* Bank of England, ECB, NFP
Heavy agenda, cant say Im that excited though. Feels like the macro fundamentals are coming into play again, although still wary re the realmoney inflow variable.
On the back of Bernankes speech yesterday, it seems CB;S might become more cautious re their debtload again. This risk stopping the reflation trade in its tracks, dragging commodities, commodity currencies and any other currencies benefitting from higher equity markets down.
Read; AUD, SEK and GBP.
* Latvia
Although I am long Eur/Lvl Fx forwards I dont necessarily view the devaluation as a done deal - yet. The mode in the Latvian government seems to be one of stubbornness. I doubt they will change anything re their FX regime til the IMF tells them to. I believe IMF would rather avoid having to tell them,,
Anyway, this could drag on for a little while. Hopefully, for the people of Latvia´s sake, they will devalue as soon as possible. This would save them prolonged and unnecessary suffering. It will be very hard as it is anyway. Seems there will be a pressconference with members of the Latvian government and the IMF today. It should carry a "positive" message re Latvian financing from the IMF.
Hopefully , IMF will not provide the big transfer without demanding an adjustment of the Latvian exchange rate regime. No strings = mindless at this stage. At least in my view.
* The SEK
It is important to remember that in terms of productivity and competitiveness, the SEK has gained zilch since this crisis started. As most of my readers know, the recent strength is mostly due to the rebound of equity markets. Alas, not sustainable. Especially not as were heading deeper into the seasonally weak June /July.
Another interesting point is the correlation between the Baltic countries GDP growth and the value of the SEK over the last year, it is very high.
With the Baltic GDP growth sinking like a stone, the SEK is lagging. It still has ways to go down as well.
* New positions and position changes
- Took profit on my long Swedbank puts
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.
04 June 2009
03 June 2009
Latvia - a trigger for a revisit of CEE turbulence and European bank system stress? SEK; trouble ahead.
* Latvia devaluation risk triggering another round of CEE selloffs.
IMF now have to make the decision; letting Latvia devalue or not? The Latvian politicians will of course make the formal decision, but, in practise, it is the IMF who now decides. As Ive mentioned before, I believe the Latvians will get their IMF loan.
However, there will/should be strings attached. One string that would suit the Latvian politicians policies would be to tie the LVL to the ERMII system. IE, letting the LVL move +-15% around the existing midrate. A way to save face for the Latvian politicians. The road to the Euro,,,,,right. It will be in vain though. Most likely scenario post such an announcement would be for the LVL to immediately weaken to the 15% limit. Stay there for a brief time and then the Lvl would be forced to float freely. Sending the Lvl weakening to a total of 40%-50%. If not more,(read, The new leading indicator for Latvia; Latvian prostitution prices ).
* The SEK and the Baltics
In my view, the Swedish Riksbanks stresstest of the Swedish banks, although harsher than the analyst consensus, was too soft. Not that surprising. Not that surprising that stockmarket analysts are off either. (They are bottom up analysts, not top down. Bottom up analysts historically have underestimated future losses, writedowns and overestimated profits during downturns.) The Swedish Riksbank are cautious not to stir things up too much at this very sensitive time for the Baltics.
Going forward, in my view, the Swedish Riksbanks estimates of creditlosses are likely to be revised upwards going forward. Anyway, the SEK is likely to come under pressure again, pushing Eur/Sek towards the 11.15/11.25 area for starters. The summer months of June and July are seasonally weak SEK months during normal circumstances. Should Latvia start the Baltic devaluation chain reaction the implications for the SEK should be heavy. A test of the alltime highs for Eur/Sek at 11.7860 should not be ruled out.
This scenario should take place within the next one to two months. If not, some other solution has been found involving the IMF, injecting an even bigger package into Latvia.
* The Baltics and the CEE area
Although the CEE area in general has floating currencies generating a significant advantage compared to the Baltics in the current environment, the CEE area has similar problems when it comes to foreign hard currency debt. Main lenders; Western European banks. Full circle.
One risk would be for a refocus on the lack of deleveraging in the European area, European bad debts and the vulnerability of European banks. This in turn risks turning more attention towards the Euro area and sovereign debt.
On the other hand, chunky realmoney flows are expected to start flowing into assetmarkets as implied volatilites have shrunk significantly. Now, realmoney flows are often a counterindicator, but, those flows are also very chunky. So, short term could see continued support for financial markets. Although I doubt the CEE area will benefit very much from the realmoney flows.
Add to this the assymetric risks present and it makes sense to start planning for a "hot" end of summer.
Disclosure; I am long Eur/Lvl Fx Forwards
* New positions and position changes
- Taken profit on long Eur Call /Usd put option
- Taken profit on long Gbp Call/ Usd put option
- Long Eur/Sek
As usual, good luck
latvia
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.
IMF now have to make the decision; letting Latvia devalue or not? The Latvian politicians will of course make the formal decision, but, in practise, it is the IMF who now decides. As Ive mentioned before, I believe the Latvians will get their IMF loan.
However, there will/should be strings attached. One string that would suit the Latvian politicians policies would be to tie the LVL to the ERMII system. IE, letting the LVL move +-15% around the existing midrate. A way to save face for the Latvian politicians. The road to the Euro,,,,,right. It will be in vain though. Most likely scenario post such an announcement would be for the LVL to immediately weaken to the 15% limit. Stay there for a brief time and then the Lvl would be forced to float freely. Sending the Lvl weakening to a total of 40%-50%. If not more,(read, The new leading indicator for Latvia; Latvian prostitution prices ).
* The SEK and the Baltics
In my view, the Swedish Riksbanks stresstest of the Swedish banks, although harsher than the analyst consensus, was too soft. Not that surprising. Not that surprising that stockmarket analysts are off either. (They are bottom up analysts, not top down. Bottom up analysts historically have underestimated future losses, writedowns and overestimated profits during downturns.) The Swedish Riksbank are cautious not to stir things up too much at this very sensitive time for the Baltics.
Going forward, in my view, the Swedish Riksbanks estimates of creditlosses are likely to be revised upwards going forward. Anyway, the SEK is likely to come under pressure again, pushing Eur/Sek towards the 11.15/11.25 area for starters. The summer months of June and July are seasonally weak SEK months during normal circumstances. Should Latvia start the Baltic devaluation chain reaction the implications for the SEK should be heavy. A test of the alltime highs for Eur/Sek at 11.7860 should not be ruled out.
This scenario should take place within the next one to two months. If not, some other solution has been found involving the IMF, injecting an even bigger package into Latvia.
* The Baltics and the CEE area
Although the CEE area in general has floating currencies generating a significant advantage compared to the Baltics in the current environment, the CEE area has similar problems when it comes to foreign hard currency debt. Main lenders; Western European banks. Full circle.
One risk would be for a refocus on the lack of deleveraging in the European area, European bad debts and the vulnerability of European banks. This in turn risks turning more attention towards the Euro area and sovereign debt.
On the other hand, chunky realmoney flows are expected to start flowing into assetmarkets as implied volatilites have shrunk significantly. Now, realmoney flows are often a counterindicator, but, those flows are also very chunky. So, short term could see continued support for financial markets. Although I doubt the CEE area will benefit very much from the realmoney flows.
Add to this the assymetric risks present and it makes sense to start planning for a "hot" end of summer.
Disclosure; I am long Eur/Lvl Fx Forwards
* New positions and position changes
- Taken profit on long Eur Call /Usd put option
- Taken profit on long Gbp Call/ Usd put option
- Long Eur/Sek
As usual, good luck
latviaThe 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 June 2009
Inflating vs deleveraging, what about the next step?
* Inflating to avoid an immediate crash -inflating the crash potential in the process.
To some extent, the Latvian scenario is a case in point. An extreme case but yet so visibly similar to other governments behaviour during this crisis. Youve got liquidity problems? Increase your leverage! The leverage days should be behind us. However, the behaviour so far has during the crisis has not indicated that this is necessarily the way authorities view it. Back to good o´l leverage days alá 2006?
The world was not "normal" during 2002-2007. Still it seems markets perceive that time period as "normal circumstances" which we will soon revert to. I dont think so. Although deleveraging has not been the main theme so far this crisis, it will become a crucial factor.
Either deleverage now or live with no or very low growth for a number of years. Its basic riskmanagement. Although certain liquidity providing measures have been necessary so far, in order to avoid a complete breakdown, many measures have been misguided and overdone. This has instead increased leverage and the overall risk and cost in the process. Stakes and risks are increasing, although the general media and so called expert noice is sounding all clear. Well see.
To extend on the by now infamous analogy by the former Citigroup CEO Charles "still dancing" Prince; Ill stay at the party, but Ill be dancing close to the exit and I am making sure my helmet is within reaching distance.
* The Swedish Riksbanks "stresstests" - everything´s fine - still.
So, basically, even if theres a devaluation in Latvia, even if there are devaluations in all three Baltic countries. Even if those devaluations reach 40%-65%, even if credit losses in the Baltics reach 30%-40%. Even if the CEE and the Euro area starts crumbling due to no pull traction from China and the US 2H this year. Even if Swedish taxpayers and domestic demand gets hit hard as a consequence, with higher unemployment, lower realestateprices, etc etc due to the Baltic crisis. Even if Swedish venture capitalists go belly up, the Swedish banks will make it?
Actually, the Swedish Riksbank did not use those assumptions when they made their report.
They did not even mention any devaluation risk. They estimated creditlosses in the Baltics to 10%. In Ukraine, 30%. In Sweden,1.3%. Denmark and Norway, 1,95%. UK, 3.9%.
Poland,5% and Russia,10%.
All for the period of the next two years, 2009-2010. During the same timeperiod, Swedish bank earnings are expected to be 85% of consensus expectations.
Under the Swedish Riksbanks expectations the Swedish banks would make it. Please note that their expectations are rather conservative. Not really what I would call a stresstest anyway. Riksbank still living in the 2006 days, eh? The low volatility quant days. Well, well see how this plays out.
Swedish taxpayers should already be aware that the government backed bank programme is already having unintended consequences, as the Swedish banks "arbs" the Swedish taxpayers by borrowing at a discount from the Swedish taxpayers and lending at a premium in the Baltics. The taxpayers take on the wrong side of a digital blow out risk, for an extremely low premium/return. Hardly what I would call protecting the taxpayers capital. Especially as earnings go straight to the banks. An example of debt inflating instead of deleveraging.
Disclosure; I am long Eur/Lvl forwards
*New positions and position changes
- Long puts on Swedbank
- Long puts on SEB
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.
To some extent, the Latvian scenario is a case in point. An extreme case but yet so visibly similar to other governments behaviour during this crisis. Youve got liquidity problems? Increase your leverage! The leverage days should be behind us. However, the behaviour so far has during the crisis has not indicated that this is necessarily the way authorities view it. Back to good o´l leverage days alá 2006?
The world was not "normal" during 2002-2007. Still it seems markets perceive that time period as "normal circumstances" which we will soon revert to. I dont think so. Although deleveraging has not been the main theme so far this crisis, it will become a crucial factor.
Either deleverage now or live with no or very low growth for a number of years. Its basic riskmanagement. Although certain liquidity providing measures have been necessary so far, in order to avoid a complete breakdown, many measures have been misguided and overdone. This has instead increased leverage and the overall risk and cost in the process. Stakes and risks are increasing, although the general media and so called expert noice is sounding all clear. Well see.
To extend on the by now infamous analogy by the former Citigroup CEO Charles "still dancing" Prince; Ill stay at the party, but Ill be dancing close to the exit and I am making sure my helmet is within reaching distance.
* The Swedish Riksbanks "stresstests" - everything´s fine - still.
So, basically, even if theres a devaluation in Latvia, even if there are devaluations in all three Baltic countries. Even if those devaluations reach 40%-65%, even if credit losses in the Baltics reach 30%-40%. Even if the CEE and the Euro area starts crumbling due to no pull traction from China and the US 2H this year. Even if Swedish taxpayers and domestic demand gets hit hard as a consequence, with higher unemployment, lower realestateprices, etc etc due to the Baltic crisis. Even if Swedish venture capitalists go belly up, the Swedish banks will make it?
Actually, the Swedish Riksbank did not use those assumptions when they made their report.
They did not even mention any devaluation risk. They estimated creditlosses in the Baltics to 10%. In Ukraine, 30%. In Sweden,1.3%. Denmark and Norway, 1,95%. UK, 3.9%.
Poland,5% and Russia,10%.
All for the period of the next two years, 2009-2010. During the same timeperiod, Swedish bank earnings are expected to be 85% of consensus expectations.
Under the Swedish Riksbanks expectations the Swedish banks would make it. Please note that their expectations are rather conservative. Not really what I would call a stresstest anyway. Riksbank still living in the 2006 days, eh? The low volatility quant days. Well, well see how this plays out.
Swedish taxpayers should already be aware that the government backed bank programme is already having unintended consequences, as the Swedish banks "arbs" the Swedish taxpayers by borrowing at a discount from the Swedish taxpayers and lending at a premium in the Baltics. The taxpayers take on the wrong side of a digital blow out risk, for an extremely low premium/return. Hardly what I would call protecting the taxpayers capital. Especially as earnings go straight to the banks. An example of debt inflating instead of deleveraging.
Disclosure; I am long Eur/Lvl forwards
*New positions and position changes
- Long puts on Swedbank
- Long puts on SEB
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 June 2009
Chinese PMI relieving markets and fundmanagers chasing the market again, but the FED model points towards lower equities.
* The Chinese PMI relieved markets. June starting with an equity rally.
The Chinese "wonder story" continues. However, it is interesting to notice that Chinas power consumption fell by 4% over the first five months of the year. So? Well, this variable has a high correlation with Chinas industrial output,,,,,
Chinese officials seem to have become more uncomfortable with the pace of which the Chinese banks have expanded their loan books this year. A statement was issued on Sunday demanding Chinese banks to "strengthen internal risk controls". It seems the Chinese are tightening their credit already. However , in this environment, the market choose to focus on the Chinese PMI numbers and the bullish aspect.
* Chinese PMI triggering relief rally
There were some concerns pre the Chinese PMI. However as they failed to materialise, equity markets jumped higher. Fundmanagers are seeing huge inflows of real money. Since they are only allowed to hold a certain level of cash, this generates problems for them. They have to buy stocks. Chasing the market.
* The FED model pointing towards lower equities.
The FED model compares Bondmarket PE with the Equity PE. The PE differential has moved into negative territory, suggesting higher yields will soon start weigh down on equities.
* New positions and position changes
- Bought Eur Call/Usd put
- Bought Gbp Call/Usd put
As always, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
The Chinese "wonder story" continues. However, it is interesting to notice that Chinas power consumption fell by 4% over the first five months of the year. So? Well, this variable has a high correlation with Chinas industrial output,,,,,
Chinese officials seem to have become more uncomfortable with the pace of which the Chinese banks have expanded their loan books this year. A statement was issued on Sunday demanding Chinese banks to "strengthen internal risk controls". It seems the Chinese are tightening their credit already. However , in this environment, the market choose to focus on the Chinese PMI numbers and the bullish aspect.
* Chinese PMI triggering relief rally
There were some concerns pre the Chinese PMI. However as they failed to materialise, equity markets jumped higher. Fundmanagers are seeing huge inflows of real money. Since they are only allowed to hold a certain level of cash, this generates problems for them. They have to buy stocks. Chasing the market.
* The FED model pointing towards lower equities.
The FED model compares Bondmarket PE with the Equity PE. The PE differential has moved into negative territory, suggesting higher yields will soon start weigh down on equities.
* New positions and position changes
- Bought Eur Call/Usd put
- Bought Gbp Call/Usd put
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.
28 May 2009
The new leading indicator for Latvia; Latvian prostitution prices
* Latvian prostitution prices fall by 67% in a year
According to a Bloomberg story, Latvian prostitution prices have fallen by 67% in the last year. http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_lynn&sid=aSRh7Cf2DTrU
Forget about house prices. The prostitution prices and infidelity websites on the internet are the leading indicators to go by according to Bloomberg. According to researchers the web traffic to infidelity websites increases during bull and bearmarket times and at market turning points. In November the traffic peaked as the assetmarkets took the biggest hit last year. No traffic increase since. In Latvia, prostitution prices are not showing any signs of turning up, according to the article.
Hence, the IMF should be on red alert together with most of Europes banking system.
* Indicator of Latvian extent of devaluation?
In order to restore competitiveness by deflation instead of an actual devaluation, achieving an equal result, the prostitution price indicator would seem to indicate that the devaluation will be more than 40%-50%. Rather 70%. Interesting if other indicators can be combined with this one in order to get a verification or not. Should have an impact when pricing LVL FX forwards if valid.
* New positions or positionchanges
No changes
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
According to a Bloomberg story, Latvian prostitution prices have fallen by 67% in the last year. http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_lynn&sid=aSRh7Cf2DTrU
Forget about house prices. The prostitution prices and infidelity websites on the internet are the leading indicators to go by according to Bloomberg. According to researchers the web traffic to infidelity websites increases during bull and bearmarket times and at market turning points. In November the traffic peaked as the assetmarkets took the biggest hit last year. No traffic increase since. In Latvia, prostitution prices are not showing any signs of turning up, according to the article.
Hence, the IMF should be on red alert together with most of Europes banking system.
* Indicator of Latvian extent of devaluation?
In order to restore competitiveness by deflation instead of an actual devaluation, achieving an equal result, the prostitution price indicator would seem to indicate that the devaluation will be more than 40%-50%. Rather 70%. Interesting if other indicators can be combined with this one in order to get a verification or not. Should have an impact when pricing LVL FX forwards if valid.
* New positions or positionchanges
No changes
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
Market flush with Latvian "immediate" devaluation rumours
* Latvian devaluation rumours
The Latvian devaluation rumours have been triggered by articles going back since this Monday. They have mainly touched on the subjects of Latvian politicians realising that the game is up, the Central bank governor Ilmar Rimsevics two interviews where he has suggested that vouchers would be introduced as payment for public employees. Central bank governor Ilmar R.;s statements really made me sit up and take notice.
This is exactly what happened during the Argentinian crisis, where they simply ran out of currency reserves as the ARS peg, tied to the Usd, was being defended. Patacónes, Lecops, Créditos, Argentinos and lots of other bits of pieces of scrip. In Argentina this was the beginning of the end for the fixed currency regime.
There are reasons to believe this is also the case in Latvia.
*Swedish preparations
Swedish authorities also seem to be on full alert that some "big" event is around the corner.
The Swedish Centralbank replenishing their FX reserves by 100 Bn SEK. the Swedish Finance minister and Financial market minister declaring they are "ready" for any events, including devaluation, in the Baltics.
The Swedish bank CEO of SEB, Annika Falkengren, declaring that a Baltic devaluation will not mean more creditlosses in total for SEB. I think she knows the game is up.
I still believe there might be a try with the ERMII, (+-15% around a midrate) but the real float should come not too much longer after that.
* LVL FX forward pricing - not indicating any imminent devaluation, makes the long LVL FX forward a very attractively priced digital option.
The only thing that seems a bit odd at the moment is the fact that the cost of buying FX LVL forwards have not really skyrocketed on shorter maturities (up to two months). Albeit higher, they are still to be considered as good value options.
This bit of the puzzle does make me wonder since it would make sense that the market had the absolute best information on this subject.
A bit of a turnoff for any imminent devaluation idea. However, it is still a very attractive digital option to own.
*New positions and positionchanges
None
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
The Latvian devaluation rumours have been triggered by articles going back since this Monday. They have mainly touched on the subjects of Latvian politicians realising that the game is up, the Central bank governor Ilmar Rimsevics two interviews where he has suggested that vouchers would be introduced as payment for public employees. Central bank governor Ilmar R.;s statements really made me sit up and take notice.
This is exactly what happened during the Argentinian crisis, where they simply ran out of currency reserves as the ARS peg, tied to the Usd, was being defended. Patacónes, Lecops, Créditos, Argentinos and lots of other bits of pieces of scrip. In Argentina this was the beginning of the end for the fixed currency regime.
There are reasons to believe this is also the case in Latvia.
*Swedish preparations
Swedish authorities also seem to be on full alert that some "big" event is around the corner.
The Swedish Centralbank replenishing their FX reserves by 100 Bn SEK. the Swedish Finance minister and Financial market minister declaring they are "ready" for any events, including devaluation, in the Baltics.
The Swedish bank CEO of SEB, Annika Falkengren, declaring that a Baltic devaluation will not mean more creditlosses in total for SEB. I think she knows the game is up.
I still believe there might be a try with the ERMII, (+-15% around a midrate) but the real float should come not too much longer after that.
* LVL FX forward pricing - not indicating any imminent devaluation, makes the long LVL FX forward a very attractively priced digital option.
The only thing that seems a bit odd at the moment is the fact that the cost of buying FX LVL forwards have not really skyrocketed on shorter maturities (up to two months). Albeit higher, they are still to be considered as good value options.
This bit of the puzzle does make me wonder since it would make sense that the market had the absolute best information on this subject.
A bit of a turnoff for any imminent devaluation idea. However, it is still a very attractive digital option to own.
*New positions and positionchanges
None
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
Get ready for volatile times in the CEE and Euro area. The Baltic area deval trigger.
* The Baltic private sector on the road to extinction = Devaluation before long
This silly game has run its course and by now even the most anti deval fundamentalist politicians seems to realise that devaluation will be unavoidable. Latvia is first in line to let their currency go. Latvias economy is by now entirely dependent on the extent of foreign loans in order to keep the fixed currency regime going.
Are the citizens of Latvia really willing to take on this extra debt burden to defend a fixed currency regime bound to fall anyway? If yes, how much are they willing to take on? Global happy days are not coming back tommorrow, despite the recent months of assetmarket bullish sentiment. It will more likely take years. How much debt does that equal? To reach the Euro? And then what? Debt still has to be paid-or?
I seriously question if there is any strategy at all (apart from the Euro dream), behind the Latvian politicians clinging to the fixed exchange regime. IMF had better use all their resources and experiences they have to administrate the chaos that will follow on the back of the Baltic devaluation. The Baltic politicians IMF are talking to today are not likely to be there in a years time.
* Use IMF capital to stabilise the initial friction post deval instead
IMF should prepare a significant rescue fund for the Baltics. Let the Baltic currencies float freely. Use the rescue funds to stabilise they social consequences that will follow initially so that people will be able to have homes, and a minimum level of income in order to support their families. Negotiate with the Swedish banks and their Government in order to make realistic and quick debt writeoffs. The Swedish Government will most likely have to finance the Swedish Banks SEB and Swedbank anyway, hence they will become the main negotiating partner.
From there, the Baltic states can have a restart, getting their exports going again, generating jobs, income, social structure, stability, etc
*The Swedish government should let shareholders, bondholders in SEB and Swedbank pay the price.
Minimize the damage to Swedish taxpayers by letting the risktakers pay as much as possible. The Swedish taxpayers will pay heavily still, unfortunately.
Transfer bad bankassets to the state at marketprices. Take over ownership of Swedish banks in a transitional phase. Restart.
*Refocus on European banks bad assets = shaky CEE markets return = refocus on Euro area bad assets
Baltic devaluations risk being the trigger for CEE shakiness again. Since the Euroarea is intertwined with it via their banks balancesheets, a refocus on the state of the Euroarea is likely. Since the European banking system is in more dire straits than the US one it is not likely to be bullish for assetmarkets. Once again, there is no comprehensive and coordinated European plan to deal with a worsening scenario from here. Not good. Fingers crossed it will all just go away. With US coming to the rescue - as usual. China is also counted on. Unfortunately I doubt neither the US , nor China will come to the rescue this time around.
* New positions and position changes
- Took profit on my long Eur/Sek
- Took profit on my long Usd/Jpy option
- Took profit on my long Eur/Huf
- Increased my long Eur/Lvl forward
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
This silly game has run its course and by now even the most anti deval fundamentalist politicians seems to realise that devaluation will be unavoidable. Latvia is first in line to let their currency go. Latvias economy is by now entirely dependent on the extent of foreign loans in order to keep the fixed currency regime going.
Are the citizens of Latvia really willing to take on this extra debt burden to defend a fixed currency regime bound to fall anyway? If yes, how much are they willing to take on? Global happy days are not coming back tommorrow, despite the recent months of assetmarket bullish sentiment. It will more likely take years. How much debt does that equal? To reach the Euro? And then what? Debt still has to be paid-or?
I seriously question if there is any strategy at all (apart from the Euro dream), behind the Latvian politicians clinging to the fixed exchange regime. IMF had better use all their resources and experiences they have to administrate the chaos that will follow on the back of the Baltic devaluation. The Baltic politicians IMF are talking to today are not likely to be there in a years time.
* Use IMF capital to stabilise the initial friction post deval instead
IMF should prepare a significant rescue fund for the Baltics. Let the Baltic currencies float freely. Use the rescue funds to stabilise they social consequences that will follow initially so that people will be able to have homes, and a minimum level of income in order to support their families. Negotiate with the Swedish banks and their Government in order to make realistic and quick debt writeoffs. The Swedish Government will most likely have to finance the Swedish Banks SEB and Swedbank anyway, hence they will become the main negotiating partner.
From there, the Baltic states can have a restart, getting their exports going again, generating jobs, income, social structure, stability, etc
*The Swedish government should let shareholders, bondholders in SEB and Swedbank pay the price.
Minimize the damage to Swedish taxpayers by letting the risktakers pay as much as possible. The Swedish taxpayers will pay heavily still, unfortunately.
Transfer bad bankassets to the state at marketprices. Take over ownership of Swedish banks in a transitional phase. Restart.
*Refocus on European banks bad assets = shaky CEE markets return = refocus on Euro area bad assets
Baltic devaluations risk being the trigger for CEE shakiness again. Since the Euroarea is intertwined with it via their banks balancesheets, a refocus on the state of the Euroarea is likely. Since the European banking system is in more dire straits than the US one it is not likely to be bullish for assetmarkets. Once again, there is no comprehensive and coordinated European plan to deal with a worsening scenario from here. Not good. Fingers crossed it will all just go away. With US coming to the rescue - as usual. China is also counted on. Unfortunately I doubt neither the US , nor China will come to the rescue this time around.
* New positions and position changes
- Took profit on my long Eur/Sek
- Took profit on my long Usd/Jpy option
- Took profit on my long Eur/Huf
- Increased my long Eur/Lvl forward
As usual, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
Subscribe to:
Posts (Atom)
Posts
