* Latvian prostitution prices fall by 67% in a year
According to a Bloomberg story, Latvian prostitution prices have fallen by 67% in the last year. http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_lynn&sid=aSRh7Cf2DTrU
Forget about house prices. The prostitution prices and infidelity websites on the internet are the leading indicators to go by according to Bloomberg. According to researchers the web traffic to infidelity websites increases during bull and bearmarket times and at market turning points. In November the traffic peaked as the assetmarkets took the biggest hit last year. No traffic increase since. In Latvia, prostitution prices are not showing any signs of turning up, according to the article.
Hence, the IMF should be on red alert together with most of Europes banking system.
* Indicator of Latvian extent of devaluation?
In order to restore competitiveness by deflation instead of an actual devaluation, achieving an equal result, the prostitution price indicator would seem to indicate that the devaluation will be more than 40%-50%. Rather 70%. Interesting if other indicators can be combined with this one in order to get a verification or not. Should have an impact when pricing LVL FX forwards if valid.
* New positions or positionchanges
No changes
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
28 May 2009
Market flush with Latvian "immediate" devaluation rumours
* Latvian devaluation rumours
The Latvian devaluation rumours have been triggered by articles going back since this Monday. They have mainly touched on the subjects of Latvian politicians realising that the game is up, the Central bank governor Ilmar Rimsevics two interviews where he has suggested that vouchers would be introduced as payment for public employees. Central bank governor Ilmar R.;s statements really made me sit up and take notice.
This is exactly what happened during the Argentinian crisis, where they simply ran out of currency reserves as the ARS peg, tied to the Usd, was being defended. Patacónes, Lecops, Créditos, Argentinos and lots of other bits of pieces of scrip. In Argentina this was the beginning of the end for the fixed currency regime.
There are reasons to believe this is also the case in Latvia.
*Swedish preparations
Swedish authorities also seem to be on full alert that some "big" event is around the corner.
The Swedish Centralbank replenishing their FX reserves by 100 Bn SEK. the Swedish Finance minister and Financial market minister declaring they are "ready" for any events, including devaluation, in the Baltics.
The Swedish bank CEO of SEB, Annika Falkengren, declaring that a Baltic devaluation will not mean more creditlosses in total for SEB. I think she knows the game is up.
I still believe there might be a try with the ERMII, (+-15% around a midrate) but the real float should come not too much longer after that.
* LVL FX forward pricing - not indicating any imminent devaluation, makes the long LVL FX forward a very attractively priced digital option.
The only thing that seems a bit odd at the moment is the fact that the cost of buying FX LVL forwards have not really skyrocketed on shorter maturities (up to two months). Albeit higher, they are still to be considered as good value options.
This bit of the puzzle does make me wonder since it would make sense that the market had the absolute best information on this subject.
A bit of a turnoff for any imminent devaluation idea. However, it is still a very attractive digital option to own.
*New positions and positionchanges
None
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
The Latvian devaluation rumours have been triggered by articles going back since this Monday. They have mainly touched on the subjects of Latvian politicians realising that the game is up, the Central bank governor Ilmar Rimsevics two interviews where he has suggested that vouchers would be introduced as payment for public employees. Central bank governor Ilmar R.;s statements really made me sit up and take notice.
This is exactly what happened during the Argentinian crisis, where they simply ran out of currency reserves as the ARS peg, tied to the Usd, was being defended. Patacónes, Lecops, Créditos, Argentinos and lots of other bits of pieces of scrip. In Argentina this was the beginning of the end for the fixed currency regime.
There are reasons to believe this is also the case in Latvia.
*Swedish preparations
Swedish authorities also seem to be on full alert that some "big" event is around the corner.
The Swedish Centralbank replenishing their FX reserves by 100 Bn SEK. the Swedish Finance minister and Financial market minister declaring they are "ready" for any events, including devaluation, in the Baltics.
The Swedish bank CEO of SEB, Annika Falkengren, declaring that a Baltic devaluation will not mean more creditlosses in total for SEB. I think she knows the game is up.
I still believe there might be a try with the ERMII, (+-15% around a midrate) but the real float should come not too much longer after that.
* LVL FX forward pricing - not indicating any imminent devaluation, makes the long LVL FX forward a very attractively priced digital option.
The only thing that seems a bit odd at the moment is the fact that the cost of buying FX LVL forwards have not really skyrocketed on shorter maturities (up to two months). Albeit higher, they are still to be considered as good value options.
This bit of the puzzle does make me wonder since it would make sense that the market had the absolute best information on this subject.
A bit of a turnoff for any imminent devaluation idea. However, it is still a very attractive digital option to own.
*New positions and positionchanges
None
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
Get ready for volatile times in the CEE and Euro area. The Baltic area deval trigger.
* The Baltic private sector on the road to extinction = Devaluation before long
This silly game has run its course and by now even the most anti deval fundamentalist politicians seems to realise that devaluation will be unavoidable. Latvia is first in line to let their currency go. Latvias economy is by now entirely dependent on the extent of foreign loans in order to keep the fixed currency regime going.
Are the citizens of Latvia really willing to take on this extra debt burden to defend a fixed currency regime bound to fall anyway? If yes, how much are they willing to take on? Global happy days are not coming back tommorrow, despite the recent months of assetmarket bullish sentiment. It will more likely take years. How much debt does that equal? To reach the Euro? And then what? Debt still has to be paid-or?
I seriously question if there is any strategy at all (apart from the Euro dream), behind the Latvian politicians clinging to the fixed exchange regime. IMF had better use all their resources and experiences they have to administrate the chaos that will follow on the back of the Baltic devaluation. The Baltic politicians IMF are talking to today are not likely to be there in a years time.
* Use IMF capital to stabilise the initial friction post deval instead
IMF should prepare a significant rescue fund for the Baltics. Let the Baltic currencies float freely. Use the rescue funds to stabilise they social consequences that will follow initially so that people will be able to have homes, and a minimum level of income in order to support their families. Negotiate with the Swedish banks and their Government in order to make realistic and quick debt writeoffs. The Swedish Government will most likely have to finance the Swedish Banks SEB and Swedbank anyway, hence they will become the main negotiating partner.
From there, the Baltic states can have a restart, getting their exports going again, generating jobs, income, social structure, stability, etc
*The Swedish government should let shareholders, bondholders in SEB and Swedbank pay the price.
Minimize the damage to Swedish taxpayers by letting the risktakers pay as much as possible. The Swedish taxpayers will pay heavily still, unfortunately.
Transfer bad bankassets to the state at marketprices. Take over ownership of Swedish banks in a transitional phase. Restart.
*Refocus on European banks bad assets = shaky CEE markets return = refocus on Euro area bad assets
Baltic devaluations risk being the trigger for CEE shakiness again. Since the Euroarea is intertwined with it via their banks balancesheets, a refocus on the state of the Euroarea is likely. Since the European banking system is in more dire straits than the US one it is not likely to be bullish for assetmarkets. Once again, there is no comprehensive and coordinated European plan to deal with a worsening scenario from here. Not good. Fingers crossed it will all just go away. With US coming to the rescue - as usual. China is also counted on. Unfortunately I doubt neither the US , nor China will come to the rescue this time around.
* New positions and position changes
- Took profit on my long Eur/Sek
- Took profit on my long Usd/Jpy option
- Took profit on my long Eur/Huf
- Increased my long Eur/Lvl forward
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
This silly game has run its course and by now even the most anti deval fundamentalist politicians seems to realise that devaluation will be unavoidable. Latvia is first in line to let their currency go. Latvias economy is by now entirely dependent on the extent of foreign loans in order to keep the fixed currency regime going.
Are the citizens of Latvia really willing to take on this extra debt burden to defend a fixed currency regime bound to fall anyway? If yes, how much are they willing to take on? Global happy days are not coming back tommorrow, despite the recent months of assetmarket bullish sentiment. It will more likely take years. How much debt does that equal? To reach the Euro? And then what? Debt still has to be paid-or?
I seriously question if there is any strategy at all (apart from the Euro dream), behind the Latvian politicians clinging to the fixed exchange regime. IMF had better use all their resources and experiences they have to administrate the chaos that will follow on the back of the Baltic devaluation. The Baltic politicians IMF are talking to today are not likely to be there in a years time.
* Use IMF capital to stabilise the initial friction post deval instead
IMF should prepare a significant rescue fund for the Baltics. Let the Baltic currencies float freely. Use the rescue funds to stabilise they social consequences that will follow initially so that people will be able to have homes, and a minimum level of income in order to support their families. Negotiate with the Swedish banks and their Government in order to make realistic and quick debt writeoffs. The Swedish Government will most likely have to finance the Swedish Banks SEB and Swedbank anyway, hence they will become the main negotiating partner.
From there, the Baltic states can have a restart, getting their exports going again, generating jobs, income, social structure, stability, etc
*The Swedish government should let shareholders, bondholders in SEB and Swedbank pay the price.
Minimize the damage to Swedish taxpayers by letting the risktakers pay as much as possible. The Swedish taxpayers will pay heavily still, unfortunately.
Transfer bad bankassets to the state at marketprices. Take over ownership of Swedish banks in a transitional phase. Restart.
*Refocus on European banks bad assets = shaky CEE markets return = refocus on Euro area bad assets
Baltic devaluations risk being the trigger for CEE shakiness again. Since the Euroarea is intertwined with it via their banks balancesheets, a refocus on the state of the Euroarea is likely. Since the European banking system is in more dire straits than the US one it is not likely to be bullish for assetmarkets. Once again, there is no comprehensive and coordinated European plan to deal with a worsening scenario from here. Not good. Fingers crossed it will all just go away. With US coming to the rescue - as usual. China is also counted on. Unfortunately I doubt neither the US , nor China will come to the rescue this time around.
* New positions and position changes
- Took profit on my long Eur/Sek
- Took profit on my long Usd/Jpy option
- Took profit on my long Eur/Huf
- Increased my long Eur/Lvl forward
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
27 May 2009
Higher yields weighing on equities. Latvias new currency - the voucher
* Yields are rising, weighing on equities
With sovereign and agency yields rising, the risk for equities have increased. Jumping assetprices and a perception that the systemic risks are behind us have pushed markets higher. Macro facts now risk kicking markets back into bearmarket trend mode. Libor rates have now moved higher for five days in a row, with corporate yields inching higher. If corporate spreads widen from here, the assetmarkets will likely move lower again.
*Latvia introducing scraps? Argentinian repeat?
The Latvian centralbank governor Ilmar Rimsevics have recently made at least two interviews where he suggested Latvia introduces vouchers in order to avoid a too abrupt halt of government spending. Scraps was introduced during the Argentinian crisis and was essentially the beginning of the end. The country simply ran out of currency to spend as they defended their Usd peg. It seems to me Latvia is one step closer to devaluation.
* How and when?
I believe there will be a renegotiation with the IMF in June/July where the IMF will loosen up their loan conditions. In exchange, Latvia will have to introduce the ERMII, ie letting the Lvl " float" +-15% around a midrate. The Lvl will then weaken 15% immediately. By fall there will be a free float, devaluing the Lvl by 40%-50% in total vs the Euro.
*Swedish authorities preparing for a Baltic devaluation?
The Swedish Riksbank today decided to replenish their Fx reserves by borrowing 100 BN Sek. Further, the Swedish finance minister Mr Anders Borg seems to be preparing for a big hit to the Swedish economy as well, sitting very tight on the countrys finances, warning about "very rough times" going forward.
Disclosure; I am long Eur/Lvl forwards
*New positions and positionchanges
- Took profit on my long Swedbank puts
- Added to my long Usd/Mxn position
- Long Eur/Sek
-Long Eur/Huf
As usual, good luck
With sovereign and agency yields rising, the risk for equities have increased. Jumping assetprices and a perception that the systemic risks are behind us have pushed markets higher. Macro facts now risk kicking markets back into bearmarket trend mode. Libor rates have now moved higher for five days in a row, with corporate yields inching higher. If corporate spreads widen from here, the assetmarkets will likely move lower again.
*Latvia introducing scraps? Argentinian repeat?
The Latvian centralbank governor Ilmar Rimsevics have recently made at least two interviews where he suggested Latvia introduces vouchers in order to avoid a too abrupt halt of government spending. Scraps was introduced during the Argentinian crisis and was essentially the beginning of the end. The country simply ran out of currency to spend as they defended their Usd peg. It seems to me Latvia is one step closer to devaluation.
* How and when?
I believe there will be a renegotiation with the IMF in June/July where the IMF will loosen up their loan conditions. In exchange, Latvia will have to introduce the ERMII, ie letting the Lvl " float" +-15% around a midrate. The Lvl will then weaken 15% immediately. By fall there will be a free float, devaluing the Lvl by 40%-50% in total vs the Euro.
*Swedish authorities preparing for a Baltic devaluation?
The Swedish Riksbank today decided to replenish their Fx reserves by borrowing 100 BN Sek. Further, the Swedish finance minister Mr Anders Borg seems to be preparing for a big hit to the Swedish economy as well, sitting very tight on the countrys finances, warning about "very rough times" going forward.
Disclosure; I am long Eur/Lvl forwards
*New positions and positionchanges
- Took profit on my long Swedbank puts
- Added to my long Usd/Mxn position
- Long Eur/Sek
-Long Eur/Huf
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
25 May 2009
Usd squeeze and garbage still flying
* The downgrade of Britains creditrating immediately got the market worried re the US
We could see Eur/Usd reach the 1.45/1.47 area on a swift move, although I am looking for a pullback first. I am not looking for any move above 1.50. The market has become preoccupied with the European dilemma to the extent that positioning was simply
too onesided. A clearout is taking place and that is just what´s needed.
*Garbage is still flying -for now
Couldn´t help but notice that the Scandinavian Airline, SAS, has received bad press and heavy shareprice downgrades from practically every analyst covering it. Still, the stock remains bid. Smells like a rally brewing in that one. I have reentered this one. Light feet.
* Will June be the last assetmarket party month this summer?
I am starting to look around for opportunities to position for increased bearishness post it. Caution here is still warranted for the massive liquidity flows getting pumped into the market.
*Inflation, US collapse, Gold and Oil are the current trend subjects.
Inflation I think is too early - still. US collapse ditto. Still more concerned about the European situation should US and China not drag Europe out of the mud. There simply is no European plan. One big risk, come fall, would be that Europe starts sinking due to the US and China running out of steam. CEE and the Baltics weighing heavily as well.
Gold looks like it will retest 970 USD again, (almost there already at 955). Will it break 1000 USD? Neutral on Oil.
* New positions and position changes
- Long SAS, the airline stock
- Bought Eur/Usd puts for a correction lower
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
We could see Eur/Usd reach the 1.45/1.47 area on a swift move, although I am looking for a pullback first. I am not looking for any move above 1.50. The market has become preoccupied with the European dilemma to the extent that positioning was simply
too onesided. A clearout is taking place and that is just what´s needed.
*Garbage is still flying -for now
Couldn´t help but notice that the Scandinavian Airline, SAS, has received bad press and heavy shareprice downgrades from practically every analyst covering it. Still, the stock remains bid. Smells like a rally brewing in that one. I have reentered this one. Light feet.
* Will June be the last assetmarket party month this summer?
I am starting to look around for opportunities to position for increased bearishness post it. Caution here is still warranted for the massive liquidity flows getting pumped into the market.
*Inflation, US collapse, Gold and Oil are the current trend subjects.
Inflation I think is too early - still. US collapse ditto. Still more concerned about the European situation should US and China not drag Europe out of the mud. There simply is no European plan. One big risk, come fall, would be that Europe starts sinking due to the US and China running out of steam. CEE and the Baltics weighing heavily as well.
Gold looks like it will retest 970 USD again, (almost there already at 955). Will it break 1000 USD? Neutral on Oil.
* New positions and position changes
- Long SAS, the airline stock
- Bought Eur/Usd puts for a correction lower
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
18 May 2009
Asian capital moving into assetmarkets - but Japanese capital stays increasingly at home
* Sovereign Asian funds diversifying into assetmarkets
Singapores Temasek announced on Friday that they are moving funds into assetmarkets, mainly commodities. Overnight China´s 80 BN Usd pensionfund announced they are moving 8 BN Usd into private equity funds.
This makes a continued bullish sentiment all the more likely as this bearmarket rally is liquidity driven and liquidity is ample. With important funds setting the example by moving out of bonds and into risky assets, more are bound to follow.
Next to get "long enough" are the real money accounts. Chasing the market further. Valuations and earnings are most likely way overestimated at this point in time, but the market needs to get long before we will see it come crashing down to earth.
I do believe there is a technical short term case for a market setback, but I will not be looking for any substantial moves lower at this point in time in any "normal" distributed markets. Digital ones are a different thing,,,,,
* The Strong Jpy and other assetclasses - correlation breakdown
The correlation between the JPY and assetmarkets has broken down since early March, when the stock market bear rally started. The Jpy is actually as strong or stronger vs the Eur and the Usd now. It seems one plausible reason is the change of behaviour by the Japanese bond investors. Japans foreign currency investments are mostly bond driven.
With the introduction of QE in more foreign countries, undermining the long term bondvalue, it seems the Japanese bondinvestors have turned increasingly inwards. I believe the structural strength of the JPY is therefore likely to continue for the next few months. In 1998, post the LTCM, as liquidity was forced fed to the market , affecting bonds, the JPY strengthened during the fall. Although the JPY strengthening at that time was extremely viscious, dropping USD/JPY from 134 to 111 in 48 hours.,I do not believe this is what we will be witnessing this time around, unless modellers and correlation traders oversell the JPY on the back of rebounding assetmarkets of course,,,,,
*New positions and position changes
- Took profit and squared the remaining half of my long Usd/Zar position
- Dipped my toes, went long Usd/Mxn
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
Singapores Temasek announced on Friday that they are moving funds into assetmarkets, mainly commodities. Overnight China´s 80 BN Usd pensionfund announced they are moving 8 BN Usd into private equity funds.
This makes a continued bullish sentiment all the more likely as this bearmarket rally is liquidity driven and liquidity is ample. With important funds setting the example by moving out of bonds and into risky assets, more are bound to follow.
Next to get "long enough" are the real money accounts. Chasing the market further. Valuations and earnings are most likely way overestimated at this point in time, but the market needs to get long before we will see it come crashing down to earth.
I do believe there is a technical short term case for a market setback, but I will not be looking for any substantial moves lower at this point in time in any "normal" distributed markets. Digital ones are a different thing,,,,,
* The Strong Jpy and other assetclasses - correlation breakdown
The correlation between the JPY and assetmarkets has broken down since early March, when the stock market bear rally started. The Jpy is actually as strong or stronger vs the Eur and the Usd now. It seems one plausible reason is the change of behaviour by the Japanese bond investors. Japans foreign currency investments are mostly bond driven.
With the introduction of QE in more foreign countries, undermining the long term bondvalue, it seems the Japanese bondinvestors have turned increasingly inwards. I believe the structural strength of the JPY is therefore likely to continue for the next few months. In 1998, post the LTCM, as liquidity was forced fed to the market , affecting bonds, the JPY strengthened during the fall. Although the JPY strengthening at that time was extremely viscious, dropping USD/JPY from 134 to 111 in 48 hours.,I do not believe this is what we will be witnessing this time around, unless modellers and correlation traders oversell the JPY on the back of rebounding assetmarkets of course,,,,,
*New positions and position changes
- Took profit and squared the remaining half of my long Usd/Zar position
- Dipped my toes, went long Usd/Mxn
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
15 May 2009
Green shoots? Brown shoots?
Happy friday,
* Markets still trading with a bullish undertone - for now
The "Green shoots" consensus will likely be severely tested before long. Especially with China´s latest inflation data showing China back in deflation. However, there are some positives; Koran expects the Korean economy to make a U shaped recovery and the Indonesian current account is back in surplus. For now this should provide an indication as to increased investment flows into these countries, indicating their currencies strengthening as well.
* The Baltics, its not just an economic issue - its a geopolitical one as well
With Russia keen on securing their Russian minorities wellbeing in neighbouring countries, this is an issue that should not be ignored going forward. With the Baltic states economies imploding at an accelerated pace and the IMF paying and applauding the Baltic states to continue down this cul de sac, this will enivetably lead to social upheaval.
This will be an ideal environment for an opportunistic neighbour to intervene. Finns, Swedes, Poles and others should be very wary. This has all the ingredients to become an issue way bigger than anyone is currently expecting.
* What to do then?
I suggest abandoning the Ostrich approach and start dealing with the issues at hand here. Correcting them as need be. This is my suggestion for a straightforward solution;
1) Secure funding for the Baltic states via the IMF, the Worldbank, the EBDR, the EU and the neighbouring Scandinavian countries. This funding should be big enough to be able to cope with the massive social effects that will come in the wake of a 40%-50% currency devaluation.
The Swedish finance minister Mr Anders Borg is technically correct when he declares the fixed exchange rate a sovereign decision for the Baltic governments. However, it is quickly becoming an international question. Why? The Baltics states are more or less depending on IMF sponsored funding. Thats why.
The Baltic governments dont know what to do from here, hence, they continue down the dead end street.
The Baltic states private sectors are becoming extinct. They need advice - now.
2) Float their currencies. Lets face it. The Euro can wait. This is not the time. Later perhaps.
3) Manage the Baltic afterchocks.
4) Support and assist the local private sectors. Get exports going again, - jobs - tax revenues, consumption - investment - growth.
This is doable now. The sooner, the lower the overall cost. To wait and postpone will surely make this very costly.
Disclosure: I am long Eur/Lvl forwards, Swedbank puts.
* New positions and positionchanges
None
Have a great weekend
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
* Markets still trading with a bullish undertone - for now
The "Green shoots" consensus will likely be severely tested before long. Especially with China´s latest inflation data showing China back in deflation. However, there are some positives; Koran expects the Korean economy to make a U shaped recovery and the Indonesian current account is back in surplus. For now this should provide an indication as to increased investment flows into these countries, indicating their currencies strengthening as well.
* The Baltics, its not just an economic issue - its a geopolitical one as well
With Russia keen on securing their Russian minorities wellbeing in neighbouring countries, this is an issue that should not be ignored going forward. With the Baltic states economies imploding at an accelerated pace and the IMF paying and applauding the Baltic states to continue down this cul de sac, this will enivetably lead to social upheaval.
This will be an ideal environment for an opportunistic neighbour to intervene. Finns, Swedes, Poles and others should be very wary. This has all the ingredients to become an issue way bigger than anyone is currently expecting.
* What to do then?
I suggest abandoning the Ostrich approach and start dealing with the issues at hand here. Correcting them as need be. This is my suggestion for a straightforward solution;
1) Secure funding for the Baltic states via the IMF, the Worldbank, the EBDR, the EU and the neighbouring Scandinavian countries. This funding should be big enough to be able to cope with the massive social effects that will come in the wake of a 40%-50% currency devaluation.
The Swedish finance minister Mr Anders Borg is technically correct when he declares the fixed exchange rate a sovereign decision for the Baltic governments. However, it is quickly becoming an international question. Why? The Baltics states are more or less depending on IMF sponsored funding. Thats why.
The Baltic governments dont know what to do from here, hence, they continue down the dead end street.
The Baltic states private sectors are becoming extinct. They need advice - now.
2) Float their currencies. Lets face it. The Euro can wait. This is not the time. Later perhaps.
3) Manage the Baltic afterchocks.
4) Support and assist the local private sectors. Get exports going again, - jobs - tax revenues, consumption - investment - growth.
This is doable now. The sooner, the lower the overall cost. To wait and postpone will surely make this very costly.
Disclosure: I am long Eur/Lvl forwards, Swedbank puts.
* New positions and positionchanges
None
Have a great weekend
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
14 May 2009
Germanys bad bank plan, The Baltics and analysts - are they for real?
* The German bad bank plan
A week or so ago, in another market sentiment world, this plan would probably have been applauded. However, if, as I believe, market sentiment over the summer will shift towards an increased focus on the debt dilemma in Europe, the German bad bank plan will likely not be appreciated by the marketplace. Admittedly, there was a proper intital attempt from the Germans to offload toxic assets from Landesbanken and commercial banks to a government owned "bad bank".
However, since this suggestion was based on making the transfers at marketprices it failed. Reason being that the vast majority of German banks would simply have been, you´ve guessed it, - insolvent.
The discrepancy between booked value and market value was simply too big.
Back to the drawing board again. New suggestion. Plan B - sweeping it all under the rug, almost. The new bad bank plan also includes a state owned "bad bank". German banks will transfer their toxic assets to the "bad bank" at 90% of their booked value. They will then pay a yearly fee (out of their dividends, not their profits), with the purpose of building up a cushion for potential future losses.
The "bad assets" vehicle will not be marked to market and will not be settled with the banks til the end of the instruments maturity. The "bad bank" will be financed via government guaranteed "toxic" bonds. Taxpayers - you like? I wouldnt. Anyway, in my view, this strategy is based on the, these days, global government standard response - the Ostrich method. Slogans; "If you cant see it - it isnt there", "Out of sight - out of mind".
Europe is counting on the US and Asia dragging Europe out of the mud soonish. There sure does not seem to be any European plan as how to do anything about it themselves, so far. Well, Im not sure the US and Asia are sound and healthy enough to pull it off this time around. If not, Europe will be in for a very, very tough period ahead.
With the German bad bank plan lacking mark to market ingredients, it becomes a static approach, with no riskmanagement taking place. This means the German taxpayers are potentially faced with a 1 Trn (likely to be less) Usd bomb detonating at some point in the future. Clearly, the "fingers crossed" riskmanagement approach rules over there.
German CDS spreads should widen on the back of this plan. To top it off Germany is facing an estimated 350 BN Eur shortfall in tax revenues til 2013. Hence, an increase of the budget deficit or a reduction of expenditure will be the outcome. I would guess the first alternative is the most likely from a political point of view. In either case, it will not assist in any recovery.
* Analysts are analysing the "worst case" scenario for the Baltics - or are they?
There seems to be one big factor missing when analysts are coming up with a "worst case" scenario for the Swedish banks credit losses in the Baltics. The level for Swedish creditlosses during the crisis in the early nineties is often referred to as a benchmark for creditlosses also in the Baltics. To me this is grossly misleading and a vast underestimate of the real risks for creditlosses in the Baltics.
The Swedish credit stock during the beginning of the nineties was almost entirely in local currency. In the Baltics, hard currency loans account for 60%-80% of the outstanding loan stock!Thus, a devaluation will have a devastating impact on creditlosses.
During the Asian crises in the late nineties, creditlosses reached levels of 40% - 50% in countries suffering devaluations and with a large share of hard currency loans in their loanstocks. This is a classic macro development. Fixed exchange rate regimes drastically increases the risks for overleveraging, overconsumption and misallocating investments. "Arbitraging" by borrowing in foreign currencies with lower rates, in the belief that the fixed currency regime will stay on just as the politicians has promised.
It is a downward spiral that at first appears as an upward one. This time is no different. The Baltics will hit Sweden´s taxpayers hard, you´ve better believe it. Hopefully politicians will make sure the bank shareholders and debt owners will pay their due price as well.
15%-20% creditlosses is not a "worst case" scenario. 40% - 50% I believe is more like it, based on a 40% - 50% devaluation across the board of the Baltic currencies. Social upheaval not included.
Disclosure; Long Eur/Lvl Forwards, Long Swedbank puts.
* New positions and position changes
- Took profit on my long Eur/Pln
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
A week or so ago, in another market sentiment world, this plan would probably have been applauded. However, if, as I believe, market sentiment over the summer will shift towards an increased focus on the debt dilemma in Europe, the German bad bank plan will likely not be appreciated by the marketplace. Admittedly, there was a proper intital attempt from the Germans to offload toxic assets from Landesbanken and commercial banks to a government owned "bad bank".
However, since this suggestion was based on making the transfers at marketprices it failed. Reason being that the vast majority of German banks would simply have been, you´ve guessed it, - insolvent.
The discrepancy between booked value and market value was simply too big.
Back to the drawing board again. New suggestion. Plan B - sweeping it all under the rug, almost. The new bad bank plan also includes a state owned "bad bank". German banks will transfer their toxic assets to the "bad bank" at 90% of their booked value. They will then pay a yearly fee (out of their dividends, not their profits), with the purpose of building up a cushion for potential future losses.
The "bad assets" vehicle will not be marked to market and will not be settled with the banks til the end of the instruments maturity. The "bad bank" will be financed via government guaranteed "toxic" bonds. Taxpayers - you like? I wouldnt. Anyway, in my view, this strategy is based on the, these days, global government standard response - the Ostrich method. Slogans; "If you cant see it - it isnt there", "Out of sight - out of mind".
Europe is counting on the US and Asia dragging Europe out of the mud soonish. There sure does not seem to be any European plan as how to do anything about it themselves, so far. Well, Im not sure the US and Asia are sound and healthy enough to pull it off this time around. If not, Europe will be in for a very, very tough period ahead.
With the German bad bank plan lacking mark to market ingredients, it becomes a static approach, with no riskmanagement taking place. This means the German taxpayers are potentially faced with a 1 Trn (likely to be less) Usd bomb detonating at some point in the future. Clearly, the "fingers crossed" riskmanagement approach rules over there.
German CDS spreads should widen on the back of this plan. To top it off Germany is facing an estimated 350 BN Eur shortfall in tax revenues til 2013. Hence, an increase of the budget deficit or a reduction of expenditure will be the outcome. I would guess the first alternative is the most likely from a political point of view. In either case, it will not assist in any recovery.
* Analysts are analysing the "worst case" scenario for the Baltics - or are they?
There seems to be one big factor missing when analysts are coming up with a "worst case" scenario for the Swedish banks credit losses in the Baltics. The level for Swedish creditlosses during the crisis in the early nineties is often referred to as a benchmark for creditlosses also in the Baltics. To me this is grossly misleading and a vast underestimate of the real risks for creditlosses in the Baltics.
The Swedish credit stock during the beginning of the nineties was almost entirely in local currency. In the Baltics, hard currency loans account for 60%-80% of the outstanding loan stock!Thus, a devaluation will have a devastating impact on creditlosses.
During the Asian crises in the late nineties, creditlosses reached levels of 40% - 50% in countries suffering devaluations and with a large share of hard currency loans in their loanstocks. This is a classic macro development. Fixed exchange rate regimes drastically increases the risks for overleveraging, overconsumption and misallocating investments. "Arbitraging" by borrowing in foreign currencies with lower rates, in the belief that the fixed currency regime will stay on just as the politicians has promised.
It is a downward spiral that at first appears as an upward one. This time is no different. The Baltics will hit Sweden´s taxpayers hard, you´ve better believe it. Hopefully politicians will make sure the bank shareholders and debt owners will pay their due price as well.
15%-20% creditlosses is not a "worst case" scenario. 40% - 50% I believe is more like it, based on a 40% - 50% devaluation across the board of the Baltic currencies. Social upheaval not included.
Disclosure; Long Eur/Lvl Forwards, Long Swedbank puts.
* New positions and position changes
- Took profit on my long Eur/Pln
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
13 May 2009
Garbage getting adjusted
* Bears in da house
I dont expect more than 10-15% down for equity markets (already down 5% ish over the last two days). Not if the stressedout institutional investors get to have their say. Many probably missed the rally and it makes more personal sense for them to go long than not. (Most are marked against benchmarks - so its all relative, not absolute.) I expect this to dampen the bearish momentum. Likewise, this move lower seems quite anticipated.
Anyway, in a few months at the latest, we should see the megabear trend reassert itself.
A Baltic devaluation would of course alter this scenario. The Baltic fixed exchange rate regimes are becoming ludicrous. Especially as the GDP;s are falling like leaves. Latvias budget deficit in relationship to the Latvian GDP is now expected by external analysts to reach 15% - 18%. The level with IMF was 5%,,,,, Fogettabt it!
Disclosure; I am long Eur/Lvl forwards.
* Im bearish assets short term
Looking for at least a few days of bearishness. In certain assets, a bit more. Commodity assets are looking weak as well near term.
* New positions and position changes
- The long Ultrashort Us Financials ETF I initiated and described yesterday was described with an incorrect name. It is called SKF.
- Added to my long SKF ETF.
- Bought Eur/Pln
- Took profit on my long Eur/Sek
- Took profit on my long Eur/Huf
- Took profit on my long Eur/Nok
- Took profit on half my long Usd/Zar, looking to add again on dips
- Bought puts on Swedbank, the Swedish Bank with huge exposure to the Baltics
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
I dont expect more than 10-15% down for equity markets (already down 5% ish over the last two days). Not if the stressedout institutional investors get to have their say. Many probably missed the rally and it makes more personal sense for them to go long than not. (Most are marked against benchmarks - so its all relative, not absolute.) I expect this to dampen the bearish momentum. Likewise, this move lower seems quite anticipated.
Anyway, in a few months at the latest, we should see the megabear trend reassert itself.
A Baltic devaluation would of course alter this scenario. The Baltic fixed exchange rate regimes are becoming ludicrous. Especially as the GDP;s are falling like leaves. Latvias budget deficit in relationship to the Latvian GDP is now expected by external analysts to reach 15% - 18%. The level with IMF was 5%,,,,, Fogettabt it!
Disclosure; I am long Eur/Lvl forwards.
* Im bearish assets short term
Looking for at least a few days of bearishness. In certain assets, a bit more. Commodity assets are looking weak as well near term.
* New positions and position changes
- The long Ultrashort Us Financials ETF I initiated and described yesterday was described with an incorrect name. It is called SKF.
- Added to my long SKF ETF.
- Bought Eur/Pln
- Took profit on my long Eur/Sek
- Took profit on my long Eur/Huf
- Took profit on my long Eur/Nok
- Took profit on half my long Usd/Zar, looking to add again on dips
- Bought puts on Swedbank, the Swedish Bank with huge exposure to the Baltics
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
12 May 2009
Reality flashback?
In a bit of a hurry this morning due to travelling arrangements. Will be updating as per normal tommorrow again.
# Shortterm it seems we are in for a correction in riskappetite and risky assets
I am looking for it to last more than one day at least,,,,, Quite a few risky assets that are severely overbought; equities, currencies, creditspreads too tight, bond yields too high, commodities too high(apart from gold perhaps).
# New positions and position changes
- Taken profit on long Eur/Usd
- Taken profit on long Gbp/Usd
- Long ETF Ultrashort Us Financials ETF
- Long Eur/Nok
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
# Shortterm it seems we are in for a correction in riskappetite and risky assets
I am looking for it to last more than one day at least,,,,, Quite a few risky assets that are severely overbought; equities, currencies, creditspreads too tight, bond yields too high, commodities too high(apart from gold perhaps).
# New positions and position changes
- Taken profit on long Eur/Usd
- Taken profit on long Gbp/Usd
- Long ETF Ultrashort Us Financials ETF
- Long Eur/Nok
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
11 May 2009
Baltics and CEE back on the radarscreen before long?
* Latvia 1Q GDP dropped 18% - get ready for further drops.
In the midst of the bearmarket rally it might be a sobering reminder that all might not be happy hunky dory days after all. With the Latvian GDP down 18% for the 1Q and harder times still ahead for this country, this number will most likely continue to be grinding, if not dropping, downwards.
What surprised me was that unemployment was still "only" at 11%. With the private sector heading for near extinction, I expect this number to skyrocket to above 20% within the next 6 months. (I guess the IMF money can create loads of public sector jobs for a while, but,,,) In any case, the Latvian authorities had better keep this number under control in order to avoid social upheaval. At 25%-30% unemployment rate, the foundations of Latvia as a democratically functioning country will likely be sliding.
The IMF has yet to make a decision on whether they will grant Latvia the next installment payment of 1.6 Bn Eur due in June. It supposedly hangs on whether Latvia can bring their budget deficit to 5% of GDP. The last estimate from the Latvian government themselves was -7.7%.
With GDP sinking like a stone I guess the risk is for the deficit in terms of share of the GDP to increase further. In other words, Latvia will not be able to fulfill the IMF criteria, not now and not later in the year. As Ive mentioned before, I dont think it will have a material impact on the IMF payment schedule anyway. Latvia will get their money, or else the country will swiftly become insolvent.
What I do wonder though, is if there will be strings attached. One would be to let go of their fixed currency regime. This would be, ehhmm, sensible, to say the least. For IMF to assist in upholding Latvias fixed currency regime despite the local economic realities and the surrounding economic environment can simply not be motivated on economically sane grounds.
The British writer Will Self launched the "Quantitative theory of insanity". According to this one there is a fixed portion of sanity in the world at any one time. As one group becomes more sane, another group becomes more insane. Well, it seems to me the people in charge of the Latvia fixed exchange rate policy surely has not become more sane. The question is; who has then?
Disclosure; I am long Eur/Lvl forwards.
*New positions and position changes
None
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
In the midst of the bearmarket rally it might be a sobering reminder that all might not be happy hunky dory days after all. With the Latvian GDP down 18% for the 1Q and harder times still ahead for this country, this number will most likely continue to be grinding, if not dropping, downwards.
What surprised me was that unemployment was still "only" at 11%. With the private sector heading for near extinction, I expect this number to skyrocket to above 20% within the next 6 months. (I guess the IMF money can create loads of public sector jobs for a while, but,,,) In any case, the Latvian authorities had better keep this number under control in order to avoid social upheaval. At 25%-30% unemployment rate, the foundations of Latvia as a democratically functioning country will likely be sliding.
The IMF has yet to make a decision on whether they will grant Latvia the next installment payment of 1.6 Bn Eur due in June. It supposedly hangs on whether Latvia can bring their budget deficit to 5% of GDP. The last estimate from the Latvian government themselves was -7.7%.
With GDP sinking like a stone I guess the risk is for the deficit in terms of share of the GDP to increase further. In other words, Latvia will not be able to fulfill the IMF criteria, not now and not later in the year. As Ive mentioned before, I dont think it will have a material impact on the IMF payment schedule anyway. Latvia will get their money, or else the country will swiftly become insolvent.
What I do wonder though, is if there will be strings attached. One would be to let go of their fixed currency regime. This would be, ehhmm, sensible, to say the least. For IMF to assist in upholding Latvias fixed currency regime despite the local economic realities and the surrounding economic environment can simply not be motivated on economically sane grounds.
The British writer Will Self launched the "Quantitative theory of insanity". According to this one there is a fixed portion of sanity in the world at any one time. As one group becomes more sane, another group becomes more insane. Well, it seems to me the people in charge of the Latvia fixed exchange rate policy surely has not become more sane. The question is; who has then?
Disclosure; I am long Eur/Lvl forwards.
*New positions and position changes
None
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
08 May 2009
NFP day - asymmetric risks
* NFP again - probabilities still in favour of higher assetprices and increased riskappetite
Markets will initially react proportionally more positive to a somewhat "better number compared to a somewhat "worse" number. Institutional investors continue to force this market higher. iTraxx Europe and the iTraxx Crossover index are currently rallying too, pre the NFP, indicating market sentiment.
*Despite the bullish environment; Some bearish signs. Too early?
-The Nasdaq continues to lag the rest of the Equity market, just like it did in the fall of 2008. Its been going on for a week now. The SOX index have turned bearish. The SOX index was one of the first indicators that went bullish as the équity market turned upwards in March.
- The SKF ETF Ultrashort financials for US financial stocks seems to be bottoming out.
- The VIX index yesterday saw strong buying interest for MAY 40 Calls. Although quite short maturitywise, it was a while ago since there was good buying interest of VIX calls.
- ZAR, HUF, SEK looks to be topping out from their recent rallies, to turn weaker again. Normally followers of Equity markets.
-Gold looks to be bottoming out and have recently started to inch higher.
Although these signs might be premature, I will monitor them closely going forward.
*US Bank stresstests are over - as expected; no stress, apart from institutional investor buying panic. A continuation of the US financials rally?
According to GS, these stresstests were valid and prudent. While I do recognise the resources within the GS, I have to disagree. The US banks stresstests were not done properly, in my book.
They were way too soft and thus will likely not have that much value. The US government never really had any choice as to the outcome of these stresstests. Besides, they were leaked well in advance to "test the waters". Looking for market reaction. Since it seemed ok, no new measures were needed. Now, this could cause a further rally in US financials as the US markets open today. I will be watching the likes of Citigroup, Bank of America and Keycorp as they could be in for a continuation rally. Well see.
* I am Bearish the ZAR
One currency I am bearish on right here and now though, is the ZAR.
Apart from the Southafrican currency (ZAR) looking severely overbought and about to go weaker, there is also the issue of the SARB potentially increasing their FX reserves by buying USD in the Fx market. Usd/Zar has moved from 10.70 to 8.27 since March. During this drop, SARB;s currency reserves remains unchanged. It might be time to replenish these reserves for the SARB, while the market is not negative towards it.
(SARB is currently quite, 50% ish, underweight compared to their EM peers Mexico, Turkey and Brazil). There is also uncertainty as to whether the Finance minister Trevor Manuel will stay in place during the new Zuma administration. Speculations have suggested he will be appointed as head of a planning commission with at least equal, if not more, importance.
However, with the new president elect Zuma announcing his new cabinet this weekend. The Finance Minister post uncertainty remains. This will keep the ZAR Fxmarket on its toes as the current/former Finance Minister Trevor Manuel has been perceived by the market as a guarantor of financial stability, order and prudence. I am long Usd/Zar.
* What else?
Got a number of optionalities lined up. In the process of timing them. Will revert.
*Position changes and new positions
- Long Usd/Zar
- Long Eur/Sek
- Long Eur/Huf
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
Markets will initially react proportionally more positive to a somewhat "better number compared to a somewhat "worse" number. Institutional investors continue to force this market higher. iTraxx Europe and the iTraxx Crossover index are currently rallying too, pre the NFP, indicating market sentiment.
*Despite the bullish environment; Some bearish signs. Too early?
-The Nasdaq continues to lag the rest of the Equity market, just like it did in the fall of 2008. Its been going on for a week now. The SOX index have turned bearish. The SOX index was one of the first indicators that went bullish as the équity market turned upwards in March.
- The SKF ETF Ultrashort financials for US financial stocks seems to be bottoming out.
- The VIX index yesterday saw strong buying interest for MAY 40 Calls. Although quite short maturitywise, it was a while ago since there was good buying interest of VIX calls.
- ZAR, HUF, SEK looks to be topping out from their recent rallies, to turn weaker again. Normally followers of Equity markets.
-Gold looks to be bottoming out and have recently started to inch higher.
Although these signs might be premature, I will monitor them closely going forward.
*US Bank stresstests are over - as expected; no stress, apart from institutional investor buying panic. A continuation of the US financials rally?
According to GS, these stresstests were valid and prudent. While I do recognise the resources within the GS, I have to disagree. The US banks stresstests were not done properly, in my book.
They were way too soft and thus will likely not have that much value. The US government never really had any choice as to the outcome of these stresstests. Besides, they were leaked well in advance to "test the waters". Looking for market reaction. Since it seemed ok, no new measures were needed. Now, this could cause a further rally in US financials as the US markets open today. I will be watching the likes of Citigroup, Bank of America and Keycorp as they could be in for a continuation rally. Well see.
* I am Bearish the ZAR
One currency I am bearish on right here and now though, is the ZAR.
Apart from the Southafrican currency (ZAR) looking severely overbought and about to go weaker, there is also the issue of the SARB potentially increasing their FX reserves by buying USD in the Fx market. Usd/Zar has moved from 10.70 to 8.27 since March. During this drop, SARB;s currency reserves remains unchanged. It might be time to replenish these reserves for the SARB, while the market is not negative towards it.
(SARB is currently quite, 50% ish, underweight compared to their EM peers Mexico, Turkey and Brazil). There is also uncertainty as to whether the Finance minister Trevor Manuel will stay in place during the new Zuma administration. Speculations have suggested he will be appointed as head of a planning commission with at least equal, if not more, importance.
However, with the new president elect Zuma announcing his new cabinet this weekend. The Finance Minister post uncertainty remains. This will keep the ZAR Fxmarket on its toes as the current/former Finance Minister Trevor Manuel has been perceived by the market as a guarantor of financial stability, order and prudence. I am long Usd/Zar.
* What else?
Got a number of optionalities lined up. In the process of timing them. Will revert.
*Position changes and new positions
- Long Usd/Zar
- Long Eur/Sek
- Long Eur/Huf
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
07 May 2009
Garbage rules - forget about the (non) stress tests
* The (non) stress test; No stress - no sweat, apart for institutional investors. Buying panic.
With most of the so called stress test well known in advance this too should pass without any sweat. Besides, the market does not seem to have been positioned for a moderate outcome.
This combined with a continuation of better than expected macro numbers and institutional investors lagging retail when it comes to asset buying, it would seem we are set for further asset buying short term. Especially as further asset moves higher combined with a further fall in volatilities and narrowing corporate bond spreads seems to be the biggest pain trade for benchmarking institutional investors.
* Increasing riskappetite remains for now - weaker Usd
China has started to reduce its demand for Usd denominated assets and suggested a change in its currency reserve policy stance. Official Chinese GDP rates are currently at 8%. Combined it would seem China is in the process of further promoting its domestic demand. This should help any countries with specifically strong trade relationships with China, such as Australia and the Aud. The Usd will suffer, especially against Latam and Asia as US corporates "exports" Usd. Europe should not be the main beneficiary since the Eurozone economy is still very much debt burdened.
* IMF revised their CEE debt numbers - providing further boost to risk appetite
With the IMF revising debt numbers from previously released CEE debt reports downwards, this region have received a further boost. How long will it last for? In this environment it could continue from here as further institutional equity and bond investments are encouraged by the news. However, in the near term it seems HUF might be close to a temporary base vs the Euro in the low 270;s.
*New positions and position changes
- Sold my SAS Airline stock after 20% profit in two days. Looking to reenter on dips below 4.00, alt chase it on a break of 5.00.
- Long Eur/Usd and Gbp/Usd via options
- Sold LOIL, the leveraged Crude oil ETF, after 25% profit in a week. Looking to reenter on dips sub 4.00 alt chase on a break above 4.60.
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
With most of the so called stress test well known in advance this too should pass without any sweat. Besides, the market does not seem to have been positioned for a moderate outcome.
This combined with a continuation of better than expected macro numbers and institutional investors lagging retail when it comes to asset buying, it would seem we are set for further asset buying short term. Especially as further asset moves higher combined with a further fall in volatilities and narrowing corporate bond spreads seems to be the biggest pain trade for benchmarking institutional investors.
* Increasing riskappetite remains for now - weaker Usd
China has started to reduce its demand for Usd denominated assets and suggested a change in its currency reserve policy stance. Official Chinese GDP rates are currently at 8%. Combined it would seem China is in the process of further promoting its domestic demand. This should help any countries with specifically strong trade relationships with China, such as Australia and the Aud. The Usd will suffer, especially against Latam and Asia as US corporates "exports" Usd. Europe should not be the main beneficiary since the Eurozone economy is still very much debt burdened.
* IMF revised their CEE debt numbers - providing further boost to risk appetite
With the IMF revising debt numbers from previously released CEE debt reports downwards, this region have received a further boost. How long will it last for? In this environment it could continue from here as further institutional equity and bond investments are encouraged by the news. However, in the near term it seems HUF might be close to a temporary base vs the Euro in the low 270;s.
*New positions and position changes
- Sold my SAS Airline stock after 20% profit in two days. Looking to reenter on dips below 4.00, alt chase it on a break of 5.00.
- Long Eur/Usd and Gbp/Usd via options
- Sold LOIL, the leveraged Crude oil ETF, after 25% profit in a week. Looking to reenter on dips sub 4.00 alt chase on a break above 4.60.
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
06 May 2009
The riskappetite continues to increase - inventory build up and exportfinance driven export demand the main drivers
Ive had to prioritise house building and a few other agendas recently which resulted in no update yesterday. Hopefully youve managed to survive anyhow.
* Markets are increasingly declaring this downturn over
I beg to differ. This downturn is by no means over. It has been injected with the equivalent of financial steroids, (ie, yet more debt) in order to keep it going for a limited amount of time. Unfortunately, this steroids supply will run out (unless governments, treasuries and centralbanks decide they will monetize their debt by printing money to buy it themselves).
Having said that, this is not the time to go against this market, at least not in the underlying. Options is a different issue, depending on how they are utilised.
*How to trade the market from here then?
Well, with an increasingly liquidity driven market, also crap rises with the tide. It must have escaped noone that the biggest junk assets that fulfilled any or all of the following criteria;heavily leveraged, heavily indebted, negative or weak cashflow, underlying market heading straight into the ground, have been the ones that by far have risen the most over the past month or so.
Long garbage has worked very well lately. It could very well continue to work nearterm.
Main drivers of this recent rally has mainly been shortsqueezing combined with underinvested institutional investors scrambling to get equities on board.
With global inventories at their lowest level since 1974, inventory build ups and export finance led exports are further driving underlying business improvements.
The climbing of this "wall of worry" seems to continue and short risky assets will likely still be the biggest pain trade - mainly due to the institutional investors. I am myself long garbage in the form of SAS, the Scandinavian Airline stock. So far, so good,,, Perhaps I should mention going for junk is by no means my main objective. Market price timing and optionality are the real variables. Although while earlier I might have shied away from outright garbage, currently I am not. Playing the momentum and market sentiment - not the story.
* Looking for optionalities
From a trading perspective it is interesting to note the "optionalities" present in the marketplace.
What do I mean by that then?
Assets or indexes with an extremely low probability of going to zero. Example; The ETF LOIL (ETFS Leveraged Crude Oil - Beta two). Underlying price is option premiumlike with a huge upside potential. Maturity; Unlimited. Probability of underlying going to zero; very unlikely.
I am long LOIL.
There are others on the radar that I am monitoring. Stay posted.
*How long will this bearmarketrally last for? (Yes - I still call it bearmarket rally)
I could see it running for one to two months more perhaps, but not longer than that.
By then garbage assets should be well overpriced, institutional investors have gotten their longs in and be fully invested. Inventories will be full again and export led finance will have filled international demand. Thus, market data will likely weaken again.
*The bad debt issue will return
Add to this the coming market realisation and focus on the fact that European banks are due to raise 600 BN Usd this year compared with 275 BN Usd for US banks. All according to the IMF and all til 2010. There is another vast difference between the US and European banks funding situation, namely the fact that the US banks are able to convert preferred stock to common stock and thereby improving their capitalratios(and becoming government owned in the process). European banks do not have this possibility which may increase their capital need beyond the 600 BN USD announced by the IMF.
As have already been announced by BAFIN, the German bank regulator, estimates that the current Toxic assets present on German banks balance sheets amounts to over 1 TRN Usd.
*Risk loving markets near term; Shaky USD?
This near term bullish and risk loving environment should not be beneficial for the USD. 6.7 TRN Usd is aimed for investments outside of the US. Hence, a push for higher yields abroad will benefit local currencies, leaving the USD softish. However, this should reverse in the 2H of this year in line with the reasons presented above.
*New positions
- Long SAS, the Scandinavian Airline
- Long LOIL the leveraged crude Oil ETF
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
* Markets are increasingly declaring this downturn over
I beg to differ. This downturn is by no means over. It has been injected with the equivalent of financial steroids, (ie, yet more debt) in order to keep it going for a limited amount of time. Unfortunately, this steroids supply will run out (unless governments, treasuries and centralbanks decide they will monetize their debt by printing money to buy it themselves).
Having said that, this is not the time to go against this market, at least not in the underlying. Options is a different issue, depending on how they are utilised.
*How to trade the market from here then?
Well, with an increasingly liquidity driven market, also crap rises with the tide. It must have escaped noone that the biggest junk assets that fulfilled any or all of the following criteria;heavily leveraged, heavily indebted, negative or weak cashflow, underlying market heading straight into the ground, have been the ones that by far have risen the most over the past month or so.
Long garbage has worked very well lately. It could very well continue to work nearterm.
Main drivers of this recent rally has mainly been shortsqueezing combined with underinvested institutional investors scrambling to get equities on board.
With global inventories at their lowest level since 1974, inventory build ups and export finance led exports are further driving underlying business improvements.
The climbing of this "wall of worry" seems to continue and short risky assets will likely still be the biggest pain trade - mainly due to the institutional investors. I am myself long garbage in the form of SAS, the Scandinavian Airline stock. So far, so good,,, Perhaps I should mention going for junk is by no means my main objective. Market price timing and optionality are the real variables. Although while earlier I might have shied away from outright garbage, currently I am not. Playing the momentum and market sentiment - not the story.
* Looking for optionalities
From a trading perspective it is interesting to note the "optionalities" present in the marketplace.
What do I mean by that then?
Assets or indexes with an extremely low probability of going to zero. Example; The ETF LOIL (ETFS Leveraged Crude Oil - Beta two). Underlying price is option premiumlike with a huge upside potential. Maturity; Unlimited. Probability of underlying going to zero; very unlikely.
I am long LOIL.
There are others on the radar that I am monitoring. Stay posted.
*How long will this bearmarketrally last for? (Yes - I still call it bearmarket rally)
I could see it running for one to two months more perhaps, but not longer than that.
By then garbage assets should be well overpriced, institutional investors have gotten their longs in and be fully invested. Inventories will be full again and export led finance will have filled international demand. Thus, market data will likely weaken again.
*The bad debt issue will return
Add to this the coming market realisation and focus on the fact that European banks are due to raise 600 BN Usd this year compared with 275 BN Usd for US banks. All according to the IMF and all til 2010. There is another vast difference between the US and European banks funding situation, namely the fact that the US banks are able to convert preferred stock to common stock and thereby improving their capitalratios(and becoming government owned in the process). European banks do not have this possibility which may increase their capital need beyond the 600 BN USD announced by the IMF.
As have already been announced by BAFIN, the German bank regulator, estimates that the current Toxic assets present on German banks balance sheets amounts to over 1 TRN Usd.
*Risk loving markets near term; Shaky USD?
This near term bullish and risk loving environment should not be beneficial for the USD. 6.7 TRN Usd is aimed for investments outside of the US. Hence, a push for higher yields abroad will benefit local currencies, leaving the USD softish. However, this should reverse in the 2H of this year in line with the reasons presented above.
*New positions
- Long SAS, the Scandinavian Airline
- Long LOIL the leveraged crude Oil ETF
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
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