Centralbank volatility subsidies - increasing cost, increasing risk.
I guess it's been going on for almost three and a half years now. During this period, central banks all over the world has used taxpayer money for capital destruction. Medicine will have to be taken no matter what. The question is if taxpayers should have to take even more risk first - and then get hit anyway?
Well, let me explain my thinking. If one accepts the fact that buying a bond is the equivalent of selling a put, then follows that central banks have been selling puts for the thre and a half years - generating a short options portfolio for the taxpayers, who ultimately are backing the central banks.
If one also considers that many central banks have been buying junk credits, central banks have, on top of it, created a short convexity portfolio. In a subsidized, synthetically low volatility environment, this might work ok. However, in an increasing to high volatility environment on the other hand,,,,, not so good.
This is also in addition to the biggest debt and global macro imbalance this world has ever faced.
So, where are we in all this?
Well, stars might be lining up and solar activity is on a definite increase.
Consider the following variables;
* Chinese currency reserve growth ; zilch. When it goes into reverse - watch out.
The Chinese have not acted smarter than the rest of us, nor do they have a superior market system.
Rather the opposite. Their short sighted and panicky injection of 1.8 Trn Usd into their financial system during the financial crisis made generated further waves of bubble building. China to some extent now a "short gamma" economy; caught between debt driven into negative yield investments and no growth.
If they push bank reserve requirements up; growth falls. If they reduce them, inflation shoots (due to way too low interest rates, making saving capital non attractive, pushing capital into assets instead).
The bubbles in realestate, the bankrupt regions, the bankrupt five biggest banks(measured in terms of bad debt), the massive negative yielding infrastructure investments and the corruption are areas I don´t have time to go through at this time, but they do certainly not have a positive impact.
Which brings us into the subject of the "curse of the fixed exchange rate" - but this is material for a separate article.
* The Euro area situation - say no more. It´s game over, whether they know it or not.
Witness the separatist activity within various countries in Europe; Spain, Italy, France, etc
"Rich" areas want to break free from the financing burden. If there´s no "solidarity" domestically, how can anyone expect this between countries in Europe. It´s all a fudge and the European citizens will sooner or later dump Brussels. Why? Europe can't afford their capital destructive spending sprees.
EU budgets are to be increased. (The poorest nations with the biggest populations wants to increase it - so that´s the way it´s most likely to play out.)
* The US fiscal situation - being the world currency means it´s both a blessing and a curse.
EG; you will be receiving finance for longer, but you will also be allowed to dig a deeper hole before financing is denied. Ending up with a global "too big to bail" situation.
It also means the pressure on any nation silly enough to run a fixed exhange rate regime will be under even more pressure.
* The current regulation and its effects.
Lower market risk absorption capacity. Increased gap risks/digital risks - especially as asset volatilities increase. The changing of financial participants business models.
This factor will may also have a way greater effect than what is currently recognized amongst market participants.
The drive for certain assets due to regulatory incentives has also pushed the herd into an investment corner consisting of low risk premiums, which it might become really hard to get out of.
* The continued reliance on Markowitz / portfolio theory, utilizing linear products.
Indicates not much in the way of risk management and infrastructural shifts have been made within the industry - so far.
There are more aspects which also will have to be postponed for another post, but the above and several decision making events globally could generate the spark necessary to throw us into the next extremely volatility phase of this crisis.
* Some other macro risks
There are plenty around; EU budget, - financing, Chinese new president, Russia, Egypt, Israel - Iran, Argentina, South Africa, rising soft commodity prices -refugee flows etc, etc.
Bottom line; absolute vol is heavily subsidized in general, but many can´t take advantage of it - which makes it even more interesting for the ones who can. The key lies in the structure.
Although a very longtime since last said - good luck.
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advice. 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. A 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, analysis, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
24 November 2012
01 November 2011
The freefalling Euro - soon at a theater near you
* Another day - another Euro rescue package
They all follow the same pattern, and essentially boil down to the following;
- We dont have any money.
- We dont understand how the market works.
- We do believe politics can solve massive economic imbalances.
- We do believe more debt and increasing leverage is a real solution.
This is the current Brussel politruk behaviour and it is not likely to change as panic sets in and these basic behavioral patterns are set on autopilot.
The Greece population is to have a referendum on the latest hard fiscal measures, and there is a real risk of this putting an end to the Greece Eur adventure.
I find it very difficult for any politician and any rescue package to stop momentum from developing further from here. Economic deleveraging is about to get in motion.
Hold on to your job and your cashflow best you can. Consolidate your assets. Try to capitalise on the developments - if you dare. It will be a rough ride. Try to take advantage of the possibilities that will open up.
Be long USD.
As usual -good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
They all follow the same pattern, and essentially boil down to the following;
- We dont have any money.
- We dont understand how the market works.
- We do believe politics can solve massive economic imbalances.
- We do believe more debt and increasing leverage is a real solution.
This is the current Brussel politruk behaviour and it is not likely to change as panic sets in and these basic behavioral patterns are set on autopilot.
The Greece population is to have a referendum on the latest hard fiscal measures, and there is a real risk of this putting an end to the Greece Eur adventure.
I find it very difficult for any politician and any rescue package to stop momentum from developing further from here. Economic deleveraging is about to get in motion.
Hold on to your job and your cashflow best you can. Consolidate your assets. Try to capitalise on the developments - if you dare. It will be a rough ride. Try to take advantage of the possibilities that will open up.
Be long USD.
As usual -good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
24 September 2011
Big bubble - big trouble
As I´ve mentioned in the blogs during the financial crisis, the steps taken during it only postponed the inevitable. And here we are, facing the facts. Its time to pay up, or reduce the debt -rebalance -globally.
This means lower liquidity - higher volatility - lower asset prices -default - debt writedowns -taxpayer payups - lower demand for products and services - business layoffs and bankruptcies - more defaults - more debt writedowns. This scenario is excluding China getting into trouble.
Unfortunately, there are increasing signs that it will.
That scenario is a scary one - but if it happens - and the risks are way too high for anyone to ignore it - the outcome could be massive. China is currently the worlds credit multiplier and liquidity provider. The curse of the fixed exchange rate have much to do with the creation of this monster. The unraveling of it could be something we will have to witness before long.
Any household, corporate, or global fund not trying their utmost to find ways to protect themselves against this (economic only, we hope) risk are putting the economic survival of their family, corporate or fund at stake.
The positive fact is that this time around, compared to the financial crisis, the traditional banks and the media are quick to jump on the bearish macro band wagon. Unfortunately, their macro horizon stops at Europe and the US. They still believe the fairy tale story that emerging markets and China will do well. Unfortunately - they won´t. As witnessed during the last week, commodities, carry plays and emerging markets are getting hammered. China is pulling back.
China has pursued the illusion of a diversification process whereby they have misallocated capital into silly investments, as well as different asset classes, pretending they are diversifying.
Unfortunately, I fear this will come to a horrible end as correlations - once again become 1 between asset classes. The liquidity factor for return on capital will be painfully clear as many investments will not generate any return of capital as liquidity dry up.
China; 40% undervalued currency. Export companies with a 2 %! profit margin. An economy dependent on domestic construction. Heavy credit losses disguised by liquidity. A corrupt government driven by centralised leadership.
Go figure.
I hope you all have your hedges on - if not, go get them.
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 means lower liquidity - higher volatility - lower asset prices -default - debt writedowns -taxpayer payups - lower demand for products and services - business layoffs and bankruptcies - more defaults - more debt writedowns. This scenario is excluding China getting into trouble.
Unfortunately, there are increasing signs that it will.
That scenario is a scary one - but if it happens - and the risks are way too high for anyone to ignore it - the outcome could be massive. China is currently the worlds credit multiplier and liquidity provider. The curse of the fixed exchange rate have much to do with the creation of this monster. The unraveling of it could be something we will have to witness before long.
Any household, corporate, or global fund not trying their utmost to find ways to protect themselves against this (economic only, we hope) risk are putting the economic survival of their family, corporate or fund at stake.
The positive fact is that this time around, compared to the financial crisis, the traditional banks and the media are quick to jump on the bearish macro band wagon. Unfortunately, their macro horizon stops at Europe and the US. They still believe the fairy tale story that emerging markets and China will do well. Unfortunately - they won´t. As witnessed during the last week, commodities, carry plays and emerging markets are getting hammered. China is pulling back.
China has pursued the illusion of a diversification process whereby they have misallocated capital into silly investments, as well as different asset classes, pretending they are diversifying.
Unfortunately, I fear this will come to a horrible end as correlations - once again become 1 between asset classes. The liquidity factor for return on capital will be painfully clear as many investments will not generate any return of capital as liquidity dry up.
China; 40% undervalued currency. Export companies with a 2 %! profit margin. An economy dependent on domestic construction. Heavy credit losses disguised by liquidity. A corrupt government driven by centralised leadership.
Go figure.
I hope you all have your hedges on - if not, go get them.
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.
16 August 2011
Another dip lower in equities before pushing higher?
* Equities should head lower short term - and then continue the correction higher.
However, equities have topped out for a while now. Risk for a heavier move lower is increasing.
But thats something for later on this summer/early fall.
* I am going short equities for this shortterm move 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.
However, equities have topped out for a while now. Risk for a heavier move lower is increasing.
But thats something for later on this summer/early fall.
* I am going short equities for this shortterm move 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.
09 August 2011
Too high expectations
* Wham Bam thankyou ma´m
Equity markets dropping sharply globally after lower future growth signals triggers drastic revaluation of equities.
The hopeless situation in Europe as well as the dissapointment that US consumers will not be acting as the buyer of last resort for goods and services for the foreseeable future.
Lets try to look at the " bright" side;
- US corporates are still doing well and are very well capitalised.
- Eurobonds could still be launched to fill the holes in the Eur pockets.
As usual, however, there is no free lunch. While it might solve market turmoil short term. Lower growth and purchasing power for Eur countries and citizens will be the consequence. It will happen anyway. Question is just - how low will they go?
* China - the elephant in the room
I would also like to mention China, which today launched July´s inflation number; 6.5% on an anuualized basis. This should really trigger further tightening measures from China, but during the current "equities falling of a cliff"
circumstances, they will probably not.
In either case, what markets - and the rest of the world, should fear now is China going bust. China has been experiencing a classic boom - and bust scenario and I believe they are about to enter the bust phase. This scares me and should scare you too - lets hope Im wrong. If I am not, you´d better prepare your house for the fiercest economic environment you might experience during your lifetime.
*Correction higher in equities starting today?
Meanwhile, the equitymarkets are bound for a rebound/ shortsqueeze.
Today could very well be the start for a decent correction higher. I am going long.
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.
Equity markets dropping sharply globally after lower future growth signals triggers drastic revaluation of equities.
The hopeless situation in Europe as well as the dissapointment that US consumers will not be acting as the buyer of last resort for goods and services for the foreseeable future.
Lets try to look at the " bright" side;
- US corporates are still doing well and are very well capitalised.
- Eurobonds could still be launched to fill the holes in the Eur pockets.
As usual, however, there is no free lunch. While it might solve market turmoil short term. Lower growth and purchasing power for Eur countries and citizens will be the consequence. It will happen anyway. Question is just - how low will they go?
* China - the elephant in the room
I would also like to mention China, which today launched July´s inflation number; 6.5% on an anuualized basis. This should really trigger further tightening measures from China, but during the current "equities falling of a cliff"
circumstances, they will probably not.
In either case, what markets - and the rest of the world, should fear now is China going bust. China has been experiencing a classic boom - and bust scenario and I believe they are about to enter the bust phase. This scares me and should scare you too - lets hope Im wrong. If I am not, you´d better prepare your house for the fiercest economic environment you might experience during your lifetime.
*Correction higher in equities starting today?
Meanwhile, the equitymarkets are bound for a rebound/ shortsqueeze.
Today could very well be the start for a decent correction higher. I am going long.
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
02 December 2010
The ECB is forced to comply with markets expectations at todays ECB meeting.
* The ECB is cornered - again.
Stuck between a rock and a hard place.
Upbeat ECB forecasts for the Eurozone to be expected for today. Simoultaneously the ECB is mulling whether to buy PIIGS bonds again. The Eurozone Emergencyfund is also out declaring an 8BN Usd bond issue for this SPV(Special Purpose Vehicle), a classic vehicle from the the financialcrisis, by the way. Evidently, Asian Central banks seems to have a vested interest in ensuring its success.
This all boils down to a a correction in the market, in my book.
Eur/Usd has fallen 12 cents in 3 weeks, so a correction towards the mid 1.3350 should be in order, it could even stretch above that. Anyway, Im viewing this from a xmas perspective and I am not expecting these festivities to last beyond xmas.
I believe markets are currently ignoring Chinas liquidity depleting measures. I am not. I am hearing the Chinese loud and clear. The Chinese liquidity generator is gearing down. Deleverage.
Get ready for higher rates and stagflation.
If this is the case. This xmas rally should be treasured.
*Positions and positionchanges
Ive bought Eur/Usd for a move towards 1.3350. Trusting ECB to oblige market expectations today.
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
Stuck between a rock and a hard place.
Upbeat ECB forecasts for the Eurozone to be expected for today. Simoultaneously the ECB is mulling whether to buy PIIGS bonds again. The Eurozone Emergencyfund is also out declaring an 8BN Usd bond issue for this SPV(Special Purpose Vehicle), a classic vehicle from the the financialcrisis, by the way. Evidently, Asian Central banks seems to have a vested interest in ensuring its success.
This all boils down to a a correction in the market, in my book.
Eur/Usd has fallen 12 cents in 3 weeks, so a correction towards the mid 1.3350 should be in order, it could even stretch above that. Anyway, Im viewing this from a xmas perspective and I am not expecting these festivities to last beyond xmas.
I believe markets are currently ignoring Chinas liquidity depleting measures. I am not. I am hearing the Chinese loud and clear. The Chinese liquidity generator is gearing down. Deleverage.
Get ready for higher rates and stagflation.
If this is the case. This xmas rally should be treasured.
*Positions and positionchanges
Ive bought Eur/Usd for a move towards 1.3350. Trusting ECB to oblige market expectations today.
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
01 December 2010
Keeping an eye on tommorrows ECB meeting; The ECB seems willing to buy peripheral bonds
* It seems the ECB has become worried enough to consider buying peripheral bonds again.
This will of course only help short term, but this is nonetheless a shortterm solution to try and normalise current markets.
If they do, markets will shift towards a positive risk on mode, benefitting Eur/Usd, equities,etc.
*Positions and positionchanges
Ive taken profit on my short Eur/Usd position. Iam now awaiting the ECB meeting tommorrow.
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 will of course only help short term, but this is nonetheless a shortterm solution to try and normalise current markets.
If they do, markets will shift towards a positive risk on mode, benefitting Eur/Usd, equities,etc.
*Positions and positionchanges
Ive taken profit on my short Eur/Usd position. Iam now awaiting the ECB meeting tommorrow.
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.
16 November 2010
The curse of fixed exchange rates
* Fixed exchange rates creates huge misallocations of resources and have very much contributed to the global problems we are witnessing today.
China, Europe, the Baltics etc are good examples of it.
Without floating exchangerates there is less of a " mark to market" of a countries worth. The interestrates mechanism is not capable of compensating fully for the lack of exchangerate flexibility.
The US of A is admittedly in trouble and they do have a floating exchangerate, but- one of the reasons it could build up such extreme imbalances was the fact that the USD is the worlds reservecurrency. Im just saying that this is a distortion in itself. Without such a status, the Usd would probably have been punished way earlier and quite severely, too.
Well, now the world order is what it is.
*The Eurozone is in deep trouble, much due to the common currency and a lack of common fiscal policy.
However, human nature, acting on economic incentives, creates far greater risks with fixed exchangerate regimes compared with floating ones.
Politicians have really stepped in it this time around. My view is that there is very little chance that any politician will be able to pull off extreme internal devaluations in these countries. No one else has succeeded so far.
The Baltics, you say? Right. Latvia failed to live up to its "money for budgetpromises" set up - twice. And still got the money (the EU commission was willing to pay all along, no matter what. )Estonia is now generating inflation - what happened to the internal devaluation?
Anyway, with the PIIGS countries its on a whole other scale. I doubt the Germans are willing or capable to pay that bill. Mrs Merkel has already stated bondholders will face some losses on any government default from 2012 onwards, as the EFSF set up changes - PIIGS bonds, anyone? Chile ,Norway and Russia has got the message loud and clear - and stopped buying PIIGS bonds.
Having said that - there might actually be a bailout of Ireland. When/if this happens, I suspect the markets will rally, anticipating bailouts for all of the PIIGS countries if necessary.
This conclusion is on very shaky ground and I would be more prone to sell into it.
*Chinas role as a liquidity generator is over.
From now on liquidity is set to tighten.
Since China does not seem to dare using the most efficient weapon - FX, in fighting cost push inflation. The consequences could actually become worse if they dont, due to overkill behaviour with blunt instruments such as the interest rate and bankreserve requirements.
*Emergings are getting hit by tidalwaves of liquidity and Turkey has now started what might become a new emerging country trend; keeping the repo rate stable but cutting the Depo waaay down.
Turkey reently cut by their depo by 400bp!
No more carry here, hot money!
Hmmmmm, and where are all the long funds, pensionfunds and lifers invested? Could it be?,,,,,, oh yes,,,,,, emerging markets, the secret holy grail,,,, could become scary, this.
* Dont mention commodities - dont mention China
"All" banks are touting the mantra of commodities and portfolio diversification. The latter actually sounds good. The only problem is that currently, all assets are driven by hot money and the correlation is way up there. I bet that on a sensitivity based analysis, it doesnt look good either. Conclusion anyone?
There is currently no real portfolio diversification in owning various assets. Anyone thinking so might be facing some quite straining scenarios going forward. Assetmanagers should be cautious. They should be using instruments to protect themselves. There should actually be room for a new breed of assetmanagers out there. The old "fire and forget, buy - and hold em" assetmanagers have had some great twenty years, but those days are now most likely over.
* New positions and position changes
Im getting ready to take some shortterm profits in FX and commodities.
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.
China, Europe, the Baltics etc are good examples of it.
Without floating exchangerates there is less of a " mark to market" of a countries worth. The interestrates mechanism is not capable of compensating fully for the lack of exchangerate flexibility.
The US of A is admittedly in trouble and they do have a floating exchangerate, but- one of the reasons it could build up such extreme imbalances was the fact that the USD is the worlds reservecurrency. Im just saying that this is a distortion in itself. Without such a status, the Usd would probably have been punished way earlier and quite severely, too.
Well, now the world order is what it is.
*The Eurozone is in deep trouble, much due to the common currency and a lack of common fiscal policy.
However, human nature, acting on economic incentives, creates far greater risks with fixed exchangerate regimes compared with floating ones.
Politicians have really stepped in it this time around. My view is that there is very little chance that any politician will be able to pull off extreme internal devaluations in these countries. No one else has succeeded so far.
The Baltics, you say? Right. Latvia failed to live up to its "money for budgetpromises" set up - twice. And still got the money (the EU commission was willing to pay all along, no matter what. )Estonia is now generating inflation - what happened to the internal devaluation?
Anyway, with the PIIGS countries its on a whole other scale. I doubt the Germans are willing or capable to pay that bill. Mrs Merkel has already stated bondholders will face some losses on any government default from 2012 onwards, as the EFSF set up changes - PIIGS bonds, anyone? Chile ,Norway and Russia has got the message loud and clear - and stopped buying PIIGS bonds.
Having said that - there might actually be a bailout of Ireland. When/if this happens, I suspect the markets will rally, anticipating bailouts for all of the PIIGS countries if necessary.
This conclusion is on very shaky ground and I would be more prone to sell into it.
*Chinas role as a liquidity generator is over.
From now on liquidity is set to tighten.
Since China does not seem to dare using the most efficient weapon - FX, in fighting cost push inflation. The consequences could actually become worse if they dont, due to overkill behaviour with blunt instruments such as the interest rate and bankreserve requirements.
*Emergings are getting hit by tidalwaves of liquidity and Turkey has now started what might become a new emerging country trend; keeping the repo rate stable but cutting the Depo waaay down.
Turkey reently cut by their depo by 400bp!
No more carry here, hot money!
Hmmmmm, and where are all the long funds, pensionfunds and lifers invested? Could it be?,,,,,, oh yes,,,,,, emerging markets, the secret holy grail,,,, could become scary, this.
* Dont mention commodities - dont mention China
"All" banks are touting the mantra of commodities and portfolio diversification. The latter actually sounds good. The only problem is that currently, all assets are driven by hot money and the correlation is way up there. I bet that on a sensitivity based analysis, it doesnt look good either. Conclusion anyone?
There is currently no real portfolio diversification in owning various assets. Anyone thinking so might be facing some quite straining scenarios going forward. Assetmanagers should be cautious. They should be using instruments to protect themselves. There should actually be room for a new breed of assetmanagers out there. The old "fire and forget, buy - and hold em" assetmanagers have had some great twenty years, but those days are now most likely over.
* New positions and position changes
Im getting ready to take some shortterm profits in FX and commodities.
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 October 2010
No G20 deal this weekend was no surprise, Nov 11-12 is where the chance lies. Will we see more drunk driving til then? Use options.
* Implied and realised assetvolatilities are set to rise - no matter the Nov G20 outcome.
Depending on the outcome, the speed of the rise will vary. In any case, global liquidity has seen its top this time around. Global liquidity to get reduced going forward.
Im using options instead of underlying.
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.
Depending on the outcome, the speed of the rise will vary. In any case, global liquidity has seen its top this time around. Global liquidity to get reduced going forward.
Im using options instead of underlying.
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.
21 October 2010
This weekends G20 meeting = a stronger Usd.
* Big short Usd bets are about to go wrong
The FED is not going to devalue the Usd via a QE2 "shock and awe" approach, rather it will be pragmatic, based on a meeting by meeting approach with no commitments for any longer term approach. The bondbuying seems to be estimated to become about 100bn Usd at the time. This is way lower than the market has priced in.
There will be no "currencywar". China is preparing measures to reduce creditgrowth and inflation as well developing domestic demand and reduce leverage. This will require a stronger currency, higher interest rates and less bank lending, reducing credit further. It is necessary to stop the Chinese realestate market spiralling totally out of control. Or has it already? Over the last three months realestate prices in the most attractive locations have alledgedly risen by 40%! From an already very much inflated level. Anyone hearing the sound a bubble popping?
Both this weekends G20 meeting and the upcoming EU heads of state meeting the weekend after will both work in favour of a stronger Usd.
This will also have a negative effect on Gold, Copper and Oil - a few other overcrowded trades . The weaker Usd, continued strong Chinese growth, weak currency and a continued strong growth of global imbalances have been important variables driving these trades.
Well, time to take profit and reverse.
* This weekends G20 meeting
The probability for an agreement between US and China has, according to the best guesstimates out there, increased from 40% pre the Chinese rate hike to 60% post it. In either case, the signals seen so far, (with China basically handing over the printing press weapon to the US by hiking their rates and increasing their own sterilizationcost at the same time as the US has scaled back their QE approach to a pragmatic - meeting by meeting one instead of "shock and awe"), indicates there will be no "currency war" (silly name).
So, from here on, global rebalancing and deleveraging could be the name of the game. This means lower growth in the Western hemisphere and increased risk for ditto in the Eastern one.
In any case, its the right riskmanagement path and it is way better than the very high risk alternative of continued global imbalance building and then disaster - scenario.
* Assetliability ratios to go lower again - credit multipliers to drop and ditto for profitability.
We have likely seen the global liquidity peak this time around - time to review leverage set ups as implied and realised volatilities are set to rise
*Emerging markets - yet another overcrowded trade. This one is running the risk of turning the "holy grail" into "holy sxxt!"
Emerging market inflows are now back at the record levels at the end of 2007, beginning of 2008. Theres a big difference between now and then though - initial liquidity. While liquidity at the time was very good, it is the reverse now - despite the low volatility circumstances.
Once vol starts pumping up, liquidity will be nowhere to be found. In emerging markets this is normalprocedure, but there are always various levels for illiquidity and this time around such a scenario is running the risk of being the worst nightmare for naive investors and speculators.
Trust me, so far I have always been on the "right side" on any emerging market crisis, you do not want to be on the wrong side of it,,,,, This time around the exitdoor might get clogged up altogether.
Perhaps not today, or tommorrow, but the signs are building.
* Positions and 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.
The FED is not going to devalue the Usd via a QE2 "shock and awe" approach, rather it will be pragmatic, based on a meeting by meeting approach with no commitments for any longer term approach. The bondbuying seems to be estimated to become about 100bn Usd at the time. This is way lower than the market has priced in.
There will be no "currencywar". China is preparing measures to reduce creditgrowth and inflation as well developing domestic demand and reduce leverage. This will require a stronger currency, higher interest rates and less bank lending, reducing credit further. It is necessary to stop the Chinese realestate market spiralling totally out of control. Or has it already? Over the last three months realestate prices in the most attractive locations have alledgedly risen by 40%! From an already very much inflated level. Anyone hearing the sound a bubble popping?
Both this weekends G20 meeting and the upcoming EU heads of state meeting the weekend after will both work in favour of a stronger Usd.
This will also have a negative effect on Gold, Copper and Oil - a few other overcrowded trades . The weaker Usd, continued strong Chinese growth, weak currency and a continued strong growth of global imbalances have been important variables driving these trades.
Well, time to take profit and reverse.
* This weekends G20 meeting
The probability for an agreement between US and China has, according to the best guesstimates out there, increased from 40% pre the Chinese rate hike to 60% post it. In either case, the signals seen so far, (with China basically handing over the printing press weapon to the US by hiking their rates and increasing their own sterilizationcost at the same time as the US has scaled back their QE approach to a pragmatic - meeting by meeting one instead of "shock and awe"), indicates there will be no "currency war" (silly name).
So, from here on, global rebalancing and deleveraging could be the name of the game. This means lower growth in the Western hemisphere and increased risk for ditto in the Eastern one.
In any case, its the right riskmanagement path and it is way better than the very high risk alternative of continued global imbalance building and then disaster - scenario.
* Assetliability ratios to go lower again - credit multipliers to drop and ditto for profitability.
We have likely seen the global liquidity peak this time around - time to review leverage set ups as implied and realised volatilities are set to rise
*Emerging markets - yet another overcrowded trade. This one is running the risk of turning the "holy grail" into "holy sxxt!"
Emerging market inflows are now back at the record levels at the end of 2007, beginning of 2008. Theres a big difference between now and then though - initial liquidity. While liquidity at the time was very good, it is the reverse now - despite the low volatility circumstances.
Once vol starts pumping up, liquidity will be nowhere to be found. In emerging markets this is normalprocedure, but there are always various levels for illiquidity and this time around such a scenario is running the risk of being the worst nightmare for naive investors and speculators.
Trust me, so far I have always been on the "right side" on any emerging market crisis, you do not want to be on the wrong side of it,,,,, This time around the exitdoor might get clogged up altogether.
Perhaps not today, or tommorrow, but the signs are building.
* Positions and 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.
20 October 2010
Chinese rate hike; CNY appreciationpace to increase, US QE to decrease - and so does global liquidity
* Eye of the storm - not for much longer?
China hiking rates - positive from a macro rebalancing point of view - but not from a shortterm liquidity and global growth point of view. As Ive mentioned earlier; globalrebalancing = global deleveraging.
As the cost and volume of the Chinese currency reserves have accelerated drastically, so has the exposure and the entailing risks. The cost of sterilization is sure to increase as the humongous currencyreserves have been allowed to accumulate over time, pushing inflation higher in the process. So far, the sterilization measures have not been adequate as only part of the currencyreserves have been sterilized. As imported inflation from commodities etc has also increased, a stronger currency is just what the doctor ordered.
The cost of sterilisation will now increases with the latest rate hike, (I believe this is just the beginning ), the Chinese authorities are likely to have concluded that it is in their best interest to increase the pace of Yuan strengthening. There are obvious risks to Chinese growth in this process. The authorities will have to walk a tight rope, but I doubt they have much choice. Fingers crossed.
This also means its time for liquidity drunk market participants to sober up - fast.
* What will happen from here?
Asian currencies to continue strengthening against the USD as they get dragged along by the CNY. The Usd to strengthen against everything else.
Gold and other supercrowded commodities to suffer. This will also be a structural phenomenon and not just shortterm. See global rebalancing above for explanation.
I also have a few other very interesting trades to get into from here, but Ill save those til later.
I would like to point out that Emergingmarkets in general are also supercrowded trades and would be looking for signs these are about to reverse. Liquidity is low and will not increase on any such development,,,,,,,,
*Positions and positionchanges
-Long GLL ETF (leveraged short Gold).
-Long SOIL ETF (leveraged short Oil).
-Long SCOP ETF (Short Copper).
- Short Aud/Usd
- Took profit on short Eur/Cad
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.
China hiking rates - positive from a macro rebalancing point of view - but not from a shortterm liquidity and global growth point of view. As Ive mentioned earlier; globalrebalancing = global deleveraging.
As the cost and volume of the Chinese currency reserves have accelerated drastically, so has the exposure and the entailing risks. The cost of sterilization is sure to increase as the humongous currencyreserves have been allowed to accumulate over time, pushing inflation higher in the process. So far, the sterilization measures have not been adequate as only part of the currencyreserves have been sterilized. As imported inflation from commodities etc has also increased, a stronger currency is just what the doctor ordered.
The cost of sterilisation will now increases with the latest rate hike, (I believe this is just the beginning ), the Chinese authorities are likely to have concluded that it is in their best interest to increase the pace of Yuan strengthening. There are obvious risks to Chinese growth in this process. The authorities will have to walk a tight rope, but I doubt they have much choice. Fingers crossed.
This also means its time for liquidity drunk market participants to sober up - fast.
* What will happen from here?
Asian currencies to continue strengthening against the USD as they get dragged along by the CNY. The Usd to strengthen against everything else.
Gold and other supercrowded commodities to suffer. This will also be a structural phenomenon and not just shortterm. See global rebalancing above for explanation.
I also have a few other very interesting trades to get into from here, but Ill save those til later.
I would like to point out that Emergingmarkets in general are also supercrowded trades and would be looking for signs these are about to reverse. Liquidity is low and will not increase on any such development,,,,,,,,
*Positions and positionchanges
-Long GLL ETF (leveraged short Gold).
-Long SOIL ETF (leveraged short Oil).
-Long SCOP ETF (Short Copper).
- Short Aud/Usd
- Took profit on short Eur/Cad
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
19 October 2010
The ECB is playing liars poker - low yields to remain.
* The ECB is playing liars poker. Jawboning about "normalisation" of the yield curve.
The audience here is supposed to be the EU commission. Sending a clear ECB message that they will NOT agree in substituting ECB monetary policy for fiscal policy in order to finance and save the PIIGS.
Meanwhile, markets have literally believed in the ECB talk, pushing yields higher.
However, as the realisation sinks in that this is just - talk, yields will come lower and so will the Eur. Besides, a stronger Eur is NOT what the eurozone needs right now. In fact, for Eurozone stability reasons, it is necessary for the Eur to weaken. A strong Eur will wreak havoc.
On top of this, this weeks ZEW and IFO numbers are likely to show a Germany topping out and turning down, which will really cause angst among politicians and policymakers. Expect some political jawboning for a weaker Eur nearterm.
* China - best and worst case scenario
Running into the G2o meeting it might be worthwhile pointing out the obvious fact that China is running a nonconvertible, semifixed currency regime, which is NOT in line with open, free markets. These facts themselves have caused severe disruptions to the world economy cet.par.
A best case scenario, both for China and the rest of the world, would be for China to let its currency float. This will infer economic global pain, a lot of it. However, letting the China bubble grow further would not only infer economic pain but could also mean a new level of armed conflicts, beyond control. You choose; rebalancing today with upfront pain, or fingers crossed with upfront pleasure for extreme pain tommorrow?
What do you choose?
Humans normally pick the latter, while riskmanagement states the former.
You decide.
In any case, we are in for some very rough and turbulent times. Rollercoasterstyle. But as any rollercoasterrider knows, its on the way down the scary stuff starts and it always ends the same way; down at the bottom where we started. Question is; where is that?
* All in all
Shortterm we are in for a pre G20 correction in assetmarkets.
Beyond that, set up for BIG trouble continues. Big questionmark is whether there will be an agreement in the near future on rebalancing or not. Without it, assetmarkets will remain positive, til we sail out into the storm again.
* Positions and positionchanges
- Short Eur/Usd, Gbp/Usd, Eur/Jpy, Eur/Cad and Gbp/Jpy since last Friday.
- Monitoring equity indicies, gold, silver, copper, steel and oil for signs of 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.
The audience here is supposed to be the EU commission. Sending a clear ECB message that they will NOT agree in substituting ECB monetary policy for fiscal policy in order to finance and save the PIIGS.
Meanwhile, markets have literally believed in the ECB talk, pushing yields higher.
However, as the realisation sinks in that this is just - talk, yields will come lower and so will the Eur. Besides, a stronger Eur is NOT what the eurozone needs right now. In fact, for Eurozone stability reasons, it is necessary for the Eur to weaken. A strong Eur will wreak havoc.
On top of this, this weeks ZEW and IFO numbers are likely to show a Germany topping out and turning down, which will really cause angst among politicians and policymakers. Expect some political jawboning for a weaker Eur nearterm.
* China - best and worst case scenario
Running into the G2o meeting it might be worthwhile pointing out the obvious fact that China is running a nonconvertible, semifixed currency regime, which is NOT in line with open, free markets. These facts themselves have caused severe disruptions to the world economy cet.par.
A best case scenario, both for China and the rest of the world, would be for China to let its currency float. This will infer economic global pain, a lot of it. However, letting the China bubble grow further would not only infer economic pain but could also mean a new level of armed conflicts, beyond control. You choose; rebalancing today with upfront pain, or fingers crossed with upfront pleasure for extreme pain tommorrow?
What do you choose?
Humans normally pick the latter, while riskmanagement states the former.
You decide.
In any case, we are in for some very rough and turbulent times. Rollercoasterstyle. But as any rollercoasterrider knows, its on the way down the scary stuff starts and it always ends the same way; down at the bottom where we started. Question is; where is that?
* All in all
Shortterm we are in for a pre G20 correction in assetmarkets.
Beyond that, set up for BIG trouble continues. Big questionmark is whether there will be an agreement in the near future on rebalancing or not. Without it, assetmarkets will remain positive, til we sail out into the storm again.
* Positions and positionchanges
- Short Eur/Usd, Gbp/Usd, Eur/Jpy, Eur/Cad and Gbp/Jpy since last Friday.
- Monitoring equity indicies, gold, silver, copper, steel and oil for signs of 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.
14 October 2010
Assetrally - Usd sinking - the eye of the storm
* Global tradeimbalances are expanding at an ever increasing pace.
As these imbalances continue to grow, the global setbackrisks are as well.
I believe we are currently in the eye of the storm.
These tensions should not be able to continue for any stretched period of time.
Why not then?
1) As the world is competing ever more fiercely for exports, the realisation that fixed or semifixed currencies are creating big domestic as well as international risks will become evident.
The Chinese argument that a stronger Renminbi will risk their economy is similar to accept an even greater sensitivity in the future as their surpluses accumulate. "When in trouble, double". Not the way to go.
2) Global fierce competition for exports will lead to trade tensions, which will lead to trade restrictions and tariffs. This will reduce global trade and hence, global GDP. The risk for armed conflicts will increase drastically. Especially as higher soft commodity prices will correlate with the weaker Usd. Noone wants risking major armed conflicts at this stage.
3) As the US currency depreciates, the risk for a suddenloss of confidence in the US currency increases, especially as the US deficits and debt continues to build and yields are close to nothing.
Should this happen, any country sitting with huge currency reserves - especially the fixed or semifixed currency regimes, China being one of them, would suffer massively. The extent of Chinese Fx reserves would mean the government would have to raise taxes or debt to compensate for the FX losses. Essentially, China would fall apart, given the extent of leverage, misallocations of investments, bank exposures to realestate markets and corporate projects and corruption. And if China falls,,,,,,, fill in the blanks please. US doesnt want it, and neither does China.
Better then to try and control this global deleveraging and rebalancing process by making a G20 agreement. Unfortunately I believe the probabaility for that is quite low since politicians only have one strategy - the ruin strategy; "when in trouble double".
Hopefully, riskappetite will adjust downwards as trade tensions increase on the back of a G20 "no deal".
Short term, I believe the market has overpriced the US QE and we will see a moderation towards QE from Bernanke tommorrow, as positioning for the G20 meeting begins. If the US softened their QE easing approach, probabilities would at least increase that China would agree to let the Renminbi appreciate at a slightly faster pace. Although a deal would still be slim, at least both parties are probabaly willing to try making one.
* Short term conclusions, outlook for the Usd, (and currently high correlated commodities);
With US QE pricing overdone, IMM positioning ditto, my expectation of increased riskaversion no matter the outcome of the G20 (G20 deal = drastically lower Eur/Usd, no deal would = further trade tensions - reduced risk appetite - lower Eur/Usd. Also, long term US interest rates would rise drastically on a deal due to China buying less US bonds as their FX reserves would grow at a slower pace. Long term US interestrates would rise much less so on a no deal. In any case, higher implied asset volatilites are to be expected.
* We are currently in the eye of the storm - enjoy it while it lasts
Have your stormgear handy.
This is the time to prepare for what's to come, while making as much as possible out of the current environment. This period should be treasured since commonsense will dictate that massive reallocations could be around the corner in order to rebalance the world economy and deleverage it. It is important to remember that rebalancing of the world economy will mean deleveraging it. That process will be very harsh indeed.
* New positions and position changes
- Stopped out of my short Eur/Usd position
- Stopped out of my short Gbp/Usd position
- Took profit on my short Eur/Jpy position
- Stopped out of my short ETF equity index positions and reversed
I will go short Eur/Usd, Eur/Jpy and Gbp/Usd pre the Ben Bernanke speech tommorrow, expecting a moderation of the QE approach in line with pre G20 positioning. I will use options in order to get cost efficient leverage and costcontrol. On top of it I expect implied volatilities to increase from here.
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.
As these imbalances continue to grow, the global setbackrisks are as well.
I believe we are currently in the eye of the storm.
These tensions should not be able to continue for any stretched period of time.
Why not then?
1) As the world is competing ever more fiercely for exports, the realisation that fixed or semifixed currencies are creating big domestic as well as international risks will become evident.
The Chinese argument that a stronger Renminbi will risk their economy is similar to accept an even greater sensitivity in the future as their surpluses accumulate. "When in trouble, double". Not the way to go.
2) Global fierce competition for exports will lead to trade tensions, which will lead to trade restrictions and tariffs. This will reduce global trade and hence, global GDP. The risk for armed conflicts will increase drastically. Especially as higher soft commodity prices will correlate with the weaker Usd. Noone wants risking major armed conflicts at this stage.
3) As the US currency depreciates, the risk for a suddenloss of confidence in the US currency increases, especially as the US deficits and debt continues to build and yields are close to nothing.
Should this happen, any country sitting with huge currency reserves - especially the fixed or semifixed currency regimes, China being one of them, would suffer massively. The extent of Chinese Fx reserves would mean the government would have to raise taxes or debt to compensate for the FX losses. Essentially, China would fall apart, given the extent of leverage, misallocations of investments, bank exposures to realestate markets and corporate projects and corruption. And if China falls,,,,,,, fill in the blanks please. US doesnt want it, and neither does China.
Better then to try and control this global deleveraging and rebalancing process by making a G20 agreement. Unfortunately I believe the probabaility for that is quite low since politicians only have one strategy - the ruin strategy; "when in trouble double".
Hopefully, riskappetite will adjust downwards as trade tensions increase on the back of a G20 "no deal".
Short term, I believe the market has overpriced the US QE and we will see a moderation towards QE from Bernanke tommorrow, as positioning for the G20 meeting begins. If the US softened their QE easing approach, probabilities would at least increase that China would agree to let the Renminbi appreciate at a slightly faster pace. Although a deal would still be slim, at least both parties are probabaly willing to try making one.
* Short term conclusions, outlook for the Usd, (and currently high correlated commodities);
With US QE pricing overdone, IMM positioning ditto, my expectation of increased riskaversion no matter the outcome of the G20 (G20 deal = drastically lower Eur/Usd, no deal would = further trade tensions - reduced risk appetite - lower Eur/Usd. Also, long term US interest rates would rise drastically on a deal due to China buying less US bonds as their FX reserves would grow at a slower pace. Long term US interestrates would rise much less so on a no deal. In any case, higher implied asset volatilites are to be expected.
* We are currently in the eye of the storm - enjoy it while it lasts
Have your stormgear handy.
This is the time to prepare for what's to come, while making as much as possible out of the current environment. This period should be treasured since commonsense will dictate that massive reallocations could be around the corner in order to rebalance the world economy and deleverage it. It is important to remember that rebalancing of the world economy will mean deleveraging it. That process will be very harsh indeed.
* New positions and position changes
- Stopped out of my short Eur/Usd position
- Stopped out of my short Gbp/Usd position
- Took profit on my short Eur/Jpy position
- Stopped out of my short ETF equity index positions and reversed
I will go short Eur/Usd, Eur/Jpy and Gbp/Usd pre the Ben Bernanke speech tommorrow, expecting a moderation of the QE approach in line with pre G20 positioning. I will use options in order to get cost efficient leverage and costcontrol. On top of it I expect implied volatilities to increase from here.
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.
23 September 2010
Lets play,,,,, the weakest link
* "The weakest link" was a gameshow running in the UK quite a few years back. A quite harsh program voting out the contestants percieved to be the "weakest links" in a group.
This can now be applied to the Eurozone, but with a different twist. We already know who the weakest links are; the PIIGS countries. However, they are currently supported by the Eurozone
rescue fund, the EFSF (The European Financial Stability Facility).
At the european head of state meeting in October, a proposal will be made to upgrade the rescue fund to a permanent tool.
The EU commission has already suggested that the EFSF should be made permanent.
What about the weakest link theme?
Well, if this proposal gets a green light, the implications are quite substantial for Eurozone surplus and deficit countries. The deficit countries are essentially written a blank check. This obviously includes a substantial moral dilemma and much increased risks of being abused.
As financiers, the surplus countries are at risk of getting massively increased bills. At some point this will become too much. If they cave in, the Eurozone implodes. Hence, in this context, the surplus countries will come under massive pressure. Amongst the surplus countries, the most important is Germany. All in all -the weakest link is,,,,,Germany.
Currently, the market doesnt care about these consequences, but prefer to focus on the inner EMU yield pick up play due to the "successful" peripheral bond auctions- and the EU commission proposal of making the EFSF permanent. Strenghtening the Eur in the process.
However, expect Germany to be on collision course with the Eurozone deficitcountries as they obviously has no interest whatsoever to migrate the peripheral countire's debt burden to Germany. I expect implied volatilities for eurozone assets to pick up in the run up to this meeting. The outlier risk is for a drastically weaker Eur.
*The Peripheral bond rally - enjoy it while it lasts, but take your profits in time for the European heads of state meeting.
With the EU commission proposal of making the EFSF permanent, the peripheral high yielders will be perceived as very attractive, reminiscent of a "free lunch". A word of caution will be in place.
The bets are increased and hence the risks are rising in the Eurozone game. The perception that governments and centralbanks will be able to sort out a growing mountain of debt may hold as long as a good cashflow/high growth remains. This assumption is very uncertain in itself. Add to that the necessity for growth to increase further in order to service the rising debt and it is not very difficult to imagine a situation where this spirals out of control.
Especially if the anchor funding entity of them all, Germany - balks.
* New positions and position changes
I view the recent Eur rally as overdone and have taken profit. I see Equity markets vulnerable for a pullback.
- Took profit and reversed position on Eur/Usd.
- Took profit and reversed position on Gbp/Usd.
- Took profit and reversed position on Eur/Jpy.
- Went long on various bearish Equity ETF;s.
As always good luck.
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
This can now be applied to the Eurozone, but with a different twist. We already know who the weakest links are; the PIIGS countries. However, they are currently supported by the Eurozone
rescue fund, the EFSF (The European Financial Stability Facility).
At the european head of state meeting in October, a proposal will be made to upgrade the rescue fund to a permanent tool.
The EU commission has already suggested that the EFSF should be made permanent.
What about the weakest link theme?
Well, if this proposal gets a green light, the implications are quite substantial for Eurozone surplus and deficit countries. The deficit countries are essentially written a blank check. This obviously includes a substantial moral dilemma and much increased risks of being abused.
As financiers, the surplus countries are at risk of getting massively increased bills. At some point this will become too much. If they cave in, the Eurozone implodes. Hence, in this context, the surplus countries will come under massive pressure. Amongst the surplus countries, the most important is Germany. All in all -the weakest link is,,,,,Germany.
Currently, the market doesnt care about these consequences, but prefer to focus on the inner EMU yield pick up play due to the "successful" peripheral bond auctions- and the EU commission proposal of making the EFSF permanent. Strenghtening the Eur in the process.
However, expect Germany to be on collision course with the Eurozone deficitcountries as they obviously has no interest whatsoever to migrate the peripheral countire's debt burden to Germany. I expect implied volatilities for eurozone assets to pick up in the run up to this meeting. The outlier risk is for a drastically weaker Eur.
*The Peripheral bond rally - enjoy it while it lasts, but take your profits in time for the European heads of state meeting.
With the EU commission proposal of making the EFSF permanent, the peripheral high yielders will be perceived as very attractive, reminiscent of a "free lunch". A word of caution will be in place.
The bets are increased and hence the risks are rising in the Eurozone game. The perception that governments and centralbanks will be able to sort out a growing mountain of debt may hold as long as a good cashflow/high growth remains. This assumption is very uncertain in itself. Add to that the necessity for growth to increase further in order to service the rising debt and it is not very difficult to imagine a situation where this spirals out of control.
Especially if the anchor funding entity of them all, Germany - balks.
* New positions and position changes
I view the recent Eur rally as overdone and have taken profit. I see Equity markets vulnerable for a pullback.
- Took profit and reversed position on Eur/Usd.
- Took profit and reversed position on Gbp/Usd.
- Took profit and reversed position on Eur/Jpy.
- Went long on various bearish Equity ETF;s.
As always good luck.
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
03 September 2010
Reversing Eur/Usd ,Gbp/Usd
* I am reversing Eur/Usd and Gbp/Usd into long positions
Closing short Gbp/Chf and going long Eur/Jpy.
More later.
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.
Closing short Gbp/Chf and going long Eur/Jpy.
More later.
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 August 2010
Taking partial profit
* The swift moves in the markets this week seems somewhat overdone - for now.
Im taking partial profit.
I believe well see more of these bearish developments ahead , but there is a good chance of an assetbullish reaction first.
*Open positions and positionchanges
- Took profit on my short Gbp/Jpy
- Took profit on my long Usd/Zar
- Took profit on my short Aud/Usd
- Took profit on my short Aud/Jpy
- New position; Short Gbp/Chf
Never got hold of short position on the Australian ASX 200 index. Bought ETF;s on short European indexes instead. Took profit there as well.
Still short Eur/Usd and Gbp/Usd.
* Other
Getting a view on deflation - stagflation - inflation.
More on these subjects in a later posting.
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.
Im taking partial profit.
I believe well see more of these bearish developments ahead , but there is a good chance of an assetbullish reaction first.
*Open positions and positionchanges
- Took profit on my short Gbp/Jpy
- Took profit on my long Usd/Zar
- Took profit on my short Aud/Usd
- Took profit on my short Aud/Jpy
- New position; Short Gbp/Chf
Never got hold of short position on the Australian ASX 200 index. Bought ETF;s on short European indexes instead. Took profit there as well.
Still short Eur/Usd and Gbp/Usd.
* Other
Getting a view on deflation - stagflation - inflation.
More on these subjects in a later posting.
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.
16 August 2010
CNY reval to the (temporary) rescue or not?
* CNY reval is on the agenda again. From a Chinese perspective it might become a necessity as steps are taken to try and manage this leveraged economy.
On that note, got some info re counterfeiting in China. Alledgedly, if one deducted Chinese growth stemming from counterfeiting, the annual GDP growth would be zero. If one applied "green accounting" all current GDP Chinese growth would be erased as well. So, all in all, deducting these two variables, the remaining net Chinese GDP growth would be negative.
Add to this a highly leveraged, centralised and very corrupt regime and a cowboy style economy you end up with,,,, Russia in the nineties? Only, the variance in livingstandards in China is even greater than in Russia back then, hence the risk of socialtensions and massive political turbulence is higher in China.
What Im trying to say is; In the "short" run the Chinese economy is overvalued and overexposed.
*Oh yes, the Chinese reval.
Well, although there are some bearish winds blowing again, a CNY reval should actually be good for riskappetite. This would definitely disturb the AUD case shortterm. Especially since the AUD would likely be one of the currencies benefitting most from such an event.
Ill return on this issue later on.
* Was a bit quick in going short CBA and Westpac - its just not doable. These stocks are stilll under a shortingban. Wonder why,,,,,, Oh well, Ill try the index instead then - if possible!
* New positions and positionchanges
No changes.
* Other
- Still trying to add a short Australian equity position - well see.
- Pondering the deflation vs inflation, stagflation outlook. Been a deflation "fan" but am currently reassessing.
- CNY revaluation timing. Not good for AUD bears when it happens. Stay posted.
- JPY intervention; Not before 80 in Usd/Jpy. Stay posted.
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.
On that note, got some info re counterfeiting in China. Alledgedly, if one deducted Chinese growth stemming from counterfeiting, the annual GDP growth would be zero. If one applied "green accounting" all current GDP Chinese growth would be erased as well. So, all in all, deducting these two variables, the remaining net Chinese GDP growth would be negative.
Add to this a highly leveraged, centralised and very corrupt regime and a cowboy style economy you end up with,,,, Russia in the nineties? Only, the variance in livingstandards in China is even greater than in Russia back then, hence the risk of socialtensions and massive political turbulence is higher in China.
What Im trying to say is; In the "short" run the Chinese economy is overvalued and overexposed.
*Oh yes, the Chinese reval.
Well, although there are some bearish winds blowing again, a CNY reval should actually be good for riskappetite. This would definitely disturb the AUD case shortterm. Especially since the AUD would likely be one of the currencies benefitting most from such an event.
Ill return on this issue later on.
* Was a bit quick in going short CBA and Westpac - its just not doable. These stocks are stilll under a shortingban. Wonder why,,,,,, Oh well, Ill try the index instead then - if possible!
* New positions and positionchanges
No changes.
* Other
- Still trying to add a short Australian equity position - well see.
- Pondering the deflation vs inflation, stagflation outlook. Been a deflation "fan" but am currently reassessing.
- CNY revaluation timing. Not good for AUD bears when it happens. Stay posted.
- JPY intervention; Not before 80 in Usd/Jpy. Stay posted.
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 August 2010
The Australian housingbubble - will it bring down CBA and Westpac?
* I havent really noticed much publicity when it comes to the Australian housing bubble.
However, Ive had a look at it and its very,very scary. As always, its a matter of timing, but I believe were getting there before long. Hence, I am selling the Aud as well as the Australian banks CBA and Westpac (they hold 50% of the Australian mortgagemarket). The loan to equity ratio is so high that a 6% writedown of mortgages would wipe out these banks equity. When this housing market heads south, a 6% writedown will be a best case scenario,,,,
Ive got some quite compelling research on the subject. If you´re interested in obtaining it, send me a mail.
* Yesterdays FED comments post the FOMC decision provided a minimum QE outcome.
It is doubtful this will match the high expectations that were build up pre FOMC. The impetus from this for assets should be a weakening one.
* New positions and positionchanges
- Added to my short Aud position
- Looking for the best ETF;s to short CBA, Westpac or ASX 200
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
However, Ive had a look at it and its very,very scary. As always, its a matter of timing, but I believe were getting there before long. Hence, I am selling the Aud as well as the Australian banks CBA and Westpac (they hold 50% of the Australian mortgagemarket). The loan to equity ratio is so high that a 6% writedown of mortgages would wipe out these banks equity. When this housing market heads south, a 6% writedown will be a best case scenario,,,,
Ive got some quite compelling research on the subject. If you´re interested in obtaining it, send me a mail.
* Yesterdays FED comments post the FOMC decision provided a minimum QE outcome.
It is doubtful this will match the high expectations that were build up pre FOMC. The impetus from this for assets should be a weakening one.
* New positions and positionchanges
- Added to my short Aud position
- Looking for the best ETF;s to short CBA, Westpac or ASX 200
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
10 August 2010
Time to change positions
* Its been a great bull ride since June in Equities, Eur, Aud and Oil, not to mention Wheat (ahhh, what a rocket).
However, I feel now is the time to reverse these positions - again.
Why? Well, to me the weaker Usd was a temporary retrieve in any case. The Usd is coming back soon due to a leveling of positions and the markets overpricing of QE is US vs recovery in Europe. Hence , I believe we will see a relative shift in long term rates favouring the Usd.
I am going long the Usd.
* The China syndrome - soon in Australia?
Australia is to suffer on the back of continued Chinese tightening as well as continued weakening Chinese assetmarkets. According to research, Chinese GDP growth is 100% due to the domestic industry of making fake brands. At least that makes me quite worried. Top it off with a very centralised structure, high leverage, insane capital allocation and you have the recipe for a real bubble burst with a bang. On the positive side; Basel 3 will likely mean an increased allocation from banks into reserve currencies such as the Aud. Short term, however, Im a seller of Aud.
* Equities still in a range - but its about to move lower within it.
Equities will still be looking good from a capital allocation model point of view, but short term I believe the market has gotten ahead of itself. Europe is not out of the woods - not by far.
I am going short European Equity indexes.
* While Oil may very well be in short supply going forward, the Gulf issue is overplayed and so is the demand for now. Im going short Brent Oil.
* The Wheat panic rocket is falling back to Earth - ish. Beware of setbacks.
However, with the recent move and the Russian wheat export stop and bad harvests already discounted by the market and a very, very swift move higher. I am at least looking for a correction lower before we get a top out test of the former high. Caution warranted though. Proper strict riskmanagement should be applied, as always.
* SouthAfrica - the Worldcup is over and the shine has faded. Whats left? A corrupt government, trying to silence the press in order to make room for murky deals and yet more corruption. This country was meant to set an example for the rest of Africa, leading openness,transparency, education, social responsibility and growth. Now its heading the other way. Mandelas legacy is fading fast. On top of it, neither the World Cup, nor the Olympic games are rarely an economic success for the hosting country, rather the opposite. I doubt it will be different for South Africa.
I am buying Usd/Zar.
* Positions and position changes
- Took profit on my long Eur/Usd position, reversed.
- Sold Gbp/Usd.
- Took profit on my long Aud/Usd position, reversed.
- Sold Gbp/Jpy.
- Took profit on my long GLL ETF (short gold).
- Took profit on my long LOIL ETF (Long Brent Oil).
- Went long SOIL ETF (Short Brent Oil).
- Long Bear ETFS on European Equity indexes
- Long Usd/Zar
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
However, I feel now is the time to reverse these positions - again.
Why? Well, to me the weaker Usd was a temporary retrieve in any case. The Usd is coming back soon due to a leveling of positions and the markets overpricing of QE is US vs recovery in Europe. Hence , I believe we will see a relative shift in long term rates favouring the Usd.
I am going long the Usd.
* The China syndrome - soon in Australia?
Australia is to suffer on the back of continued Chinese tightening as well as continued weakening Chinese assetmarkets. According to research, Chinese GDP growth is 100% due to the domestic industry of making fake brands. At least that makes me quite worried. Top it off with a very centralised structure, high leverage, insane capital allocation and you have the recipe for a real bubble burst with a bang. On the positive side; Basel 3 will likely mean an increased allocation from banks into reserve currencies such as the Aud. Short term, however, Im a seller of Aud.
* Equities still in a range - but its about to move lower within it.
Equities will still be looking good from a capital allocation model point of view, but short term I believe the market has gotten ahead of itself. Europe is not out of the woods - not by far.
I am going short European Equity indexes.
* While Oil may very well be in short supply going forward, the Gulf issue is overplayed and so is the demand for now. Im going short Brent Oil.
* The Wheat panic rocket is falling back to Earth - ish. Beware of setbacks.
However, with the recent move and the Russian wheat export stop and bad harvests already discounted by the market and a very, very swift move higher. I am at least looking for a correction lower before we get a top out test of the former high. Caution warranted though. Proper strict riskmanagement should be applied, as always.
* SouthAfrica - the Worldcup is over and the shine has faded. Whats left? A corrupt government, trying to silence the press in order to make room for murky deals and yet more corruption. This country was meant to set an example for the rest of Africa, leading openness,transparency, education, social responsibility and growth. Now its heading the other way. Mandelas legacy is fading fast. On top of it, neither the World Cup, nor the Olympic games are rarely an economic success for the hosting country, rather the opposite. I doubt it will be different for South Africa.
I am buying Usd/Zar.
* Positions and position changes
- Took profit on my long Eur/Usd position, reversed.
- Sold Gbp/Usd.
- Took profit on my long Aud/Usd position, reversed.
- Sold Gbp/Jpy.
- Took profit on my long GLL ETF (short gold).
- Took profit on my long LOIL ETF (Long Brent Oil).
- Went long SOIL ETF (Short Brent Oil).
- Long Bear ETFS on European Equity indexes
- Long Usd/Zar
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.Errors and Omissions may occur.Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
10 June 2010
Change of plans, short term, things seems to be looking up.
* Spanish bond auction went well, positive numbers overnight from Japan, Australia and China
This means increased global rebalancing potential as European countries are getting increased possibilities for exports, as asian fiscal policies are turning more domestic. With asia and parts of the emerging world requiring tighter monetary policies. With Europe in delevraging mood due to sinking domestic conditions, this export potential will help.
The Eur will still have to weaken substantially, even below parity, to test all time lows. However, now does not seem to the time for it. Also, the Eur/Usd move lower has to take place during semicontrolled conditions in order to avoid European banks and general asset markets falling.
With the Eur moneymarket curve flattening, Portugal and Spain successfully issuing 3 year bonds. Should the ECB extend its liquidity terms today, I expect OIS spreads to narrow further, dragging high yield and assetmarkets higher. BOE will remain soft.
Equity markets remain at a low value compared to expected profits for 2010. A short term Equity move higher would therefore be in line with a positive ECB outcome.
*Positions and positions changes; Change of plans
My change of heart from yesterday is based on markettiming issues as well as the comments above. Main scenario remains, however, I choose to participate in this shortterm development/correction.
- Took profit on my short Eur/Usd, position reversed.
- Took profit on my short Gbp/Usd
- Took profit on my short Aud/Usd, position reversed.
- Took S/L on my long Usd/Jpy
- Took profit on my long equity index put options
- Took profit on my long bank put options.
- Long GLL ETF (short Gold)
- Long LOIL ETF (Long Brent Oil)
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 means increased global rebalancing potential as European countries are getting increased possibilities for exports, as asian fiscal policies are turning more domestic. With asia and parts of the emerging world requiring tighter monetary policies. With Europe in delevraging mood due to sinking domestic conditions, this export potential will help.
The Eur will still have to weaken substantially, even below parity, to test all time lows. However, now does not seem to the time for it. Also, the Eur/Usd move lower has to take place during semicontrolled conditions in order to avoid European banks and general asset markets falling.
With the Eur moneymarket curve flattening, Portugal and Spain successfully issuing 3 year bonds. Should the ECB extend its liquidity terms today, I expect OIS spreads to narrow further, dragging high yield and assetmarkets higher. BOE will remain soft.
Equity markets remain at a low value compared to expected profits for 2010. A short term Equity move higher would therefore be in line with a positive ECB outcome.
*Positions and positions changes; Change of plans
My change of heart from yesterday is based on markettiming issues as well as the comments above. Main scenario remains, however, I choose to participate in this shortterm development/correction.
- Took profit on my short Eur/Usd, position reversed.
- Took profit on my short Gbp/Usd
- Took profit on my short Aud/Usd, position reversed.
- Took S/L on my long Usd/Jpy
- Took profit on my long equity index put options
- Took profit on my long bank put options.
- Long GLL ETF (short Gold)
- Long LOIL ETF (Long Brent Oil)
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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