28 November 2008
End of month Usd buying at the Lon 4pm fix?
Due to S&P being down 10% on the month, there is guesstimates that today will bring 12-15 Bn Usd of Usd buying mainly vs Euro, Gbp and Aud. Last month it was widely talked about and discounted. This time it seems less discounted, although the amount is also about half the one in October. Expect heavy Usd buying as we approach the fix. Watch out for Usd selling post it. Hence, should be quite choppy price action around 4pm Lon time.
Russia - slipping on that slippery slope
The Russian centralbank confirmed they are widening the RUB corridor at the same time as hiking interest rates from 12% to 13%.
This was motivated by; "stemming capital outflows and dampening inflationtrends". Smells like they are loosing the grip to me. Hmmm,,, perhaps the bull rally will not last that long? At least not in Europe. I honestly hope that the Latvian government knows what to do in this situation. First thing I come up with is for the currency to float. But then again, what do I know?
Where is the Swedish Riksbank contingency planning? They need to become more proactive on this issue and realise that this is a very serious crisis, coming soon to a Swedish bank and currency near you. Get involved. Stop pretending everything is hunkydory. The Swedish banks will lobby their hardest in order not to float. They should be ignored.
Anyway, keep a very close eye on the developments in Russia nearterm.
If the Russian bear should fall, it would drag many others with it, with strong repercussions for Europe.
For anyone interested, go to http://www.imf.org/external/index.htm and read the IMF;s latest working paper on "The tasks ahead". In essence, it highlights the very problematic funding issues for the IMF in order to be able to support the Emerging markets, as well as the necessity of it. Not very encouraging reading if one expected the Emerging market funding issue to have been all figured out. Any big Emerging country going down, such as Russia would cause major problems as such a country by itself, might empty the IMF;s funds.
This was motivated by; "stemming capital outflows and dampening inflationtrends". Smells like they are loosing the grip to me. Hmmm,,, perhaps the bull rally will not last that long? At least not in Europe. I honestly hope that the Latvian government knows what to do in this situation. First thing I come up with is for the currency to float. But then again, what do I know?
Where is the Swedish Riksbank contingency planning? They need to become more proactive on this issue and realise that this is a very serious crisis, coming soon to a Swedish bank and currency near you. Get involved. Stop pretending everything is hunkydory. The Swedish banks will lobby their hardest in order not to float. They should be ignored.
Anyway, keep a very close eye on the developments in Russia nearterm.
If the Russian bear should fall, it would drag many others with it, with strong repercussions for Europe.
For anyone interested, go to http://www.imf.org/external/index.htm and read the IMF;s latest working paper on "The tasks ahead". In essence, it highlights the very problematic funding issues for the IMF in order to be able to support the Emerging markets, as well as the necessity of it. Not very encouraging reading if one expected the Emerging market funding issue to have been all figured out. Any big Emerging country going down, such as Russia would cause major problems as such a country by itself, might empty the IMF;s funds.
GS downgrading Europe - big time
For the first time in 25 years, the GS European chief economist is making a dowgrade just 1 month after the previous revision. This underscores the severity of it, in my opinion. Doing such a thing is a hard prestige hit. Europe is going dooown, if anyone thought otherwise.
GS is revising Eurozone GDP growth for 2009 from -0,3% to -1,3%.
The biggest recession in postwar history.
This is equivalent to what Sweden went through in the early nineties, in what is regarded as the worst banking crisis in European history. (Although I guess it has faded somewhat compared to what we are witnessing in the global banking industry this time around.)Well, we havent seen the Baltic "subprime" collapse unfold yet. Scandinavian banks will surely get a chance to break their previous record. I reckon theyve got good chances of achieving this. Will be a strong sense of dejavu for the Swedish Riksbank, but with a new twist, bailing out the banks AND the Baltics!
Enjoy the ride of this bear rally while it lasts and make money on it, but dont buy into the story that we have bottomed. It might last one more hour, day, week or month, but, not months or a year. I want to see a solution to the Emerging market story first. A downgrading of Europe is NOT going to help.
I have bought calls on US banks, looking for US equities and banks to outperform other markets in the short term.
As always, good luck!
GS is revising Eurozone GDP growth for 2009 from -0,3% to -1,3%.
The biggest recession in postwar history.
This is equivalent to what Sweden went through in the early nineties, in what is regarded as the worst banking crisis in European history. (Although I guess it has faded somewhat compared to what we are witnessing in the global banking industry this time around.)Well, we havent seen the Baltic "subprime" collapse unfold yet. Scandinavian banks will surely get a chance to break their previous record. I reckon theyve got good chances of achieving this. Will be a strong sense of dejavu for the Swedish Riksbank, but with a new twist, bailing out the banks AND the Baltics!
Enjoy the ride of this bear rally while it lasts and make money on it, but dont buy into the story that we have bottomed. It might last one more hour, day, week or month, but, not months or a year. I want to see a solution to the Emerging market story first. A downgrading of Europe is NOT going to help.
I have bought calls on US banks, looking for US equities and banks to outperform other markets in the short term.
As always, good luck!
27 November 2008
No Latvian pegchange demanded by IMF, it seems,,,,
LATVIAN IMF PLAN WILL NOT CHANGE CURRENCY PEG, GODMANIS SAYS.
"Stupid is as stupid does", as Forrest Gump used to say.
Guess Ill revise my timing on this one then, unless this is a political classic in these matters, saying one thing and doing another.
Lets see. In any case, I hope the population agrees with this, and I also hope the politicians have found a solution. Really, I do. Its just that I dont quite know myself what that solution would look like with the current currency regime set up and given the global macro environment.
"Stupid is as stupid does", as Forrest Gump used to say.
Guess Ill revise my timing on this one then, unless this is a political classic in these matters, saying one thing and doing another.
Lets see. In any case, I hope the population agrees with this, and I also hope the politicians have found a solution. Really, I do. Its just that I dont quite know myself what that solution would look like with the current currency regime set up and given the global macro environment.
Equitymarkets up for the 4th day, and counting.
Bearmarket rally, still rolling. Will it continue? Well, everybody trying their hardest, for sure.
US quantitative easing in full progress post Tuesdays Usd 800Bn Fed funded programme to buy GSE and other mortgage debt. Bond and mortgage yields falling on the back of it.
* US home (average) loan rates declined from 6% on Monday to 5.5% on Wednesday. Stressed mortgage rates for 30 year fixed loans fell from 6.33% Monday to 5.97% Wednesday.
Corporate bond spreads declining along with mortgage spreads, all supporting the equity market, which has responded very well.
* Citigroup jumping ca 85% since the closing last friday, with the rest of the banking sector tagging along, although with various speed. All courtesy of the US Treasury.
* One of the delevaring indicators, the USD, has weakened against the Euro from 1.24 last week to over 1.30 yesterday. Sub 1.29 today. Emerging market buying of equities and currencies, with the EU bringing cohesion funding spending forward.
Question is, will we now see the pools of unleveraged liquidity, generated from the forced asset liquiditation over the last months come back into the market? Will attractive valuations be enough? If so, there will be a substantial bearmarket rally. Institutional realmoney will be the main indicator. The "Once (or twice/third) burned twice shy" rule is still applicable though. Capital preservation focus should still rule for now.
Watch this space.
Me myself am dipping my toes using mainly options. After being long US bank puts, I am now long ditto calls as well, having reduced the puts. Want to get hold of Brent Oil and Gold Calls, but easier said than done at the moment.
Monitoring the Emergings closely.
I am still long Swedish bank puts due to the Baltics, long Fx Sek puts vs Euro for ditto reasons. (There are other reasons as well, more on this later).
Still long the Usd in cash.
Happy thanksgiving! Count your blessings and best of luck.
US quantitative easing in full progress post Tuesdays Usd 800Bn Fed funded programme to buy GSE and other mortgage debt. Bond and mortgage yields falling on the back of it.
* US home (average) loan rates declined from 6% on Monday to 5.5% on Wednesday. Stressed mortgage rates for 30 year fixed loans fell from 6.33% Monday to 5.97% Wednesday.
Corporate bond spreads declining along with mortgage spreads, all supporting the equity market, which has responded very well.
* Citigroup jumping ca 85% since the closing last friday, with the rest of the banking sector tagging along, although with various speed. All courtesy of the US Treasury.
* One of the delevaring indicators, the USD, has weakened against the Euro from 1.24 last week to over 1.30 yesterday. Sub 1.29 today. Emerging market buying of equities and currencies, with the EU bringing cohesion funding spending forward.
Question is, will we now see the pools of unleveraged liquidity, generated from the forced asset liquiditation over the last months come back into the market? Will attractive valuations be enough? If so, there will be a substantial bearmarket rally. Institutional realmoney will be the main indicator. The "Once (or twice/third) burned twice shy" rule is still applicable though. Capital preservation focus should still rule for now.
Watch this space.
Me myself am dipping my toes using mainly options. After being long US bank puts, I am now long ditto calls as well, having reduced the puts. Want to get hold of Brent Oil and Gold Calls, but easier said than done at the moment.
Monitoring the Emergings closely.
I am still long Swedish bank puts due to the Baltics, long Fx Sek puts vs Euro for ditto reasons. (There are other reasons as well, more on this later).
Still long the Usd in cash.
Happy thanksgiving! Count your blessings and best of luck.
26 November 2008
Oh no,EU bailout, 6.5BN Usd to the autoindustry
So it has officially started, the bailoutrace. Wrong track. This will lead to protectionism and competitive weakening of currencies in efforts to jumpstart "their own" economy. Suboptimal global GDP growth is NOT what we need right now. Oh dear,,,
Full throttle against the raging river
Been away on a trip. Looking into a company with a very bright future.
Quite a few events taking place meanwhile;
* General and specific packages being launched in US, UK and "promised" in Europe.
* Tax cuts talked about in Europe, US, tax hikes for the wealthy in the UK.
* Global rate cuts continuing globally. As Ive mentioned before, we are now seeing Emerging markets joining in as well; Russia, Turkey, Poland, South Africa, and more will follow. Expect weaker currencies there, but first the short Try positions are being flushed out.
* Quantitative easing showing its effect in the long bond market with long bond yields falling heavily in the US.
* FED buying MBS and GSE debt, in essence directly supporting the consumers.
* However, Usd funding demand very heavy, especially from UK banks, pushing 3mth eur basis euribor from -120 to -165, 3mth cbl, gbp libor was -165 to -212. Cbl was at its highest to start with, so it has just kept pushing. Next week there will be an 84 day ECB auction.
So far these auctions havent attracted much demand due to their current rates being 40-50 bp above the market. This level is now attractive due to market developments, so expect heavy demand there. Cbl situation does not seem to get that relief. Anyway, where am I going with this? I am concerned that liquidity spreads are widening when state money continues to be injected on a scale never seen before. To sum it up; Extreme amounts of money, but wheres the velocity? Without money velocity, no "bang for the buck". More Tax cuts and infrastructure programs to get people into work, please.
All in all, the efforts made by centralbanks and governments globally is simply massive, extraordinarily, for a lack of a better word.
* I am now concerned by the velocity of money. It need to be sped up. This is where the fiscal measures come in. Instead of spending money on dinosaur businesses and corporations, please make sure people get money in their pockets by making labour cheaper via lower taxes for employers as well as lower income taxes and VAT.
* Governments should invest in infrastructure projects, there are plenty to choose from. Some are even urgently needed anyway. This will achieve higher efficiency, productivity and profitability, making each country more competitive. We are facing a worsening global macro outlook. Making the right decisions are key here. Unfortunately it all smells like protectionism in the end. As long as the bailout talks of various industries persist, anyway.
I suspect unemployment will have to rise towards 10-15% in western countries. Higher in Emerging ones. At least, infrastructure projects can sort some of that out, or at least cap it.
Net, net;
Hard efforts are being made, but not enough fiscal policy measures to make me bullish.
Im still bearish.
What comes after deflation? Inflation. Not really on the radar screen as of yet, but something to keep in the back of your mind. Now; Cash is king, then; Cash will be the worst place to be.
Quite a few events taking place meanwhile;
* General and specific packages being launched in US, UK and "promised" in Europe.
* Tax cuts talked about in Europe, US, tax hikes for the wealthy in the UK.
* Global rate cuts continuing globally. As Ive mentioned before, we are now seeing Emerging markets joining in as well; Russia, Turkey, Poland, South Africa, and more will follow. Expect weaker currencies there, but first the short Try positions are being flushed out.
* Quantitative easing showing its effect in the long bond market with long bond yields falling heavily in the US.
* FED buying MBS and GSE debt, in essence directly supporting the consumers.
* However, Usd funding demand very heavy, especially from UK banks, pushing 3mth eur basis euribor from -120 to -165, 3mth cbl, gbp libor was -165 to -212. Cbl was at its highest to start with, so it has just kept pushing. Next week there will be an 84 day ECB auction.
So far these auctions havent attracted much demand due to their current rates being 40-50 bp above the market. This level is now attractive due to market developments, so expect heavy demand there. Cbl situation does not seem to get that relief. Anyway, where am I going with this? I am concerned that liquidity spreads are widening when state money continues to be injected on a scale never seen before. To sum it up; Extreme amounts of money, but wheres the velocity? Without money velocity, no "bang for the buck". More Tax cuts and infrastructure programs to get people into work, please.
All in all, the efforts made by centralbanks and governments globally is simply massive, extraordinarily, for a lack of a better word.
* I am now concerned by the velocity of money. It need to be sped up. This is where the fiscal measures come in. Instead of spending money on dinosaur businesses and corporations, please make sure people get money in their pockets by making labour cheaper via lower taxes for employers as well as lower income taxes and VAT.
* Governments should invest in infrastructure projects, there are plenty to choose from. Some are even urgently needed anyway. This will achieve higher efficiency, productivity and profitability, making each country more competitive. We are facing a worsening global macro outlook. Making the right decisions are key here. Unfortunately it all smells like protectionism in the end. As long as the bailout talks of various industries persist, anyway.
I suspect unemployment will have to rise towards 10-15% in western countries. Higher in Emerging ones. At least, infrastructure projects can sort some of that out, or at least cap it.
Net, net;
Hard efforts are being made, but not enough fiscal policy measures to make me bullish.
Im still bearish.
What comes after deflation? Inflation. Not really on the radar screen as of yet, but something to keep in the back of your mind. Now; Cash is king, then; Cash will be the worst place to be.
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