Apologies team a lot to catch up on in terms price action and all the various technical indicators and sentiment.
Let me start with the reports as there are a lot here to update with:
Firstly the Swiss team’s latest:
SPX 2100 is broken. (As I update this end of day the break at the close is 1 point S&P500! That’s not enough so we may bounce around here in volatile trade to work this direction through). On the break, the door is open to a fast and hard impulsive sell off for US equities. In my view the beta correction will be seen on US equities. The reversal bars of Monday’s moves were the entry. I’m short SOX, Dow and SP500 with 25% of the macro fund covered in a mix of options and etf shorts. As i’m fairly defensively allocated and more weighted to Europe and Asia than the US this hedge is sufficient for now. Evidence before being more aggressive. If I’m correct with the beta downside move being seen in US equities my account may even see some upside from the move.
Here Fitzpatrick from Citi:
He is maintaining his euro shorts vs the US$ and has tactically added. To my mind its somewhat chasing to be adding to the long US$ at these levels. Personally I think the GBPUSD has room to run and that trade is now more attractive than the long US$ vs Euro trade but just my view. The correlation between euro weakness vs US$ and GBP has been high over the last month and quarter. This correlation is likely to breakdown, starting yesterday, in my view. Its now 9 weeks to the UK general elections.
And here GS:
Their bets I like here are short the AUD (their conviction 2) and long euro equities buying the dips (their conviction 3).
Here a quintet of FX reports:
First last week’s MS excellent wkly:
And here this week’s latest:
And here the JP wkly fx report:
And here
Note here the level of the eurgbp. We hit the 07255 level today again and there is some price evidence of support at this level. As reported in the forum section of capsyn i’ve taken profit at this level and have accumulated an initial position long the euro vs gbp. 9 weeks until the UK general election.
And here ML with sector analysis and recommendations:
Here JP with their excellent fund flow report:
Last week’s:
And this week’s
Here an excellent report from ML on sentiment:
Here JP on the macro but an excellent report and very useful as it plays nicely into the technical and trading strategies:
Here CS with their weekly Strat. Note the commodity stocks. Rio and Glen. On more weakness in copper a trading entry may emerge on both in the next quarter or so.
A number of reports still to come and I wanted to post this link to a third party macro and micro economic focused US website:
The US economy is far from well and housing and construction weakness sustains in spite of zirp and money supply increases. Asset prices are rising but volumes tell a very different story. Once again growth is stalling and the long forecast capex spending increases fail to emerge once again. FX debasement must be cyclical between the major currencies as it is very clear that none can sustain strength for very long. Trading in line with these cyclical fx moves is vital at these times.
All the best
Rich
As a macro few update:
Here RBC with a great regular report:
Note the correlation between sterling strength and uk housing strength. Positive long term correlation. Watch that one therefore!
Also note that gold has decoupled from every other instrument completely on the short and medium term. She shows neither a positive or negative correlation to anything in the market as far as i can see in the month and quarter. This is interesting. I have suggested here that gold is being “smoothed” by some group or other, to what ends i have no idea. It is being smoothed to be accumulated at lower prices or is it being kept high artificially as a closet geopolitical monetary threat to the US$? I have my suspicions but this is not useful. From a trading perspective to see all correlations breakdown suggests a low volatility period for gold here. In my book that’s fine. I hold gold in the short term as a hedge to an asymmetric move by instruments given the absence of “safe” market allocations. Given the likely low volatility in the instrument now is unlikely the time to hold options in the asset class. But give it quarter or two to allow historic vol fall again and the option trade window may open again for us. Lets see.
Another asset class we track here religiously, world property update here:
In my travels most recently i viewed beach houses 300sqm in Vietnam, Denang on 500sqm plots and a large development with lots of neighbors being sold for 650,000 $ and more. You can find cheaper properties on more land and privacy in Spain. This is not a recommendation to buy Spanish property but it is an indicator to me that Europe is very cheap even vs S.America and S.E.Asian developing nations. I can eat as cheaply in Spain as i can in Vietnam and property in Spain and S.Italy and Portugal and Greece is often cheaper than many developing nations. The world has certainly changed. That’s a past tense, note!
More on UK (7th May uk general elections).
A new release from the IFS on UK wages. Its a depressing read indeed. And if you would like to add a chart to overlay these charts I suggest you add real increases in UK house prices over the top of this data set. Consumption is being sustained via low savings, reducing interest rates on variable rate mortgages and high asset price growth via uk house prices. If inflation has been under reported (as most commentators with a non vested position widely acknowledge then its clear real incomes have most probably declined for the last 20 years or so.
Some text book historic theory. A positive and strong correlation to excess house price appreciation over wages. Recall from the mid 1970s to the mid 1990s wages grew more in line with house prices. The secular bull trends of public and consumer sector debt increases, lower savings, lower interest rates all stopped adding to wage growth at around this time. This fits with credit growth historic super cycle theory. Initially rapid positive MS growth leads to wage growth but at a certain point excess credit creation creates mis allocation of capital and wages stop increasing. The system increasingly needs a reset as many have commented. Of course timing is the issue for allocators).
Back to UK. This data and strategy of asset price growth via selective MS increases and credit creation is a receipt for short term suspension of deep long term structural problems. (I could quote Mises here. You all know the quote, I’m sure.
In time the GBP will be a wonderful short vs bullion, most likely.
Here the report:
Germany:
Here Naxis on the German power house:
And here on German credit:
A few German stats:
Wages 2014 up by 3%
Wage projection increases 2015 4 to 5% (current average private sector wage demands coming in at 5%+)
House prices 2014 up 5%
Savings up to 10% for h2 2014
Trade balance to approach 10% of GDP for 2015
Consumer debt is extremely low for a developed economy (a third of the uks)
http://research.stlouisfed.org/fred2/series/HDTGPDDEQ163N
And cash as a payment method represents 80% of all transactions.
Retail sales up 5.3% annual (Latest print).
4.8% unemployment, lowest level for 35 years.
In spite of little recent biz investment the capacity utilization still has some headroom so in theory clear water re inflation for a while yet.
Public sector surpluses. Germany has a set of nos that shine and look sustainable so long as the euro stays low.
Adam Posen: And here, the ex BOE (very highly paid), current extremely well paid consultant, adviser to the BOJ and economics commentator most recently covering Davos and advising the IMF amongst others, getting it compelety wrong in 2003 on Germany. By the way he publishes a negative paper on Germany every year without fail. One year he will get it right. I give you the glorious Adam Posen.
And here the glorious Posen, more recently on bubbles and why central banks shouldn’t stop them from forming. Like Krugman he probably believe bubbles create growth. “A bubble now would be good for growth”. Krugman
(Over the last decade or so doing the reverse of what he suggests is generally a good trade and investment so he is worth keeping a track of).