark to market whatsoever, I would guess this is just a spinoff, although this would be a real way of getting to grips with the banks problems.
There is also the question of how these assets will be valued once they have been bought. So far I havent seen any detail on this. It is quite important and a question that need to be answered. Will be interesting to see whether this is also in place or not.
So far the stock markets have rallied and riskaversion continues to fall. This might very well continue. However I am wary of setbacks to this plan. Mr Geithner is hanging by a loose thread and if this latest plan would somehow not be deemed sufficient in detail or workability.,he is likely to have to go, creating turbulence and uncertainty in the process.
Positions;
I have closed my short Sek vs Eur, short Try, Pln and Huf.
Long basket of US banks stocks.
Long gamma in Eur/Usd, Eur/Jpy.
Long Nok/Sek.
Long Gbp/Usd, Gbp/Chf.
Long Oil, Short Gold.
Long Gold miner stock IVN.
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.
It depends on the purpose.
-If the purpose is to get "toxic assets" off the US banks balance sheets, it seems it could run into difficulties as only the banks truly "desperate" for capital might come forward. The bidding process for the private sector seems to be structured in such a way that the private investor will pay for a little bit over 7% of the initial investment no matter what they bid. With yield levels already very low, this would be an additional reason for private investors to be cautious in bidding for assets on offer. I doubt whether this will then help US banks to get recapitalised. However, it will establish a market price level. I would guess this would be the primary purpose.
-If the purpose is to force US banks to mark to market their balance sheet assets, it might be quite efficient as market prices will get established. However, the risk is high that this will trigger further¨recapitalisation needs, adding further supply to the market. With many influencal heavyweights in favour of no mark to market whatsoever, I would guess this is just a spinoff, although this would be a real way of getting to grips with the banks problems.
There is also the question of how these assets will be valued once they have been bought. So far I havent seen any detail on this. It is quite important and a question that need to be answered. Will be interesting to see whether this is also in place or not.
So far the stock markets have rallied and riskaversion continues to fall. This might very well continue. However I am wary of setbacks to this plan. Mr Geithner is hanging by a loose thread and if this latest plan would somehow not be deemed sufficient in detail or workability.,he is likely to have to go, creating turbulence and uncertainty in the process.
Positions;
I have closed my short Sek vs Eur, short Try, Pln and Huf.
Long basket of US banks stocks.
Long gamma in Eur/Usd, Eur/Jpy.
Long Nok/Sek.
Long Gbp/Usd, Gbp/Chf.
Long Oil, Short Gold.
Long Gold miner stock IVN.
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.
19 March 2009
The FED steroid injection - raising the stakes
*The FED going for quantitative easing, a sign of commitment or desperation?
I guess there are several takes on it. The positive one is that the FED gets ahead of the curve. The negative one is the state of the US banking system is in a far worse state than what the market is aware of. The bottom line is that the FED is raising the stakes and increasing the risks, given the heavy dependency on foreign financing due to their mountain of debt.
As of March 11th, the FED;s balancesheet was about 2Trn Usd. With the new measures announced, the FED;s balancesheet is set to expand to more than 4 Trn Usd.
*What are the consequences?
Short term, most likely this will mean an undermining of the USD, so weaker Usd, exporting an easing of monetary conditions abroad in the process. Implied volatility and riskaversion should come lower from this, benefitting riskier assets and narrowing spreads. Commodities should benefit as well, especially energyrelated ones.
Gold shot up yesterday, alledgedly on inflation related concerns. Gold seemed quite isolated in that context, especially with long end yields and riskaversion falling. While Gold could continue to have swift 50-100 Usd moves from here either way in the shortterm, the price action would seem to be reminiscent of a topping out process. Either way, I will make sure to be in on it since it generates serious money.
The Eur/Jpy bullish case should be in fullforce still while the Usd/Jpy one has weaken somewhat due to relative weakened policy credibility, growth on the US front plus vastly changed long yield differentials in favour of the Jpy.
I doubt any carry revival is on the cards near term though. Although financials have run up already, they could have further to go. As Ive pointed out earlier, I prefer US banks stocks to European ones. Mainly due to the cycle of which the US ones are in and the digital risk of the Baltics plus the Eastern europe dilemma which has yet to play out.
I would like to emphasise that these effects are mainly short term as riskaversion could shift drastically should the effect of the recent FED moves dissappoint. Unfortunately, the risks taken by the FED could make things potentially worse beyond the short term.
*Credibility of Mr Bernanke
Only a few days ago Mr Bernanke declared that the US economy would recover in 2010. With this plan enacted it would seem the transparency of the FED is heavily reduced or no longer in place. Both swap spreads and TIPS widened sharply post the announcement yesterday and might be something to keep in the back of ones mind in the midst of all bull talk.
*Positions changes
I have taken profit on my long Eur/Usd options and am awaiting better timing to get back in. Looking for Eur/Usd to reach 1.40 before long.
I have closed out my long Gbp/Jpy,
Gold rallied strongly overnight and while I am still positioned bearish Gold I am opening up for pure gamma plays here as well.
*FED and riskmanagement
The FED is getting plenty of applause for their latest measures and while I have to concede that the FED seem willing to try "anything and everything", they are also increasing risks and raising the stakes via measures that does not really solve the underlying issues. There is a risk that crunchtime is just rolled forward, snowballing it in the process. The Martingale method is not one to apply to riskmanagement but it is the one that the FED currently applies. This is very concerning to me.
The old saying; "When in trouble - double" is not what riskmanagers should apply, neither is it what the FED should. Lets hope it works out. Fingers crossed. (Seems to be the dominant corporate and government riskmanagement strategy out there at the moment, unfortunately).
*Finally how much is a Trillion USD?
With the FED throwing TRN Usd numbers left right and centre, it might be a good idea to get such a number in perspective.
Here are a few illustrations to achieve this; http://www.mint.com/blog/finance-core/visualizing-one-trillion-dollars/
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.
I guess there are several takes on it. The positive one is that the FED gets ahead of the curve. The negative one is the state of the US banking system is in a far worse state than what the market is aware of. The bottom line is that the FED is raising the stakes and increasing the risks, given the heavy dependency on foreign financing due to their mountain of debt.
As of March 11th, the FED;s balancesheet was about 2Trn Usd. With the new measures announced, the FED;s balancesheet is set to expand to more than 4 Trn Usd.
*What are the consequences?
Short term, most likely this will mean an undermining of the USD, so weaker Usd, exporting an easing of monetary conditions abroad in the process. Implied volatility and riskaversion should come lower from this, benefitting riskier assets and narrowing spreads. Commodities should benefit as well, especially energyrelated ones.
Gold shot up yesterday, alledgedly on inflation related concerns. Gold seemed quite isolated in that context, especially with long end yields and riskaversion falling. While Gold could continue to have swift 50-100 Usd moves from here either way in the shortterm, the price action would seem to be reminiscent of a topping out process. Either way, I will make sure to be in on it since it generates serious money.
The Eur/Jpy bullish case should be in fullforce still while the Usd/Jpy one has weaken somewhat due to relative weakened policy credibility, growth on the US front plus vastly changed long yield differentials in favour of the Jpy.
I doubt any carry revival is on the cards near term though. Although financials have run up already, they could have further to go. As Ive pointed out earlier, I prefer US banks stocks to European ones. Mainly due to the cycle of which the US ones are in and the digital risk of the Baltics plus the Eastern europe dilemma which has yet to play out.
I would like to emphasise that these effects are mainly short term as riskaversion could shift drastically should the effect of the recent FED moves dissappoint. Unfortunately, the risks taken by the FED could make things potentially worse beyond the short term.
*Credibility of Mr Bernanke
Only a few days ago Mr Bernanke declared that the US economy would recover in 2010. With this plan enacted it would seem the transparency of the FED is heavily reduced or no longer in place. Both swap spreads and TIPS widened sharply post the announcement yesterday and might be something to keep in the back of ones mind in the midst of all bull talk.
*Positions changes
I have taken profit on my long Eur/Usd options and am awaiting better timing to get back in. Looking for Eur/Usd to reach 1.40 before long.
I have closed out my long Gbp/Jpy,
Gold rallied strongly overnight and while I am still positioned bearish Gold I am opening up for pure gamma plays here as well.
*FED and riskmanagement
The FED is getting plenty of applause for their latest measures and while I have to concede that the FED seem willing to try "anything and everything", they are also increasing risks and raising the stakes via measures that does not really solve the underlying issues. There is a risk that crunchtime is just rolled forward, snowballing it in the process. The Martingale method is not one to apply to riskmanagement but it is the one that the FED currently applies. This is very concerning to me.
The old saying; "When in trouble - double" is not what riskmanagers should apply, neither is it what the FED should. Lets hope it works out. Fingers crossed. (Seems to be the dominant corporate and government riskmanagement strategy out there at the moment, unfortunately).
*Finally how much is a Trillion USD?
With the FED throwing TRN Usd numbers left right and centre, it might be a good idea to get such a number in perspective.
Here are a few illustrations to achieve this; http://www.mint.com/blog/finance-core/visualizing-one-trillion-dollars/
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 March 2009
In the midst of the bearrally - how long before the Latvian devaluation?
* Time to let go
Having said that, so far I have underestimated the reaction time of the Latvian authorities. However, this is a macroeconomic nobrainer. It is so obvious that even the Swedish banks, having successfully managed to lobby the Swedish financeminister Mr Anders Borg into pushing for a non float in conjunction with the Latvian IMF deal, might now realise that there will be more value to be had from a quick devaluation rather than from a slow and painful kryptonite deflation meltdown. Which might sound counterintuitive at a first glance.
Unfortunately, I have very low expectations of any bank management flipping towards a pro devaluation stance, simply because that would mean them loosing their jobs. This too, will happen anyway. With this in mind, "they" are most likely willing to continue this very efficient capital destruction together with the Latvian politicians. Besides, I am also doubtful whether they will grasp the crystal clear macro aspect of it, sorry.
*Consequenses of continuing on the fixed currency regime path
To put it very plain and simple;
No float = houses with no inhabitants. No jobs domestically means moving abroad. Further lowering the asset value for the bank. Expect this to increase the NPL;s and thus, the creditlosses. The Latvian agricultural sector development pretty much sets the pattern for the manufacturing and service industry as a whole; The domestic agricultural market has already almost ceased to exist for domestic farmers. Foreign produce is simply so much chaper that the population at large buys imported produce. This pattern will be similar across the board. No business, no employment.
I expect the currentaccount gap to remain widely negative. This also limits the longevity of the fixed currency regime sharply since Latvia will be extremely dependent on foreign financing in the form of straight forward loans. At the moment, the only source to foreign loan financing is the IMF, the EIB, the World bank and any other bilateral agreement potentially available. Read; Sweden.
The marketplace is essentially closed for refinancing. With the massive upcoming financing needs for countries globally due to mainly but not only, banks bad assets and the nonmark to market approach of those assets on the balance sheets, the organisations mentioned above will come under heavy pressure to be able to get financing available from sponsor countries (biggest contributor; the USA).
Thus, such a situation will call for prioritisation and "efficient" use of capital. In that context, financing a country´s current account deficit in order for it to keep a "doomed" fixed currency regime is as much a waste of capital as it gets. Besides, the ECB will not let them into the Euro anyway, and if they did, then what? A non float will risk social upheaval and chaos.
Just drop it.
*Consequences of floating the currency
The float; Quick and sharp contraction due to massive loanlosses from households and businesses. A sharply weaker currency. However, the inflationthreat should be subdued if any other countries with sharply lowered currencies are anything to go by in this deflationary environment.
Reconstruction and a restart with a chance to export again. People will actually be able to have jobs, thus being able to pay something to the banks. Businesses will actually be able to have some kind of business activity, being able to pay something to the banks. This is all better than the much lower outcomes under a fixed currency regime scenario.
The main advantage is, however that the future prospects will be so much better for the country compared to the "fixed exchange" route. Another massive advantage, will be that any debt that Latvia takes on will have a prospect of getting repaid as well as avoiding throwing borrowed money straight into the current account gap for very little or no value whatsoever. Increasing the debt burden and burning up the money borrowed - in a deflationary environment,,,,, is a quick way of sinking a country. Stop that process.
Just drop it.
I am long Eur/Lvl.
To sum it up;
At present there does not seem to be a workable gameplan in place. There are definitely constructive solutions to be had. In my book, none of them involve a continuation of the fixed currency regime. All of them involve a float or a devaluation of some sort, preferrably combined with external financing in order to tackle the initial blow, restructure and move on forward. From there the Baltic countries could yet again continue their development forward. Perhaps I am missing something here but in that case I am yet to discover it.
* What about the SEK?
The SEK is currently very much undervalued from a fundamental perspective. However, this is of little assistance in determining the price in the shortterm.
The Swedish Riksbank is currently using the SEK for quantitative easing purposes, ie talking down the currency. On top of that, the market is using the SEK as a Baltic proxy. Further, the Swedish banks have likely continued refinancing and capital injection needs for their Baltic subsidiaries given the deteriorating Baltic situation. Until the Baltic states float their currencies I expect the SEK to remain fundamentally weak. Once that has happened, the SEK should be able to regain some ground.
I am long Eur/Sek, targeting 11.60.
* NOK - time to reevaluate?
NOK must be one of the few currencies out there that could be regarded as a "safe haven" in this environment. The reason being their pension fund and ongoing stimulus packages. Any fiscalstimulus activities not being covered by regular inflow to the pensionfund will becovered by sales of foreign assets in the pensionfund, leading to NOK purchases by the state. I am long Nok/Sek, targeting 1.30.
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.
Having said that, so far I have underestimated the reaction time of the Latvian authorities. However, this is a macroeconomic nobrainer. It is so obvious that even the Swedish banks, having successfully managed to lobby the Swedish financeminister Mr Anders Borg into pushing for a non float in conjunction with the Latvian IMF deal, might now realise that there will be more value to be had from a quick devaluation rather than from a slow and painful kryptonite deflation meltdown. Which might sound counterintuitive at a first glance.
Unfortunately, I have very low expectations of any bank management flipping towards a pro devaluation stance, simply because that would mean them loosing their jobs. This too, will happen anyway. With this in mind, "they" are most likely willing to continue this very efficient capital destruction together with the Latvian politicians. Besides, I am also doubtful whether they will grasp the crystal clear macro aspect of it, sorry.
*Consequenses of continuing on the fixed currency regime path
To put it very plain and simple;
No float = houses with no inhabitants. No jobs domestically means moving abroad. Further lowering the asset value for the bank. Expect this to increase the NPL;s and thus, the creditlosses. The Latvian agricultural sector development pretty much sets the pattern for the manufacturing and service industry as a whole; The domestic agricultural market has already almost ceased to exist for domestic farmers. Foreign produce is simply so much chaper that the population at large buys imported produce. This pattern will be similar across the board. No business, no employment.
I expect the currentaccount gap to remain widely negative. This also limits the longevity of the fixed currency regime sharply since Latvia will be extremely dependent on foreign financing in the form of straight forward loans. At the moment, the only source to foreign loan financing is the IMF, the EIB, the World bank and any other bilateral agreement potentially available. Read; Sweden.
The marketplace is essentially closed for refinancing. With the massive upcoming financing needs for countries globally due to mainly but not only, banks bad assets and the nonmark to market approach of those assets on the balance sheets, the organisations mentioned above will come under heavy pressure to be able to get financing available from sponsor countries (biggest contributor; the USA).
Thus, such a situation will call for prioritisation and "efficient" use of capital. In that context, financing a country´s current account deficit in order for it to keep a "doomed" fixed currency regime is as much a waste of capital as it gets. Besides, the ECB will not let them into the Euro anyway, and if they did, then what? A non float will risk social upheaval and chaos.
Just drop it.
*Consequences of floating the currency
The float; Quick and sharp contraction due to massive loanlosses from households and businesses. A sharply weaker currency. However, the inflationthreat should be subdued if any other countries with sharply lowered currencies are anything to go by in this deflationary environment.
Reconstruction and a restart with a chance to export again. People will actually be able to have jobs, thus being able to pay something to the banks. Businesses will actually be able to have some kind of business activity, being able to pay something to the banks. This is all better than the much lower outcomes under a fixed currency regime scenario.
The main advantage is, however that the future prospects will be so much better for the country compared to the "fixed exchange" route. Another massive advantage, will be that any debt that Latvia takes on will have a prospect of getting repaid as well as avoiding throwing borrowed money straight into the current account gap for very little or no value whatsoever. Increasing the debt burden and burning up the money borrowed - in a deflationary environment,,,,, is a quick way of sinking a country. Stop that process.
Just drop it.
I am long Eur/Lvl.
To sum it up;
At present there does not seem to be a workable gameplan in place. There are definitely constructive solutions to be had. In my book, none of them involve a continuation of the fixed currency regime. All of them involve a float or a devaluation of some sort, preferrably combined with external financing in order to tackle the initial blow, restructure and move on forward. From there the Baltic countries could yet again continue their development forward. Perhaps I am missing something here but in that case I am yet to discover it.
* What about the SEK?
The SEK is currently very much undervalued from a fundamental perspective. However, this is of little assistance in determining the price in the shortterm.
The Swedish Riksbank is currently using the SEK for quantitative easing purposes, ie talking down the currency. On top of that, the market is using the SEK as a Baltic proxy. Further, the Swedish banks have likely continued refinancing and capital injection needs for their Baltic subsidiaries given the deteriorating Baltic situation. Until the Baltic states float their currencies I expect the SEK to remain fundamentally weak. Once that has happened, the SEK should be able to regain some ground.
I am long Eur/Sek, targeting 11.60.
* NOK - time to reevaluate?
NOK must be one of the few currencies out there that could be regarded as a "safe haven" in this environment. The reason being their pension fund and ongoing stimulus packages. Any fiscalstimulus activities not being covered by regular inflow to the pensionfund will becovered by sales of foreign assets in the pensionfund, leading to NOK purchases by the state. I am long Nok/Sek, targeting 1.30.
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.
17 March 2009
Entering the JPY bearish season
*We are soon entering the most JPY bearish season of the year, post the fiscal Japanese year.
Normally the run up to the Japanese fiscal year end means a quite strong season for the JPY. As pointed out in previous pieces, not this year. I dont expect it to happen in the two weeks that remain either. Rather the opposite.
I am long Gbp/Jpy, Eur/Jpy via options.
*New variables driving FX
As the dust settles from a quite volatile start to the year (despite VIX being lower than in November of last fall), it seems new variables will be driving FX from here.
If earlier the rate differentials were dominating FX movements in a world of liquidity, this is not necessarily the case anymore.
With interestrates converging towards zero, growth and relative growth differentials combined with policy credibility seems to be taking over as the two FX driving variables.
Earlier, assetclass correlations were relatively stable. Due to a lack of liquidity and risk absorbtion in the market, this is no longer the case. This will open up for very interesting assetclass plays going forward, as the order of which assetclasses move will likely shift going forward, depending more on market positioning as long as liquidity and risktaking remains low.
* On the CEE front, growth believers are in - too early?
On the macrofront, developments continue to deteriorate, although squeezes in the CDS market, narrowing the CDS spreads, has pushed local currencies stronger. This has created a short term positive sentiment for the market. With the gloomy shortterm outlook for the USD this could continue short term, although I am now short PLN, HUF, TRY, being light on my feet.
Unless liquidity and risktaking increases, I doubt differentiation will increase for the CEE countries. Besides, although more stable macro outlook in Poland, compared to Hungary, Poland still have their massive corporate hedging dilemmas, where the parliament are to test whether FX options contracts can legally be deleted. Although extremely unlikely, this will continue to remain a worry for the market.
*Market still hooking up to any positive news
Markets wants to be bullish and will be looking for any reason to be so short term. While this is alright, the murky macrobackground will be in desperate need of bank pull for it to continue higher from here.
*The Geithner plan mumble
Suggestions have been made that Treasury Secretary Geithner would be preparing a toxic asset plan that would entail the goverment guaranteeing a minimum level for these assets. Then letting private investors and taxpayers making up the difference to match the balance sheet value of the banks. In other words; If this is correct, The US Treasury would assist the US banks in fudging the asset valuations, or in other words; cooking the books.
To me, this is a lousy suggestion, no matter how you twist it. The worst and most dangerous part of it would be that it might set precedent for other governments and banks globally. It would certainly be favoured by politicians, since it would follow the least part of resistance and problems would be postponed further down the road by not dealing with them hear and now.
Frankly, this would be what got the world into this serious trouble in the firstplace - not marking to market. Its is plainly silly, naive and dangerous. Lets hope it does not happen.
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.
Normally the run up to the Japanese fiscal year end means a quite strong season for the JPY. As pointed out in previous pieces, not this year. I dont expect it to happen in the two weeks that remain either. Rather the opposite.
I am long Gbp/Jpy, Eur/Jpy via options.
*New variables driving FX
As the dust settles from a quite volatile start to the year (despite VIX being lower than in November of last fall), it seems new variables will be driving FX from here.
If earlier the rate differentials were dominating FX movements in a world of liquidity, this is not necessarily the case anymore.
With interestrates converging towards zero, growth and relative growth differentials combined with policy credibility seems to be taking over as the two FX driving variables.
Earlier, assetclass correlations were relatively stable. Due to a lack of liquidity and risk absorbtion in the market, this is no longer the case. This will open up for very interesting assetclass plays going forward, as the order of which assetclasses move will likely shift going forward, depending more on market positioning as long as liquidity and risktaking remains low.
* On the CEE front, growth believers are in - too early?
On the macrofront, developments continue to deteriorate, although squeezes in the CDS market, narrowing the CDS spreads, has pushed local currencies stronger. This has created a short term positive sentiment for the market. With the gloomy shortterm outlook for the USD this could continue short term, although I am now short PLN, HUF, TRY, being light on my feet.
Unless liquidity and risktaking increases, I doubt differentiation will increase for the CEE countries. Besides, although more stable macro outlook in Poland, compared to Hungary, Poland still have their massive corporate hedging dilemmas, where the parliament are to test whether FX options contracts can legally be deleted. Although extremely unlikely, this will continue to remain a worry for the market.
*Market still hooking up to any positive news
Markets wants to be bullish and will be looking for any reason to be so short term. While this is alright, the murky macrobackground will be in desperate need of bank pull for it to continue higher from here.
*The Geithner plan mumble
Suggestions have been made that Treasury Secretary Geithner would be preparing a toxic asset plan that would entail the goverment guaranteeing a minimum level for these assets. Then letting private investors and taxpayers making up the difference to match the balance sheet value of the banks. In other words; If this is correct, The US Treasury would assist the US banks in fudging the asset valuations, or in other words; cooking the books.
To me, this is a lousy suggestion, no matter how you twist it. The worst and most dangerous part of it would be that it might set precedent for other governments and banks globally. It would certainly be favoured by politicians, since it would follow the least part of resistance and problems would be postponed further down the road by not dealing with them hear and now.
Frankly, this would be what got the world into this serious trouble in the firstplace - not marking to market. Its is plainly silly, naive and dangerous. Lets hope it does not happen.
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.
16 March 2009
Geithners solution to Toxic/bad bank assets; will it do the trick? Market certainly seems to think so.
*Banks need to be sorted out before circumstances improve
Will be interesting later in the week when US Treasury Secretary Tim Geithner comes up with his proposal. For the taxpayers and US economy`s sake, I hope he chooses to lift out the good bank assets of the existing banks and leave the bad ones in the current banks, restarting the "new" bad asset free ones with private capital. The most costefficient way of doing it, to me anyway.
Buying toxic/badassets from the banks will most likely lead to taxpayers overpaying, which means an inefficient use of capital. Market is certainly hopeful of Mr Geithner getting it right though. Ive been long a basket of US bank stocks since last week and its up 60% already.
*Europe is a different ballgame and this should be recognised by the market, but is is not - yet anyway
Europe is lagging the US when it comes to dealing with banks toxic/bad assets. So far a plan to deal with this has not been seen. Especially not a coordinated one. I am holding off buying European bank stocks.
*Bullish marketsentiment rules - I am trying to go with it, but will flip pre G20
Riskaversion has sunk and market really wants this "to be it". Mr Geithner will have to throw the market a nice bone for this sentiment to continue though. Dont think all crowded trades have been squeezed as of yet. Gold still havent moved to the low 800;s. Seems Gold is in for a decent move either way before long. I am looking for the downside.
*FED meeting this week; Quantitative easing or not?
Think the FED will hold off before they start buying longend US bonds. If they do, this should mean higher US longend Yields and a weaker USD. I have gone long Eur/Usd via options, looking for a further push from 1.30 to 1.33 ish short term. I am also long Eur/Jpy via options. Long Gbp/Chf, long gamma in Eur/Chf.
*CEE - still squeezing, but as we approach the 2nd April G20 risks are increasing for a flip in sentiment and price action.
I am probably a little bit early, but dipping my toes shorting CEE here. I am also dipping my toes in short SEK vs Euro. Watching Equities closely.
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.
Will be interesting later in the week when US Treasury Secretary Tim Geithner comes up with his proposal. For the taxpayers and US economy`s sake, I hope he chooses to lift out the good bank assets of the existing banks and leave the bad ones in the current banks, restarting the "new" bad asset free ones with private capital. The most costefficient way of doing it, to me anyway.
Buying toxic/badassets from the banks will most likely lead to taxpayers overpaying, which means an inefficient use of capital. Market is certainly hopeful of Mr Geithner getting it right though. Ive been long a basket of US bank stocks since last week and its up 60% already.
*Europe is a different ballgame and this should be recognised by the market, but is is not - yet anyway
Europe is lagging the US when it comes to dealing with banks toxic/bad assets. So far a plan to deal with this has not been seen. Especially not a coordinated one. I am holding off buying European bank stocks.
*Bullish marketsentiment rules - I am trying to go with it, but will flip pre G20
Riskaversion has sunk and market really wants this "to be it". Mr Geithner will have to throw the market a nice bone for this sentiment to continue though. Dont think all crowded trades have been squeezed as of yet. Gold still havent moved to the low 800;s. Seems Gold is in for a decent move either way before long. I am looking for the downside.
*FED meeting this week; Quantitative easing or not?
Think the FED will hold off before they start buying longend US bonds. If they do, this should mean higher US longend Yields and a weaker USD. I have gone long Eur/Usd via options, looking for a further push from 1.30 to 1.33 ish short term. I am also long Eur/Jpy via options. Long Gbp/Chf, long gamma in Eur/Chf.
*CEE - still squeezing, but as we approach the 2nd April G20 risks are increasing for a flip in sentiment and price action.
I am probably a little bit early, but dipping my toes shorting CEE here. I am also dipping my toes in short SEK vs Euro. Watching Equities closely.
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.
13 March 2009
No more pretending needed for politicians - the competitive devaluation competition is official as SNB joins in with - intervention
I am currently involved in expanding and rebuilding our house, which is why I missed out on yesterdays piece. Apologies. Cant guarantee it will not happen again, but as usual, should that be the case, you will of course get reimbursed. Money back guarantee. Back to the market.
*SNB brings their guns out in the open as quantitative easing is applied via FX. SNB intervened on the EBS trading platform used by banks and financial institutions. As SNB filled up limits there they continued via the Swissbanks. Pushing Eur/Chf from 1.49 to 1.5250 in the process. Today spot is more than one big fig higher.
Although I believe the SNB will continue their intervention in order to keep the CHF weak, I could see an initial retracement from here and I am now short Eur/Chf via options for a correction towards 1.50 before resuming the move higher.
*Implications from the SNB intervention
My take on it is as follows; the competitive devaluation strategy is now officially up for grabs for any country -this is not good, since it will feed financial as well as trade protectionism, suboptimising the world GDP in the process, increasing all kinds of friction between countries, elevating depression and other unpleasant risks.
Going forward, FX as a tool to achieve quantitative easing will increasingly come up on various countries agenda as an alternative solution to quantitative easing via just interestrates, as more and more countries get extremely close to zero interest rates. Japan definitely comes to mind. Their foreign bond purchases have been massive lately and as mentioned in previous pieces, Japanese authorities will do their utmost to avoid big valuation losses for the Japanese lifers sitting on most of the 2.1 TRN Usd of foreign assets as the Japanese fiscal year end is coming up at the end of March.
IF these big Japanese foreign bond purchases continues post fiscal year end, I expect further Jpy weakening. FX intervention from the Japanese should not be ruled out either.
* Temporarily CEE relief from weak CHF, less pressure on deleveraging, short term positive
Since Hungary, Poland etc are exposed to CHF and other hard currencies due to foreign currency loans, the weakening of the CHF should provide some relief to these battered currencies. Having said that, the CEE currencies has had quite dramatic moves over the last few days, pricing in the CHF weakness so far and then some.
However, this has been an excellent excuse to squeeze out the short CEE positions and any other crowded positions to be found in any assetclass, and markets will likely seek out all stops than can be found.
A positive is that the deleveraging pressure eases with a weaker CHF. Should the JPY continue to weaken as well, this would of course help.
Riskaversion should ease short term, with higher equities, lower gold, higher Oil as a consequence, despite the upcoming OPEC meeting.
The upcoming G20 meeting should also raise expectations for a more coordinated solution to the global crisis, alhough I believe markets will become dissappointed by the outcome of it.
Hopefully, the G20 participants realise the merits of a weak CHF and JPY, and can agree that it is in the best shortterm interest globally, in order to improve the chances for an orderly deleveraging process rather than a disorderly one. Unfortunately, I think the probability of standard G20 bickering is quite high.
*China making some noice regarding UST - beneficial for Equities -short term
China is making UST bond holders somewhat uncomfortable given the fundamental supply - demand isssue at hand. Without US applying quantitative easing via the long end of the bond market (they cant really touch their currency), risk is for higher yields - shortterm. Driving capital into the equity market instead. A short term play.
*The G20 finance ministers having a "pre G20 meeting" this weekend
I am watching out for some erratic moves pre the "pre G20 finance minister meeting".
* Positions
I have added to my long Oil position as an OPEC play
I am also long IVN, a goldmining stock, as according to official and public sources, they are about to receive a licence to start mining in Mongolia. Over the past few weeks there has been significant Call option interest in IVN for April and June. TA indicates that any weekly break of 4.72 Usd is likely leading to a very sharp move, up towards 7.75 Usd.
It closed yesterday at 4.78/4.80 Usd.
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.
*SNB brings their guns out in the open as quantitative easing is applied via FX. SNB intervened on the EBS trading platform used by banks and financial institutions. As SNB filled up limits there they continued via the Swissbanks. Pushing Eur/Chf from 1.49 to 1.5250 in the process. Today spot is more than one big fig higher.
Although I believe the SNB will continue their intervention in order to keep the CHF weak, I could see an initial retracement from here and I am now short Eur/Chf via options for a correction towards 1.50 before resuming the move higher.
*Implications from the SNB intervention
My take on it is as follows; the competitive devaluation strategy is now officially up for grabs for any country -this is not good, since it will feed financial as well as trade protectionism, suboptimising the world GDP in the process, increasing all kinds of friction between countries, elevating depression and other unpleasant risks.
Going forward, FX as a tool to achieve quantitative easing will increasingly come up on various countries agenda as an alternative solution to quantitative easing via just interestrates, as more and more countries get extremely close to zero interest rates. Japan definitely comes to mind. Their foreign bond purchases have been massive lately and as mentioned in previous pieces, Japanese authorities will do their utmost to avoid big valuation losses for the Japanese lifers sitting on most of the 2.1 TRN Usd of foreign assets as the Japanese fiscal year end is coming up at the end of March.
IF these big Japanese foreign bond purchases continues post fiscal year end, I expect further Jpy weakening. FX intervention from the Japanese should not be ruled out either.
* Temporarily CEE relief from weak CHF, less pressure on deleveraging, short term positive
Since Hungary, Poland etc are exposed to CHF and other hard currencies due to foreign currency loans, the weakening of the CHF should provide some relief to these battered currencies. Having said that, the CEE currencies has had quite dramatic moves over the last few days, pricing in the CHF weakness so far and then some.
However, this has been an excellent excuse to squeeze out the short CEE positions and any other crowded positions to be found in any assetclass, and markets will likely seek out all stops than can be found.
A positive is that the deleveraging pressure eases with a weaker CHF. Should the JPY continue to weaken as well, this would of course help.
Riskaversion should ease short term, with higher equities, lower gold, higher Oil as a consequence, despite the upcoming OPEC meeting.
The upcoming G20 meeting should also raise expectations for a more coordinated solution to the global crisis, alhough I believe markets will become dissappointed by the outcome of it.
Hopefully, the G20 participants realise the merits of a weak CHF and JPY, and can agree that it is in the best shortterm interest globally, in order to improve the chances for an orderly deleveraging process rather than a disorderly one. Unfortunately, I think the probability of standard G20 bickering is quite high.
*China making some noice regarding UST - beneficial for Equities -short term
China is making UST bond holders somewhat uncomfortable given the fundamental supply - demand isssue at hand. Without US applying quantitative easing via the long end of the bond market (they cant really touch their currency), risk is for higher yields - shortterm. Driving capital into the equity market instead. A short term play.
*The G20 finance ministers having a "pre G20 meeting" this weekend
I am watching out for some erratic moves pre the "pre G20 finance minister meeting".
* Positions
I have added to my long Oil position as an OPEC play
I am also long IVN, a goldmining stock, as according to official and public sources, they are about to receive a licence to start mining in Mongolia. Over the past few weeks there has been significant Call option interest in IVN for April and June. TA indicates that any weekly break of 4.72 Usd is likely leading to a very sharp move, up towards 7.75 Usd.
It closed yesterday at 4.78/4.80 Usd.
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.
11 March 2009
Washing positions clean
*Back from my trip.
Was over for my brothers youngest Christening in London and met up with some people while there.
Overall impression from the trading community; all bearish, all negative. Usually means their positions are in the same direction. Got that crowded feeling. However, these days, things are different for traders. Most run way smaller positions than they would usually do, even in an environment like this, despite this being pretty much the definition of a trading environment.
Main reason being that the incentive for traders in banks is just not there for the time being. When they make money they dont get paid, if they have a bad run they loose their job. So from that perspective, they basically should not take any risk at all. However, that logic conclusion is unlikely to be workable, since they might then loose their job anyway. I am talking about traders that made serious money in the markets last year, trying to figure out where to spend their calories from here. It used to be that working in London was low on quality of life but high on quality of work and great pay. Right now none of the above seems to apply.
* Washing positions with a sweetsmelling detergent
So the bearmarket rally came around, while I was on my trip of course,,,,
Got to start trading my own vacationevent correlation from now on, will write it down.
Time has come to wash positions clean before we resume existing trends. Since assetclass correlations have been, ehhh, unstable there is a nice time lag to take advantage of. GOLD is definitely a crowded trade, and although it has come down a bit, Im expecting a continued wash.
I have added to my short Gold position. Shorts in OIL havent really started to wash, we will see post the upcoming OPEC meeting. I am still long OIL, looking to add on a break higher.
I have closed my positions in Usd/Try, Eur/Huf and Eur/Pln. I am still long Nok/Sek, but will close on a break of 1.2500.
* Taking on correlation risk to create high octane gamma
I am still shortbanks with Baltic and CEE exposure via puts, but bought a basket of US banks stocks against it. Want to join the bearmarketrally, especially for financials, but want to avoid the digital risk implicit in being long any bank stock with exposure to the Baltics. Further, Id rather be long US financials than European ones at this stage. Working well so far.
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.
Was over for my brothers youngest Christening in London and met up with some people while there.
Overall impression from the trading community; all bearish, all negative. Usually means their positions are in the same direction. Got that crowded feeling. However, these days, things are different for traders. Most run way smaller positions than they would usually do, even in an environment like this, despite this being pretty much the definition of a trading environment.
Main reason being that the incentive for traders in banks is just not there for the time being. When they make money they dont get paid, if they have a bad run they loose their job. So from that perspective, they basically should not take any risk at all. However, that logic conclusion is unlikely to be workable, since they might then loose their job anyway. I am talking about traders that made serious money in the markets last year, trying to figure out where to spend their calories from here. It used to be that working in London was low on quality of life but high on quality of work and great pay. Right now none of the above seems to apply.
* Washing positions with a sweetsmelling detergent
So the bearmarket rally came around, while I was on my trip of course,,,,
Got to start trading my own vacationevent correlation from now on, will write it down.
Time has come to wash positions clean before we resume existing trends. Since assetclass correlations have been, ehhh, unstable there is a nice time lag to take advantage of. GOLD is definitely a crowded trade, and although it has come down a bit, Im expecting a continued wash.
I have added to my short Gold position. Shorts in OIL havent really started to wash, we will see post the upcoming OPEC meeting. I am still long OIL, looking to add on a break higher.
I have closed my positions in Usd/Try, Eur/Huf and Eur/Pln. I am still long Nok/Sek, but will close on a break of 1.2500.
* Taking on correlation risk to create high octane gamma
I am still shortbanks with Baltic and CEE exposure via puts, but bought a basket of US banks stocks against it. Want to join the bearmarketrally, especially for financials, but want to avoid the digital risk implicit in being long any bank stock with exposure to the Baltics. Further, Id rather be long US financials than European ones at this stage. Working well so far.
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 March 2009
Traveling
I am traveling. I will not be updating this blog on a regular basis again till Wed 11 Mar.
Til then, 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.
Til then, 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.
05 March 2009
Still pitchdark - forget about China coming to the rescue.
* It must come as no surprise that I dont expect the Baltic bank story to end well.
Ive been nagging about this for too long now. The Swedish banks are THE Centralbank in the Baltics. Unfortunately it would seem they might shortly be incapacitated to provide more funds. Since no Government and other organisations in their right state of mind would lend capital to these countries (the market certainly would´t), "they" would then have no other choice than to devalue.
*The premier Wen yesterday spoke about Chinese growth next year of 8% and that China would be boosting the economy via fiscal injections.
For a country still leaning on central planning command style, I have a hard time believing they will be able to navigate through these rough waters in a better way than a fully fledged democratic market economy. Admittedly, the Chinese PMI data looks very promising and seems about to turn higher. But what is the validity of this? How much is it really worth?
Purchasing managers in China are more or less ordered as to what their expectations for the future should be. GDP numbers etc are more often than not bang on in line with expectations. In a world where currently hardly any number comes in as expected, how come that happens in the case of China? I am very wary of the real economic situation there and will definitely NOT pin my hopes for a world recovery on it. The western world will have to sort this out themselves. China might actually turn out to be a HUGE drag for the worldeconomy as it is forced to downsize its giant production capacity suit.
For now, it seems to me the Equity market is very much driven by expectations of upcoming Chinese stimulus packages to save the world. It seems the US stimulus packages are not expected to get much traction anytime soon. Geithner is fast moving into the domestic freezer and Obama seems to have lost his ways with Washington DC and Capitol Hill already, which is concerning. risk is that Geithner continues full throttle down the "protectionist -pressuring - China - to strengthen -their currency track" that would be a disastrous mistake. In line with opening pandoras box.
Since I am not a believer of the "China sorting out the world version", I will second guess the equity market on the subject. There will be some stimulus measures coming from China, and the equity market wants to believe it will work. From that angle, I can see a bearmarket rally coming. To be monitored.
* Chinese stimulus measures - handle with care
For a country designed to produce everything to the world it might sound quite difficult, investing in more production capacity. "When in trouble,double?" - I think NOT.
Chinese authorities had better be very careful with any coming stimulus measures. Investing further production capacity in order to keep unemployment down could be a very risky proposition. The global economy might not even turn next year, meaning any investments now will make for an even bigger collapse later on.
With negative real interest rates the obvious risk is that stimulus money will find its way into the Shanghai stockmarket instead, creating yet another bubble. Nah, I am issuing a warning sign on China, it might very well be the next "bubble in trouble."
*US Banks
The US banks have led the way to the basement in terms of stock collapses. Dont expect less hardship with the Swedish bank stocks. It will be tough,very tough. Although the downward path might have some bright spots, it is still going - down.
I am still long bank puts.
*Re Equities and my expectations for a bear rally before long;
Well it sure didnt happen yesterday. Tomorrow will be an interesting day. Dont get me wrong though. To me it seems clear that the banks with Baltic exposure will drive shareholder values to zilch. Trying to time it. Question is; Is it about to happen right here, right now, or will there be a bear rally in between? TA seems to indicate at least a temporary basing out. As always, trying to trade it.
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.
Ive been nagging about this for too long now. The Swedish banks are THE Centralbank in the Baltics. Unfortunately it would seem they might shortly be incapacitated to provide more funds. Since no Government and other organisations in their right state of mind would lend capital to these countries (the market certainly would´t), "they" would then have no other choice than to devalue.
*The premier Wen yesterday spoke about Chinese growth next year of 8% and that China would be boosting the economy via fiscal injections.
For a country still leaning on central planning command style, I have a hard time believing they will be able to navigate through these rough waters in a better way than a fully fledged democratic market economy. Admittedly, the Chinese PMI data looks very promising and seems about to turn higher. But what is the validity of this? How much is it really worth?
Purchasing managers in China are more or less ordered as to what their expectations for the future should be. GDP numbers etc are more often than not bang on in line with expectations. In a world where currently hardly any number comes in as expected, how come that happens in the case of China? I am very wary of the real economic situation there and will definitely NOT pin my hopes for a world recovery on it. The western world will have to sort this out themselves. China might actually turn out to be a HUGE drag for the worldeconomy as it is forced to downsize its giant production capacity suit.
For now, it seems to me the Equity market is very much driven by expectations of upcoming Chinese stimulus packages to save the world. It seems the US stimulus packages are not expected to get much traction anytime soon. Geithner is fast moving into the domestic freezer and Obama seems to have lost his ways with Washington DC and Capitol Hill already, which is concerning. risk is that Geithner continues full throttle down the "protectionist -pressuring - China - to strengthen -their currency track" that would be a disastrous mistake. In line with opening pandoras box.
Since I am not a believer of the "China sorting out the world version", I will second guess the equity market on the subject. There will be some stimulus measures coming from China, and the equity market wants to believe it will work. From that angle, I can see a bearmarket rally coming. To be monitored.
* Chinese stimulus measures - handle with care
For a country designed to produce everything to the world it might sound quite difficult, investing in more production capacity. "When in trouble,double?" - I think NOT.
Chinese authorities had better be very careful with any coming stimulus measures. Investing further production capacity in order to keep unemployment down could be a very risky proposition. The global economy might not even turn next year, meaning any investments now will make for an even bigger collapse later on.
With negative real interest rates the obvious risk is that stimulus money will find its way into the Shanghai stockmarket instead, creating yet another bubble. Nah, I am issuing a warning sign on China, it might very well be the next "bubble in trouble."
*US Banks
The US banks have led the way to the basement in terms of stock collapses. Dont expect less hardship with the Swedish bank stocks. It will be tough,very tough. Although the downward path might have some bright spots, it is still going - down.
I am still long bank puts.
*Re Equities and my expectations for a bear rally before long;
Well it sure didnt happen yesterday. Tomorrow will be an interesting day. Dont get me wrong though. To me it seems clear that the banks with Baltic exposure will drive shareholder values to zilch. Trying to time it. Question is; Is it about to happen right here, right now, or will there be a bear rally in between? TA seems to indicate at least a temporary basing out. As always, trying to trade it.
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.
04 March 2009
Pitch dark - but are we in for an Equity bear rally before long?
* Time for an Equity breather?
We have broken through important support levels, especially in the US equity markets.
However, no market moves in a straight line, especially not with this level of volatility. From a TA perspective I am starting to lean towards a bearmarket rally before long.
Sounds crazy I know, but I am currently loosing bearish conviction.
I have taken some profit on my long bank puts, but I still have some left. Will be looking to ship these out as well, squaring up the bearish bank equity position.
Looking to reenter post rally (if there is any).
With correlations fluctuating wildly it might not be as crazy as it sounds. (see below).
* Gold continues to look like it is setting up for some serious stop loss squeezing on those massively long ETF GLD positions. Gold reaching down to 908 so far today. The real price action will however be seen when the US market comes in.
* Dipping my toes in long Oil.
* Seems reallocations of capital flows, a lower risktolerance across the financial industry, hedge funds included, have led to an increase in correlation volatility.
The correlation between assetclasses and sectors fluctuating wildly despite otherwise relatively stable volatility levels across assetclasses. Makes for interesting developments going forward.
We have recently seen some interesting correlation breakups;
- Gold and the USD.
- US and European equity markets.
- Equity markets and the CEE currencies.
- Equity markets and the JPY and to some extent, the CHF.
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.
We have broken through important support levels, especially in the US equity markets.
However, no market moves in a straight line, especially not with this level of volatility. From a TA perspective I am starting to lean towards a bearmarket rally before long.
Sounds crazy I know, but I am currently loosing bearish conviction.
I have taken some profit on my long bank puts, but I still have some left. Will be looking to ship these out as well, squaring up the bearish bank equity position.
Looking to reenter post rally (if there is any).
With correlations fluctuating wildly it might not be as crazy as it sounds. (see below).
* Gold continues to look like it is setting up for some serious stop loss squeezing on those massively long ETF GLD positions. Gold reaching down to 908 so far today. The real price action will however be seen when the US market comes in.
* Dipping my toes in long Oil.
* Seems reallocations of capital flows, a lower risktolerance across the financial industry, hedge funds included, have led to an increase in correlation volatility.
The correlation between assetclasses and sectors fluctuating wildly despite otherwise relatively stable volatility levels across assetclasses. Makes for interesting developments going forward.
We have recently seen some interesting correlation breakups;
- Gold and the USD.
- US and European equity markets.
- Equity markets and the CEE currencies.
- Equity markets and the JPY and to some extent, the CHF.
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.
03 March 2009
Trying halfheartedly to find something bullish to grip onto
*At least this was not negative;
-As mentioned on several occassions over the last month, the Japanese authorities are throwing all they got at supporting their struggling corporates ahead of year end. Overnight, Japanese authorities announced they will be utilising 5 BN Usd from their FX reserves to support struggling Japanese corporates.
- Overnight, the Australian central bank (RBA) left their rates unchanged at 3.25%.
It would seem the RBA are awaiting the effect of measures taken so far before proceeding. Given that the recent Australian data actually has been stronger than other regions, it seems a reasonable conclusion. (Retailsales, C/A deficit, trade surplus, exports and imports have been better than expected or better than previous time period.) This triggered stops in many currencypairs, and made sentiment more positive, with equity markets clawing back losses.
- The move lower in equities yesterday was on very low volume.
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.
-As mentioned on several occassions over the last month, the Japanese authorities are throwing all they got at supporting their struggling corporates ahead of year end. Overnight, Japanese authorities announced they will be utilising 5 BN Usd from their FX reserves to support struggling Japanese corporates.
- Overnight, the Australian central bank (RBA) left their rates unchanged at 3.25%.
It would seem the RBA are awaiting the effect of measures taken so far before proceeding. Given that the recent Australian data actually has been stronger than other regions, it seems a reasonable conclusion. (Retailsales, C/A deficit, trade surplus, exports and imports have been better than expected or better than previous time period.) This triggered stops in many currencypairs, and made sentiment more positive, with equity markets clawing back losses.
- The move lower in equities yesterday was on very low volume.
Sorry , but I will leave it at that for the time being. The weakish JPY factor should at least help lower the deleveraging pressure and pace to some extent at least, despite it moving towards more illiquid assetclasses.
Other than that, the most positive sign I can find is that bearish momentum in equities seems to be loosing steam and pace, despite breaking lower through important levels. Worth monitoring implied volatilities. Given all the bearish macro news and other bearish news being pumped out on a daily basis, quite a bit more mayhem would have seem to be in place.
Anyway, yesterday I closed my long Usd/Zar after reaching the 10.50 target. Ditto for my long Usd/Cad in the low 1.29;s. The way the price action looks in Usd/Zar, a clear break of 10.50 will make me go long again, though. Next stop will then be 10.75/80 before 11.15.
*Gold continues to look top heavy, I have added to my shorts.
*Bailouts and bankinsolvencies
Other than that, Im getting numb by all the US bailoutpackages and by now it would seem that it should be clear to everyone that there is no quick fix easy solution other than taking the stop loss.
That would mean governments would need to come clean and admit that many of their banks are insolvent and then deal with it. As long as they keep pretending they are not, this will not end. business pretend, so to speak. One should remember that Europe is having its own subprime taking place right here and now and we have only seen the beginning of it.
This goes especially for governments of banks with heavy exposure towards the Baltics, the CEE but also the PIIGS countries. The absolute first on this "come clean about bank insolvency list" are governments owning banks with exposure to the BELL(alledgedly coined by strategists at Merrill Lynch, ehhh Bank of America) countries; Bulgaria, Estonia, Latvia and Lithuania. It is no coincidence that all of the BELL countries are under fixed or semi fixed currency regimes. They will all float.
As mentioned several times before, no substantial bank intermediary effect will be seen from governments pumping liquidity into banks til the "bad assets" are being separated from the good ones. The really frightening issue is whether these giant bad assets are really bailable.
At least, governments should stop pumping taxpayer money into countries with fixed or semifixed currency regimes. It is simply wasting capital. They will soon need it themselves. Cash is king, or was it options?
As always, good luck
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 March 2009
The EU summit - divided we stand
*EU leaders agree that they disagree. Leaders seem to agree that protectionism is bad - France launches a 6.5 BN Eur for a French autoindustry bailout, and gets EU approval!
All talk and no action. That sums up this weekends EU summit quite well. From here there will be "individual solutions" to any CEE country in dire straits. The CEE countries were mainly advised to use the IMF, World bank, EIB, etc to raise extra funds whenever needed, but the EU leaders also pledged that the Western european bank owners are supposed to pump in money into their CEE subsidiaries via government support programs designed to refinance the Western european banks.
The EU leaders have now also agreed on what kind of specific national support solutions will be allowed in order to refinance Western banks; "Toxic banks", government capital injections via ownership stakes, loans or buying of bank assets, nationalisation.
First of all, I have a very hard time believing that governments will actually approve pumping taxpayer money into CEE "black holes" via the western banks, as leverage for Western european banks remain at record levels, western companies are strapped for cash and western households are getting into truble. Nah, dont think so.
Secondly, EU leaders have basically made clear that "anything goes" on a nation by nation basis when it comes to save ones banks. Zero coordination, zero plan -massive financial protectionism.
In short, it seems the CEE countries are in for another round of pressure. The intervention threat stated by the Polish and Hungarian authorities are about to be called upon. They have painted themselves into a corner. This is not good. They will surely need their FX reserves badly for other purposes before long. This will be another exercise in money wasting. They might win a battle or two but they will most definitely loose the war vs the market.
I am short PLN, HUF, ZAR, TRY and CAD. Looking to go short RUB and to add to the other positions on currency rallies. TRY should be in line for a move towards 1.80 as the middle east flows are weakening. Eur/PLN to test 4.90/5.00, Eur/HUF to test 310. Centralbanks resolve will be tested in the process. More volatility ahead!
Usd/Zar should test 10.5o for starters.
Usd/Cad to test 1.30.
*More pressure on the Baltics - time to float their currencies
The Baltic countries would be best adviced to float their currencies while they have any reserves at all left. Anything else would be foolish. The ensuing situation in the Baltics will be very harsh, no doubt about that, but it will be far worse if wasting the FX reserves before floating. Because they will float - if they want to remain a democracy.
I am long EUR/LVL.
*SEB and Swedbank - one last correction higher before 10 SEK?
Although the macro situation is worsening by the day via the Baltics, Ukraine, Germany, etc which should drag these banks down, there seems to be some technical base building.
While I will remain short, I might actually take some profit on a tactical basis purely for TA reasons.
*Gold - needs to close below 947 for a swift move to 910/920.
Think we will have a go towards 910/920 shortly as long as 960 holds - despite the very gloomy macro environment. Gold badly needs a washout. Even the taxidrivers will tell you to buy Gold these days. (No offense).
I am short gold and am looking to add on a break lower.
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.
All talk and no action. That sums up this weekends EU summit quite well. From here there will be "individual solutions" to any CEE country in dire straits. The CEE countries were mainly advised to use the IMF, World bank, EIB, etc to raise extra funds whenever needed, but the EU leaders also pledged that the Western european bank owners are supposed to pump in money into their CEE subsidiaries via government support programs designed to refinance the Western european banks.
The EU leaders have now also agreed on what kind of specific national support solutions will be allowed in order to refinance Western banks; "Toxic banks", government capital injections via ownership stakes, loans or buying of bank assets, nationalisation.
First of all, I have a very hard time believing that governments will actually approve pumping taxpayer money into CEE "black holes" via the western banks, as leverage for Western european banks remain at record levels, western companies are strapped for cash and western households are getting into truble. Nah, dont think so.
Secondly, EU leaders have basically made clear that "anything goes" on a nation by nation basis when it comes to save ones banks. Zero coordination, zero plan -massive financial protectionism.
In short, it seems the CEE countries are in for another round of pressure. The intervention threat stated by the Polish and Hungarian authorities are about to be called upon. They have painted themselves into a corner. This is not good. They will surely need their FX reserves badly for other purposes before long. This will be another exercise in money wasting. They might win a battle or two but they will most definitely loose the war vs the market.
I am short PLN, HUF, ZAR, TRY and CAD. Looking to go short RUB and to add to the other positions on currency rallies. TRY should be in line for a move towards 1.80 as the middle east flows are weakening. Eur/PLN to test 4.90/5.00, Eur/HUF to test 310. Centralbanks resolve will be tested in the process. More volatility ahead!
Usd/Zar should test 10.5o for starters.
Usd/Cad to test 1.30.
*More pressure on the Baltics - time to float their currencies
The Baltic countries would be best adviced to float their currencies while they have any reserves at all left. Anything else would be foolish. The ensuing situation in the Baltics will be very harsh, no doubt about that, but it will be far worse if wasting the FX reserves before floating. Because they will float - if they want to remain a democracy.
I am long EUR/LVL.
*SEB and Swedbank - one last correction higher before 10 SEK?
Although the macro situation is worsening by the day via the Baltics, Ukraine, Germany, etc which should drag these banks down, there seems to be some technical base building.
While I will remain short, I might actually take some profit on a tactical basis purely for TA reasons.
*Gold - needs to close below 947 for a swift move to 910/920.
Think we will have a go towards 910/920 shortly as long as 960 holds - despite the very gloomy macro environment. Gold badly needs a washout. Even the taxidrivers will tell you to buy Gold these days. (No offense).
I am short gold and am looking to add on a break lower.
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.
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