The train has left the station a bit but it would be interesting to see what other countries do.
USDJPY has sold off by 2 to 3% over the last few days. The EURUSD has also rallied similar amounts.
I would perhaps go long the momentum for a bit but not too crazily....
Will think about it more and post.
I am more worried about the long term inflation...
Wednesday, December 17, 2008
Money market funds are getting the money
The money market funds macro-group (+$121.6 billion) was the only macro-group attracting net flows in November, while stock and mixed-equity funds handed back $26.4 billion and bond funds
witnessed $16.7 billion of net redemptions.
- Large-cap funds (-$4.7 billion) continued to be the flows pariah of the U.S. Diversified Equity (USDE) funds group, despite posting better returns than the other capitalization groups during the month.
- In November the Mixed-Equity Funds macro-group (-$4.6
billion) suffered only its fourth monthly redemption since July 2002. The mixed-asset target horizon funds group (+$1.9
billion) could not make up for the net redemptions witnessed by the mixed-asset target allocation funds group (-$5.5 billion).
- In November the World Equity Funds macro-classification recaptured the claim to shame of having the largest net outflows of Lipper's major equity macro-classifications, handing back $11.2 billion.
witnessed $16.7 billion of net redemptions.
- Large-cap funds (-$4.7 billion) continued to be the flows pariah of the U.S. Diversified Equity (USDE) funds group, despite posting better returns than the other capitalization groups during the month.
- In November the Mixed-Equity Funds macro-group (-$4.6
billion) suffered only its fourth monthly redemption since July 2002. The mixed-asset target horizon funds group (+$1.9
billion) could not make up for the net redemptions witnessed by the mixed-asset target allocation funds group (-$5.5 billion).
- In November the World Equity Funds macro-classification recaptured the claim to shame of having the largest net outflows of Lipper's major equity macro-classifications, handing back $11.2 billion.
Friday, December 12, 2008
Auto Companies
My thoughts are these wranglings are going on because all the parties concerned feel that the companies WILL be rescued any way....
However, investors didn't fall into as much of a panic so far today...VIX has mostly fallen today from 59 levels to 55...
Let's wait and watch...
However, investors didn't fall into as much of a panic so far today...VIX has mostly fallen today from 59 levels to 55...
Let's wait and watch...
Short BRL?
One of my friends from Brazil sent me this note on the Brazilian Real... This short BRL trade may be worth doing simply as a hedge against your long stock positions...
Capital Flows out of BRL
1. the process of portfolio realignment is not over... capital is fleeing and this process is correlated with bad news there (investors taking money out to cover theirs obligations abroad or just to buy safer assets in other places)
Commodity Prices
2. Price of commodities (main Brazilian exports) is going down, which is also reflecting on balance of commerce (this effect tends to be greater than benefits to increase the volume of goods exported - given that the world is not buying so much). This means that the adjustment on the balance of commerce will be slow, and for the next year, the balance tends to be negative...Also, the balance of commerce is sensitive to Embraer exports (aviation company), which, under the current scenario, has not received many requests.
Central Bank
3. The Brazilian Central bank has signed that it will not increase interest rates (which attract foreign investors) since inflation is under control . Although the rate is high - 13.75% - this is not historically very high (we had long periods recently with the basic rate in 17-20%). In the last meeting of the monetary policy committe the rate was mantained and the head of the Central Bank indicated that changes in the near future, if any, will be downward (also, there is a lot of political pressure from politicians afraid that we go through a recession...)
My comments: The investors may still flock to the Real for the high interest rates if they don't cut too aggressively and it seems that they will survive the crisis. My view on short Real etc. is predicated upon the slowing down of growth for the short term.
Trade: I would go short the BRL preferably thorough some sort of a barrier option which will be a cheap punt. One can also go short via regular options but that will be quite expensive with the volatility. Now is the time to go on Oanda online and bet on barriers
Capital Flows out of BRL
1. the process of portfolio realignment is not over... capital is fleeing and this process is correlated with bad news there (investors taking money out to cover theirs obligations abroad or just to buy safer assets in other places)
Commodity Prices
2. Price of commodities (main Brazilian exports) is going down, which is also reflecting on balance of commerce (this effect tends to be greater than benefits to increase the volume of goods exported - given that the world is not buying so much). This means that the adjustment on the balance of commerce will be slow, and for the next year, the balance tends to be negative...Also, the balance of commerce is sensitive to Embraer exports (aviation company), which, under the current scenario, has not received many requests.
Central Bank
3. The Brazilian Central bank has signed that it will not increase interest rates (which attract foreign investors) since inflation is under control . Although the rate is high - 13.75% - this is not historically very high (we had long periods recently with the basic rate in 17-20%). In the last meeting of the monetary policy committe the rate was mantained and the head of the Central Bank indicated that changes in the near future, if any, will be downward (also, there is a lot of political pressure from politicians afraid that we go through a recession...)
My comments: The investors may still flock to the Real for the high interest rates if they don't cut too aggressively and it seems that they will survive the crisis. My view on short Real etc. is predicated upon the slowing down of growth for the short term.
Trade: I would go short the BRL preferably thorough some sort of a barrier option which will be a cheap punt. One can also go short via regular options but that will be quite expensive with the volatility. Now is the time to go on Oanda online and bet on barriers
BAD BAD Day ahead
Today is going to be a BAD day in the financial markets…. Bail out rejected and a massive securities fraud by ex NASDAQ Chairman up to 50 Billion dollars it seems…..
Note on Market Movements
Note on Market Movements
- USDJPY is close to breaking 90. USDBRL has climbed to 2.39 as opposed to 1.6 levels in September 08! ( Meaning Brazilian Real has fallen…)
- NZDJPY – the most popular carry trade has fallen from 90 this Jan to below 50… I wonder how it will do today..
- S&P futures are showing a 4% fall today… VIX is at 55.98 and I think it will go above 60 again. Expect Bond prices to rise like crazy again. Wonder where we go from 0% yields on T Bills….
- I couldn't get short financials in time... BLAH but it is a good trade if you are short!
Wednesday, December 10, 2008
Trading Performance
I will be a bit coy about the numbers. However, my portfolio is small and I have done quite well with my investments in the short market positions. The issue many people will raise is that it is not a "REAL PORTFOLIO" since I may be excessively risk taking in a bragging rights portfolio. So I won't release the exact numbers until I am able to make this portfolio into a "real one" by graduate student standards :)...
Personally, I am just trying to trade it professionally and my views are my views.
- Current views/Positions I want to have:
I am trying to buy some puts on all financials (yes, again)
I am trying to buy "cheap" Jan 20th putts and Feb 09 puts on the S&P 500 since I think this is a trending down market with nice tradable "range" it pays to enter low bids and when you get filled to trade them.
I am especially interested in buying puts on Capital One Financial, Discover and most other credit card companies- If I really believed in the position, I would sell calls on them to fund the puts but I don't want to be short vol in this market
I want to buy Walmart as I think the recovery is a long way off and all the cheap stores will do quite well.
Maybe time to look at infrastructure etc.
in 6 months time, we start buying financials and Gold...
in 6 months/12 months, I start going long India massively...as I have said before, great exchange rate and great prices. When the world economy recovers, India and China will be ahead....
Personally, I am just trying to trade it professionally and my views are my views.
- Current views/Positions I want to have:
I am trying to buy some puts on all financials (yes, again)
I am trying to buy "cheap" Jan 20th putts and Feb 09 puts on the S&P 500 since I think this is a trending down market with nice tradable "range" it pays to enter low bids and when you get filled to trade them.
I am especially interested in buying puts on Capital One Financial, Discover and most other credit card companies- If I really believed in the position, I would sell calls on them to fund the puts but I don't want to be short vol in this market
I want to buy Walmart as I think the recovery is a long way off and all the cheap stores will do quite well.
Maybe time to look at infrastructure etc.
in 6 months time, we start buying financials and Gold...
in 6 months/12 months, I start going long India massively...as I have said before, great exchange rate and great prices. When the world economy recovers, India and China will be ahead....
Bailing out Detroit SUCKS - Welcome USSA
USSA?
I understand the political need to get reelected. However, Hayek, the famous political economist would turn in his grave to watch the USA get back to pre Thatcher Britain. The Govt. will manage car companies, banks, decide the products, decide the pay and so on and so forth. These actions, are even more quickly marking the "top" of the American supremacy.... What has made us great is fostering competition and innovation. The United States of Socialist America is a terrible idea- it has almost never worked.
Bailing out financial institutions, I understand- else the rest of the economy grinds to a halt as financial intermediation is stopped and the risk premium really shoots up. If all the mortgage, credit card and other financial companies fail then innovation is stifled. However, TAKING our money and putting it in a place not known for innovation is quite counterproductive. Interestingly, we are not treating the other car companies (BMW, Toyota etc.) as the "same"- something we punish Japan for.
Managing Detriot's "bankruptcy" such that none of the bond holders would be hurt, in my mind would have been wort considering. Let the equity holders decide who runs the company- stop the CDS market from freezing if you want by protecting the bonds (if we are being consistent with let's protect financial intermediaries....).
Now there will be unusable DEMOCRATIC cars....
Blah....
I understand the political need to get reelected. However, Hayek, the famous political economist would turn in his grave to watch the USA get back to pre Thatcher Britain. The Govt. will manage car companies, banks, decide the products, decide the pay and so on and so forth. These actions, are even more quickly marking the "top" of the American supremacy.... What has made us great is fostering competition and innovation. The United States of Socialist America is a terrible idea- it has almost never worked.
Bailing out financial institutions, I understand- else the rest of the economy grinds to a halt as financial intermediation is stopped and the risk premium really shoots up. If all the mortgage, credit card and other financial companies fail then innovation is stifled. However, TAKING our money and putting it in a place not known for innovation is quite counterproductive. Interestingly, we are not treating the other car companies (BMW, Toyota etc.) as the "same"- something we punish Japan for.
Managing Detriot's "bankruptcy" such that none of the bond holders would be hurt, in my mind would have been wort considering. Let the equity holders decide who runs the company- stop the CDS market from freezing if you want by protecting the bonds (if we are being consistent with let's protect financial intermediaries....).
Now there will be unusable DEMOCRATIC cars....
Blah....
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