* Chinese tighteningfears and Greek budget issues are currently weighing on equities
The Chinese tighteningfears may be well placed, but the Chinese numbers seem to indicate that inflation is no big issue as of yet. Question is if one can trust the numbers.
Same goes for the Greek fiscal numbers. There is an obvious market risk with the Greek CDS rate climbing higher. Countries with similar or worse problems might get under the market´s spotlight, increasing market volatility. A few CEE countries are still suffering from overleveraging in hard currencies. The Baltics are still in dire straits, with Latvia still a case in point. It seems there is a discrepancy between the market pricing of assetrisk vs the current macro realities.
* If 2009 was the year for Centralbank conformity, will 2010 become the year of Centralbank differentiation?
Although the Western world is still in a world of deflation, Asia is not. Liquidity is abundant. Capital is not. Asia will likely increasingly focus on domestic demand and less on exports. Hiking interestrates in the process, sucking in hot money. To prevent hot money inflows, regualory measures will have to be taken in order to disincentivise these flows.
A net effect will still be stronger Asian currencies, increasing the speed of global rebalancing.
This will increase the pressure for a stronger CNY, and thus a ditto USD.
Macrowise this should weigh on equities, especially if China starts exporting inflation, increasing the impetus for higher global rates.
On a positive note, this should also mean increased margins for Western exportcompanies with solid finances and an Asian distribution.
* New positions and position changes
- Took profit on my Long Eur/Usd position.
- Short Eur/Usd
- Long R/R on various banks with exposure to the Baltics and the CEE.
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 January 2010
04 January 2010
Government debt - the ignored risk.
* Although markets have recently been reminded of the dangers of too high government debt, it is not really viewed as a major risk.
To some extent, this makes logical sense. After all, last year governments and centralbankers coordinated their efforts in taking on debt on a massive scale and it worked, right?
It sure did. For the markets. Shortterm. From here though, there is not a lot of room to take on more government debt. Rather the opposite. The build up has been massive. Still though, the private sector is struggling with high unemployment, low growth, weak corporate balancesheets and a still highly leveraged household sector as well as a mixed realestate world, where some realestatemarkets have not really adjusted as of yet.
To top it off, the creditplug is still in place.
On the positive side, the patient is out of the hospital, but still high on drugs. Whether everything actually works as it should it far from certain. However, the patient viewed as if this is the case.
Against this background, I am focusing on macro fundamentals to get it right. I suggest will likewise have a sovereign theme to start off the year.
Hence, NOK and CAD should be preferred, GBP, EUR, JPY, ZAR and NZD should not. Although in the ZAR and NZD case, the yield factor will likely be counterproductive to such position in a low volatility environment.
China´s and India´s PMI rises to 56.6 and 55.6 respectively will support the stockmarkets. However, this will also drive expectations of Asian rate rises. This in turn will affect US rate hike expectations. Which in turn will generate expectations of a stronger USD in order to compensate for undervalued Asian ones. This could tip the stockmarket lower,,,,,,,
* The US ISM number should be under scrutiny today. A strong one will likely drive US yields higher still, dragging the Usd with it. I view the last two weeks low correlation between the USD and equities as temporary due to year end flows. A strong Usd from here should weigh on equities.
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, this makes logical sense. After all, last year governments and centralbankers coordinated their efforts in taking on debt on a massive scale and it worked, right?
It sure did. For the markets. Shortterm. From here though, there is not a lot of room to take on more government debt. Rather the opposite. The build up has been massive. Still though, the private sector is struggling with high unemployment, low growth, weak corporate balancesheets and a still highly leveraged household sector as well as a mixed realestate world, where some realestatemarkets have not really adjusted as of yet.
To top it off, the creditplug is still in place.
On the positive side, the patient is out of the hospital, but still high on drugs. Whether everything actually works as it should it far from certain. However, the patient viewed as if this is the case.
Against this background, I am focusing on macro fundamentals to get it right. I suggest will likewise have a sovereign theme to start off the year.
Hence, NOK and CAD should be preferred, GBP, EUR, JPY, ZAR and NZD should not. Although in the ZAR and NZD case, the yield factor will likely be counterproductive to such position in a low volatility environment.
China´s and India´s PMI rises to 56.6 and 55.6 respectively will support the stockmarkets. However, this will also drive expectations of Asian rate rises. This in turn will affect US rate hike expectations. Which in turn will generate expectations of a stronger USD in order to compensate for undervalued Asian ones. This could tip the stockmarket lower,,,,,,,
* The US ISM number should be under scrutiny today. A strong one will likely drive US yields higher still, dragging the Usd with it. I view the last two weeks low correlation between the USD and equities as temporary due to year end flows. A strong Usd from here should weigh on equities.
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.
03 January 2010
Happy new year and decade
* A new calendar year, a new decade
If leverage up was the theme for the last decade, it certainly still hangs around as a theme going into the new one. With centralbanks keeping rates artificially low it is bound to continue.
Question is for how long.
Sovereign risk is definitely high up on the agenda and will likely play an important part in the macro world from here. As the creditplug remains, this is still a big risk ..factor to be reconned with.
The vanilla household realestate market are is not really viewed as a big risk factor for creditlosses in the northern European countries, but it is likely underestimated.
* Initial assetviews on 2010
- Stronger Usd via a flatter US yieldcurve and an increased volatility for US yields, shift in Asian investment patterns from exports to domestic investments, contributing to global rebalancing.
Short term the most recent Usd strength looks a bit stretched. Shortterm I am selling Usd, looking to go long it once the correction is completed.
- Weaker equity indicies, especially in Europe, Euro related sovereign problems will remain, as will ditto creditplugs, creditlosses, high unemployment.
- Strong asian demand for soft commodities keeping them well supported, not so for other dittos.
- Increased pressure on "pegged" currencies due the global rebalancing process.
- Emerging market currencies increasingly vulnerable due to risk of higher global rates and a stronger Usd, disruptions to the "global recovery" story.
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.
If leverage up was the theme for the last decade, it certainly still hangs around as a theme going into the new one. With centralbanks keeping rates artificially low it is bound to continue.
Question is for how long.
Sovereign risk is definitely high up on the agenda and will likely play an important part in the macro world from here. As the creditplug remains, this is still a big risk ..factor to be reconned with.
The vanilla household realestate market are is not really viewed as a big risk factor for creditlosses in the northern European countries, but it is likely underestimated.
* Initial assetviews on 2010
- Stronger Usd via a flatter US yieldcurve and an increased volatility for US yields, shift in Asian investment patterns from exports to domestic investments, contributing to global rebalancing.
Short term the most recent Usd strength looks a bit stretched. Shortterm I am selling Usd, looking to go long it once the correction is completed.
- Weaker equity indicies, especially in Europe, Euro related sovereign problems will remain, as will ditto creditplugs, creditlosses, high unemployment.
- Strong asian demand for soft commodities keeping them well supported, not so for other dittos.
- Increased pressure on "pegged" currencies due the global rebalancing process.
- Emerging market currencies increasingly vulnerable due to risk of higher global rates and a stronger Usd, disruptions to the "global recovery" story.
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 December 2009
Greekrelated pre xmas Usd power - sign of what to come?
* Economic divergence within the Eurozone weighing on the Euro.
Although getting close to oversold by now, Eur/Usd has probably topped out this time around.
* Heavy snow and minus 9C means real winter for Xmas for a change.
I love it. Been intermittent writing for a while now.
Been quite busy and regrettably I have had to make the choice to scale down on the writing. However, Im aiming to increase the frequency. Ill revert tommorrow.
As ususal - 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.
Although getting close to oversold by now, Eur/Usd has probably topped out this time around.
* Heavy snow and minus 9C means real winter for Xmas for a change.
I love it. Been intermittent writing for a while now.
Been quite busy and regrettably I have had to make the choice to scale down on the writing. However, Im aiming to increase the frequency. Ill revert tommorrow.
As ususal - good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
27 November 2009
Neighbour bailout for Dubai around the corner? Either way, continued volatility is the conclusion.
* Dubai world bailout in the offing?
Markets should be in for some good volatility near term as the question of Dubai World will reach a conclusion. Since bailouts are all the rage these days, I have to hold that as the most likely outcome.
If not, well then we should see further pressure on Usd and Gbp funded assets.
Since the Usd has taken over the role as the worlds premier funding currency ahead of the Jpy, albeit with fierce competition from several other currencies in the low yielder category, I guess most assetclasses should be affected under such a scenario.
*Dubai and the Turkey connection - is there one?
Unless my recollection is incorrect, I believe a not irrelevant part of Turkey funding flows stems from this area. Please doublecheck me on it though. The Usd/Try spot reaction yesterday seemed to indicate something out of the ordinary anyway. With skepticism arising re the current governments intentions to initiate and follow an IMF led program, the TRY is increasingly vulnerable. Perhaps not in Dec, but in the New Year.
*Other fixed currency regimes favoured by the markets hot money should pay attention to the Dubai situation
China being a case in point. Fixed exchangerates, undervalued currencies, hot money flooding in as a consequense, hefty misallocation of capital, leading increasing degree of loony investments as a consequence. It happened in Dubai, it is happening in China - for sure.
The scale of the Chinese misallocation process is of course gigantic.
Hopefully it will not unravel nearterm,,,
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
Markets should be in for some good volatility near term as the question of Dubai World will reach a conclusion. Since bailouts are all the rage these days, I have to hold that as the most likely outcome.
If not, well then we should see further pressure on Usd and Gbp funded assets.
Since the Usd has taken over the role as the worlds premier funding currency ahead of the Jpy, albeit with fierce competition from several other currencies in the low yielder category, I guess most assetclasses should be affected under such a scenario.
*Dubai and the Turkey connection - is there one?
Unless my recollection is incorrect, I believe a not irrelevant part of Turkey funding flows stems from this area. Please doublecheck me on it though. The Usd/Try spot reaction yesterday seemed to indicate something out of the ordinary anyway. With skepticism arising re the current governments intentions to initiate and follow an IMF led program, the TRY is increasingly vulnerable. Perhaps not in Dec, but in the New Year.
*Other fixed currency regimes favoured by the markets hot money should pay attention to the Dubai situation
China being a case in point. Fixed exchangerates, undervalued currencies, hot money flooding in as a consequense, hefty misallocation of capital, leading increasing degree of loony investments as a consequence. It happened in Dubai, it is happening in China - for sure.
The scale of the Chinese misallocation process is of course gigantic.
Hopefully it will not unravel nearterm,,,
* New positions and positionchanges
- Took profit on half of the equity index puts sold yesterday, sold equity index calls today.
- Took profit on my SKF ETF on the US open
- Took profit on my long Eur/Sek
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.
26 November 2009
Eur/Usd in Dec; repatriation flows to kick in - watch out in the new year.
* With the European credit plug firmly in place - the Euro economy does not look promising
PIIGS countries - say no more.
Portugal, Italy, Ireland, Greece and Spain,,,,,, Were they not Euro members, their CDS´s would remind you more of Ukraine and the Baltics than anything else.
These countries are all in deep trouble and the cavalry (credit) is not seen anywhere.
The German Landesbanken are all in dire straits as well.
Hence, I believe we are likely to see a repeat of last year with regards to Eur/Usd, a massive repatriation surge in December as net foreign assets are trimmed down in favour of balance sheet restoration and a "change of plans" for business strategies. Ie increasingly domestically focused.
Once the new years out the way however,,,, helmets on. High risk for sharply lower Eur and ditto equity markets.
Due to the fixed exchangerate, deflationary forces in fex Greece will push local creditspreads straight up, generating defaults and writedowns of banks loanbooks. Greece and other EMU countries in a similar situation have created their problems in a very similar way as Argentina and the Baltics did; too high domestic consumption, nonproductive investment, leverage and debt against too low investment into the supplyside of the economy.
* The ECB is signalling an end to the quantitative easing.
Apparently, they are concerned that "there may be too much liquidity in the system" hmmmm,,, really? Well, of course there is, but I thought that was part of "the plan". Or is there no plan? Well, with one year money supply growth falling from 14% to almost zilch in a year, it would seem too early to withdraw any quantitative easing.
However, I guess the ECB is looking at the misallocation effects beyond the assetmarkets. Greece is currently building up a fiscal deficit stretching imagination. Explaining why the Greek CDS is now at 195 ish points, = at par with Turkey´s CDS. Difference is, as mentioned earlier, were it not for the Euro, that Greek CDS would be 3 - 4 times higher,,,
European corporate balancesheets are still weakish, industrial production sluggish and the creditplug still firmly in place. Conclusion; ECB is walking a tight rope. If they follow through on this I will be looking to dump European assets; Equities; bankstocks, any other corporate with high debt and weak cashflow, weak balancesheet the Euro etc.
With Europe and the rest of the world heavily on steroids, why stop now? Better late than never, maybe. ECB is caught between a rock and a hard place, whatever they choose there will be difficulties.
* The Dubai world
On top of this we have the "Dubai world" problems. This will have repercussions on the UK and US realestate markets as capital is consolidated. As if the Gbp needed more trouble,,,, Noone should be surprised that the excessive project in Dubai is in dire straits, but this is obviously not good news. It will not help credit, cyclical currencies or corporates.
* Weaker Usd = higher assetmarkets still?
I doubt it. If we talk fiscal consolidation and add Dubai on top of it there is risk of choppy markets. Volatility should increase. This xmas might be a good one to be long vol in order to get nice presents from Santa. If we see fiscal consolidation from investors a weaker Usd will mean a weaker equity market as well.
* New positions and position changes
- Short Equity index Calls for Dec, closed them today for a quick profit. Sold puts. Looking to resell Calls, close puts on any rebound higher. Obviously looking for one.¨
- Long Eur/Usd
- Long Eur/Gbp
- Long SKF ETF
- Long XACT BEAR ETF
- Long Eur/Sek
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.
PIIGS countries - say no more.
Portugal, Italy, Ireland, Greece and Spain,,,,,, Were they not Euro members, their CDS´s would remind you more of Ukraine and the Baltics than anything else.
These countries are all in deep trouble and the cavalry (credit) is not seen anywhere.
The German Landesbanken are all in dire straits as well.
Hence, I believe we are likely to see a repeat of last year with regards to Eur/Usd, a massive repatriation surge in December as net foreign assets are trimmed down in favour of balance sheet restoration and a "change of plans" for business strategies. Ie increasingly domestically focused.
Once the new years out the way however,,,, helmets on. High risk for sharply lower Eur and ditto equity markets.
Due to the fixed exchangerate, deflationary forces in fex Greece will push local creditspreads straight up, generating defaults and writedowns of banks loanbooks. Greece and other EMU countries in a similar situation have created their problems in a very similar way as Argentina and the Baltics did; too high domestic consumption, nonproductive investment, leverage and debt against too low investment into the supplyside of the economy.
* The ECB is signalling an end to the quantitative easing.
Apparently, they are concerned that "there may be too much liquidity in the system" hmmmm,,, really? Well, of course there is, but I thought that was part of "the plan". Or is there no plan? Well, with one year money supply growth falling from 14% to almost zilch in a year, it would seem too early to withdraw any quantitative easing.
However, I guess the ECB is looking at the misallocation effects beyond the assetmarkets. Greece is currently building up a fiscal deficit stretching imagination. Explaining why the Greek CDS is now at 195 ish points, = at par with Turkey´s CDS. Difference is, as mentioned earlier, were it not for the Euro, that Greek CDS would be 3 - 4 times higher,,,
European corporate balancesheets are still weakish, industrial production sluggish and the creditplug still firmly in place. Conclusion; ECB is walking a tight rope. If they follow through on this I will be looking to dump European assets; Equities; bankstocks, any other corporate with high debt and weak cashflow, weak balancesheet the Euro etc.
With Europe and the rest of the world heavily on steroids, why stop now? Better late than never, maybe. ECB is caught between a rock and a hard place, whatever they choose there will be difficulties.
* The Dubai world
On top of this we have the "Dubai world" problems. This will have repercussions on the UK and US realestate markets as capital is consolidated. As if the Gbp needed more trouble,,,, Noone should be surprised that the excessive project in Dubai is in dire straits, but this is obviously not good news. It will not help credit, cyclical currencies or corporates.
* Weaker Usd = higher assetmarkets still?
I doubt it. If we talk fiscal consolidation and add Dubai on top of it there is risk of choppy markets. Volatility should increase. This xmas might be a good one to be long vol in order to get nice presents from Santa. If we see fiscal consolidation from investors a weaker Usd will mean a weaker equity market as well.
* New positions and position changes
- Short Equity index Calls for Dec, closed them today for a quick profit. Sold puts. Looking to resell Calls, close puts on any rebound higher. Obviously looking for one.¨
- Long Eur/Usd
- Long Eur/Gbp
- Long SKF ETF
- Long XACT BEAR ETF
- Long Eur/Sek
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.
29 September 2009
European creditplug remains, expect a stronger Euro towards the end of the year, near term it looks soft though.
* European financial sector repatriation a theme towards the end of the year
European creditgrowth has imploded over the last six months, hence, net external assets are likely to decline.
Meanwhile, financialmarkets yieldhunting is growing as steep yieldcurves and lower volatilities forces funds into assetmarkets in order to generate any return whatsoever. Highest yield wins, (currently) no matter (almost) what. Quality of the asset currently seems to be of second order importance.
To some extent it is understandable. The Centralbanks liquiditygates remains open. (With RBA the current exception, sending signals of a ratehike this fall.) Centralbankers are acutely aware of that the current rise in assetmarkets is a function of Centralbank liquidityflooding.
The Centralbankers current one (and only) plan for now is for this flooding to float crappy assets too, bringing collateral and balancesheet relief to the financial sector in the process.
Since March, US investors have stopped repatriating assets and has since seeked higher yielding investments away from the Usd. 9.5 Trn Usd still remains on the US sidelines yielding zilch. Hence, continued outflows are to be expected.
* Assetmarkets and Eur/Usd to benefit towards the end of the year
With the German election over, I expect the Landesbanken consolidation to shift up a gear or two. The seven Landesbanken will likely be consolidated into two or three only. This means consolidation of assets and a likely refocus on domestic biz only. Hence I expect some selling and repatriation of foreign assets, benefitting the Euro towards the end of the year.
This, combined with shaky European financial balancesheets and US investors shifting assets abroad, spells a higher repatriationled Eur/Usd theme towards the year end. Higher assetmarkets and continued yieldhunting should follow. As Ive mentioned in previous notes though, the JPY should remain strong "no matter what". Not for the USD and the GBP though, as these are the new funding currencies of the world.
To top it off, the ERBD has asked for a 10BN Usd increase from its member states, funds to be spend on the CEE economies. This equals an increase of ERBD;s equity by 50%. More handouts.
*Risks on the rise - but they will likely be allowed to build for a while still
Near term threats could cause some turbulence
The current developments are obviously increasing financial risks. Especially as consensus is increasingly viewing this as a sustainable recovery. Equityvaluations are quite high (not a problem if one believes the sustainable recovery theme,) China´s 60th revolution celebration on 1 Oct could be the startingpoint for a tighter creditpolicy. This is obviously something to monitor.
Once this fairytale turns on its head, the velocity might surprise a few.
* New positions and positionchanges
- Took profit on my long Gbp/Usd puts.
- Took profit on my long Gbp/Jpy puts.
- Took profit on my long Nok/Sek spot.
- Stopped out of my long Eur/Chf spot, Eur calls expired OTM
- Stopped out my remaining long Usd/Zar spot.
- Stopped out of my long ETF SKF
Currently no positions
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.
European creditgrowth has imploded over the last six months, hence, net external assets are likely to decline.
Meanwhile, financialmarkets yieldhunting is growing as steep yieldcurves and lower volatilities forces funds into assetmarkets in order to generate any return whatsoever. Highest yield wins, (currently) no matter (almost) what. Quality of the asset currently seems to be of second order importance.
To some extent it is understandable. The Centralbanks liquiditygates remains open. (With RBA the current exception, sending signals of a ratehike this fall.) Centralbankers are acutely aware of that the current rise in assetmarkets is a function of Centralbank liquidityflooding.
The Centralbankers current one (and only) plan for now is for this flooding to float crappy assets too, bringing collateral and balancesheet relief to the financial sector in the process.
Since March, US investors have stopped repatriating assets and has since seeked higher yielding investments away from the Usd. 9.5 Trn Usd still remains on the US sidelines yielding zilch. Hence, continued outflows are to be expected.
* Assetmarkets and Eur/Usd to benefit towards the end of the year
With the German election over, I expect the Landesbanken consolidation to shift up a gear or two. The seven Landesbanken will likely be consolidated into two or three only. This means consolidation of assets and a likely refocus on domestic biz only. Hence I expect some selling and repatriation of foreign assets, benefitting the Euro towards the end of the year.
This, combined with shaky European financial balancesheets and US investors shifting assets abroad, spells a higher repatriationled Eur/Usd theme towards the year end. Higher assetmarkets and continued yieldhunting should follow. As Ive mentioned in previous notes though, the JPY should remain strong "no matter what". Not for the USD and the GBP though, as these are the new funding currencies of the world.
To top it off, the ERBD has asked for a 10BN Usd increase from its member states, funds to be spend on the CEE economies. This equals an increase of ERBD;s equity by 50%. More handouts.
*Risks on the rise - but they will likely be allowed to build for a while still
Near term threats could cause some turbulence
The current developments are obviously increasing financial risks. Especially as consensus is increasingly viewing this as a sustainable recovery. Equityvaluations are quite high (not a problem if one believes the sustainable recovery theme,) China´s 60th revolution celebration on 1 Oct could be the startingpoint for a tighter creditpolicy. This is obviously something to monitor.
Once this fairytale turns on its head, the velocity might surprise a few.
* New positions and positionchanges
- Took profit on my long Gbp/Usd puts.
- Took profit on my long Gbp/Jpy puts.
- Took profit on my long Nok/Sek spot.
- Stopped out of my long Eur/Chf spot, Eur calls expired OTM
- Stopped out my remaining long Usd/Zar spot.
- Stopped out of my long ETF SKF
Currently no positions
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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