* Quick feet. The Usd funding currency is being utilised to the max. Jpy just one of many.
The Usd bullishness has evaporated. Low rates are set to remain low amongst G20 countries for the foreseeable future. With creditmarkets still malfunctioning, this is yet another (quite risky) way of getting credit flowing again. Rising assetprices will eventually have that effect.
Enjoy the ride. This is one giant misallocation that businesses and households will take advantage of. Performing the massive missallocation process. Corporates and households with the best riskmanagement strategies will still be standing once the credittightening starts.
*Latam flows are accelerating, weighing on the Usd.
As Em flows are accelerating, this will be weighing on the "soon to be new global funding currency No1", the Usd. Assetinvestors should be quite pleased as it will spur commodities and equities further.
* The Chinese situation
The PM has made it clear that the fiscal and monetary accomodation will remain in place for the foreseeable future due to the vulnerability of the current economic rebound. Meanwhile, Chinese banks continue to lend. However,the fundamental trade flows remain in dire straits, with exports lagging. Since Chinese exports, in contrast to European ones, never got steroids injected via state supported export finance, the Chinese export numbers are likely more reliable than the European ones. This indicates a still quite gloomy global trade picture.
*How long will "happy days" last?
Tough call of course. As long as Centralbanks offer quantitative easing or economies fall back into recession. In the end I guess the Emerging markets will have to step up to the plate and deliver superior growth soonish. If they cant, who should then finance these funny money?
As inflated assetmarkets finally reaches the level where assetrelief becomes great enough to ease the strain on financial institutions balancesheets, the ensuing unplugging of the creditplug will start the tightening process. Then assetprices will suffer. More on that at another time.
For now, assetbuyers should love this environment with equities and bondmarkets rallying simultaneously.
As long as the creditplug remains, equities will rally. Whether the unplugging or the fallback into recession comes first we will see, but either way, it should at least be a couple of months before we know. Meanwhile, the pumping may continue.
* New positions and position changes
- Took profit on my long Eur/Nok spot position
- Took profit on my long Eur/Sek spot position
- Sold Usd/Jpy spot
As usual, good luck
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