Thursday 30 July 2009

Great Letter from an FT reader.

Take a look at this letter from an FT reader in the paper's correspondence section. I share Mr Lachman's sentiment entirely.

Some trade recommendations - Basically buy US dollars

Apoplogies for my failure to post recently, it has been a combination of sitting on the sidelines and working like a dog. Getting up at 5 every morning means I have little energy left for this blog. Sorry! Although I don't have any charts at the moment due to a data issue I have some trading recommendations. They are as follows:

1. Sell NZDUSD on pullbacks towards .6600 with an initial target at .6100 and a stop above .6750

2. Sell AUDUSD if it gets to near .8400 with a stop at .8480 and a target initially at .7700.

3. Sell GBPUSD at 1.6680 for a 1.5400 target and a stop at 1.6770.

So as summarised above, haul in some of those good old USD's.

Some other trade suggestions are getting long AUDNZD, GBPCHF and EURCHF.

Good luck and I will try to update over the weekend when I have some more time and up-to-date data, especially on the AUDNZD, GBPCHF and EURCHF front.

Tuesday 14 July 2009

Some great television from Adam Curtis - The Trap

Some of you may be interested in a series by the documentary maker Adam Curtis called 'The Trap'. I saw it when it first came out on BBC2 a few years ago and was hooked. I have seen them a number of times and am overjoyed every time I watch it just to know that there is a documentary maker around who has such deep insight and big picture undersatnding of the world we live in. A must in my opinion for any Macro investor, or just those of you that are intersted in the world that you inhabit and simply wish to understand it, or see another persons view.

Part 1:



Part 2:



Part 3:

Sunday 12 July 2009

GBPUSD - Price action hints at a correction towards 1.5200


Looking at the above chart we see a rising channel formed which was followed by a false break higher. This has led to near-term weakness. I favour a continuation of this weakness but favour it to stall near 1.5803. This may then provide a selling opportunity on a bounce back towards 1.6500/1.6600. Stops should be placed over the annual high at 1.6745. Medium term I favour a correction towards 1.5200. Click on chart for a larger image.

Nifty 50 p/e ratio - Brief update


Above is a chart of the NSEI Nifty 50 on a weekly basis including the p/e reading in the lower half so that readers can follow the link between the two. As per my prior posts I see a retrace towards 3600 before the possibility of thinking about getting long again. This also ties in nicely with my post below about a hint at the change in perception of global growth. I will try to update my developed vs emerging ratio too.

EURAUD and GBPAUD hint at direction of global economy.





This post is essentially just an observation of reversal patterns in both GBPAUD and EURAUD which can be seen in the two charts above, together with targets. Click on charts for a larger image. Both have broken over necklines although GBPAUD has yet to close above it. My own bias is for a continuation of the recovery in both pairs and as per my earlier post the volatility breakout in GBPAUD may be taking place.

So assuming that there is some more upside say for the next few weeks at least, what does this tell us about the near term perception of the strength of the global recovery? If both GBPAUD and EURAUD are biased higher then we are arguing that EUR and GBP will outperform AUD. This is clearly not a play on global growth. Thus my observation is simply that certain markets are beginning to price in a hint of a reversal in optimism about global growth in the near-term.

Saturday 4 July 2009

Inflation vs deflation - which is more likely?




Once again I am taken back to my youth and my fathers wise words that extremism breeds extremism. This leads me to follow on from my recent piece about deflation, bond yields and equity markets. During my morning snooze I found myself contemplating my existence and pondered how true it is that extremism breeds extremism and we all know how markets like to push for extremes.....

As often happens I wake up and I have a trade idea in my mind and in this case it was selling GBPUSD and it occurred a few days ago (no jokes). I may return to that in a later post. Digging deep into my subconscience I believe the idea was linked to an FT article that I had been reading on the train home some weeks ago about how large the state is now as a national employer. Thats right, unbridled capitalism got us into this mess but now we are left with a huge proportion of the workforce dependent on the state..... The UK is a socialist state.

Now, we also know that over the last few decades the shift in power from workers to corporations has accelerated towards the corporation. This has led to concepts such as outsourcing and as a result stagnant to lower wages with only the chosen few milking the system at the expense of the rest. As with all things, I believe we are simply in a perpetual cycle and now is the time for a swing back to power to workers and away from the corporation. In economics we would say from capital back to labour.


So what we know is that the state is being choked by it's own debt with more to come, it is also the largest employer in the country and it is likely that we get a swing in power back to workers (I don't wish to use the word labour as it may be confused with the political morons that are in power). So under these circumstances, which is more likely to manifest itself, inflation or defaltion? Ask yourself who gains the most if deflation sets in. Number one on the list of those who gain would be the state. As yields fall on government debt and in time that debt is rolled over at lower coupons, the amount of tax income that is used to service the debt holders is reduced and so more can be ploughed back into the economy. Secondly the most astute consumers who have not taken on any debt will also gain as should be the case, those that were not greedy and did not take part in the madness should be rewarded. Does the state favour an inflationary scenario or a deflationary one?


So for all the talk of inflation versus deflation, just ask yourself who gains in each scenario and who is the country's biggest employer. The power shift back to workers is coming and with it so will deflation. In time, as we know only too well, extremism leads to extremism and so a swing from deflation to perhaps hyperinflation may come some day, but give it a rest for now, we are nowhere near having to worry about inflation.