Sunday, May 23, 2010

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my usual mustard on the current market situation 23.5.10

Hello,
at first glance I have to say unfortunately, for last week: same business as usual in recent weeks. Is exactly what happened, what did the last few weeks, said. Since the end of the QE-Programme markets become more volatile, risky assets tend weaker, credit spreads are larger.
The relationship of the QE-Programme is in the MSCI Chart increasingly clear:



2 interesting developments of the last week I found but then it is worth mentioning:
The euro, in many media said many dead, saw a small comeback.
good for the financial markets? No, unfortunately not. Why? Because now that happen, I have a little premature at 13.3. have feared. (Context EUR / USD and equity markets:
http://franzlischka.blogspot.com/2010/03/mein-ublicher-senf-zur-aktuellen_13.html )
The appreciation of the euro was only marginally the U.S. dollar, instead a massive for Australian dollar and other currencies instead of carry trade system:

Ouch, I can say. This looks like a massive short squeeze. Must be so because some traders have been positioned all wrong.
The EUR / USD appreciation, however, was relatively restrained. Sequence for the remaining markets: the popular carry trades like AUD / USD were destroyed last week right as possible. And so what has long been very negative for the equity and other markets:

After I read already grad short on the euro and in any case every time on quantitative easing: reading lately constantly the ECB would have started with the purchase of the bonds PIIGS QE their own program. I think that is plenty of covered. For a few reasons. That the program is sterilized by weekly deposits, is only the technical aspect, so, strictly speaking, by definition, can already be no QE. Despite of this, virtually exchanged good against "bad" money. Important for me is the volume of the program: In the first week, the ECB bonds bought at € 16 billion, the buying of MBS bonds alone (the largest, but not only part of the QE of the Fed) had a volume of $ 1.25 trillion ! They are completely different dimensions. The sterilization of weekly deposits indicates also suggest that the ECB does not intend to hold the bonds for long. Within the ECB, the program was already controversial. Axel Weber, the most likely successor Trichet (from November 2011) announced his displeasure for a central banker also incredibly sharp known in the media. Here, the ECB clearly politically driven over and will never stand resolutely behind the program, unlike in the United States, where Bernanke's reputation as the man with the helicopter more than justice.


was at the economic data's in the U.S. this week so some disappointments (Initial Claims, Leading Indicators). The most important economic indicator for me was the last week but the weekly published MBA Purchasing Index, which measures the applications for mortgage loans (only for purchase, refinance it for its own index). It reflects the feared to boom-and-bust scenario, in consequence of the Home Buyer Tax Credit, on 30 April ended:

Only a strong increase, then a fall to a new 13-year low. That will still mean a couple of excellent April data, but devastating Maidaten. And the next problem is anyway already: Reset The next wave of mortgage.
Here the age-old and well-known chart from Credit Suisse:

If your time to "mortgage resets" googling, which might best equal web for pictures and not in, but you will find lots of similar charts. Here are some results:
http://www.thefinancialphysician.com/blog/wp-content/uploads/2009/12/mor.gif
http://www.americalsenior.com/images/Mortgage% 20Resets % 20Part% 202.jpg
http://www.dawnsellssandiego.com/blog/wp-content/uploads/2008/12/adjustable-rate-mortgage-reset-schedule.JPG
message is always the same: After the subprime crisis is
2007/08 from now on the Alt-A and option ARM crisis. The message this week that foreclosures have increased in Q1 to a new high, there should be only the first hint. The charts say the height of the crisis until the end of 2011 ahead. Can
's are in the U.S. housing market even worse? Yes, I would argue. The heavy losses of recent years have not yet revised the Anstige the bubble years. According to Robert Shiller (data from www.irrationalexuberance.com) showed house prices in the U.S. by the end of the 2nd World War to the bubble inflation barely. Even here, though, the "real" value of the property will be accepted. Well, by then a big drop of roughly 20% of it:

And not only that every boom is followed by a crash, the prices are not on the realistic value, but far below suppressed. To exaggeration Following is a top to bottom. Is like a law of nature. And the sole reason I can not even imagine that would be a further correction circuit to 20%. The ground, we see 2011/12 probably only much lower. And that will still be due to a peculiarity of the U.S. Mortgages: As I've written a couple of times, the Immobileinbesitzer liable in most U.S. states do not personally for their mortgage, but only with her house. The result is that the issue of "strategic default" (so much as a voluntary bankruptcy) more important. Already, according to estimates 20-25% of all mortgages "under water", ie the house is lower than the mortgage debt. If prices continue Covered the situation will worsen further. For many homeowners, it pays to be simply nothing at all to stand for the mortgage now. The legal situation is here as an implicit put option on the house price. This could lead to a vicious cycle: falling prices lead to more defaults, this will push prices ever, as does additional defaults.

Yes, everything is not exactly rosy.
If I derive my macro picture looks to me the "Big Picture" in something like this:
The (preliminary) QE-end and a renewed crash on U.S. real estate markets have for me for the next 2 years strong deflationary character (it could be obtained by the QE-program-related "risk on" / "Off Risk Behaviors in the financial markets as well inflations-/deflationsgetrieben Watch). For the next time for me to dominate the deflation trade. And that is a very negative environment for all "risky assets". Conversely, because I was asked many times lately, whether at the level of a short position in the Bund future is not nearly a "No-Brainer" would be: No, I do not think. I do not know how low rates fall even more, but I think much more deeply most can imagine.
Only when the U.S. housing market his land, you'll be building the vast amounts of money that were pressed by central banks in the markets (and certainly the next few years yet), a significant inflationary pressures. So in the great inflation-vs. Deflation debate I see my position in time-dependent: After a surprise to many recent deflationary shock in this and next year will rotate the picture until around 2012. Only then will the time of the inflation trade. Oil $ 200, Gold $ 10,000? No idea, but not sure now.
And so until next time!
Greetings
Franz

Saturday, May 15, 2010

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my usual mustard to current market situation 15.5.10

Hi, maybe you have seen on Monday, why I I left for my last comment got so long. O) This is called a political exchange. Well, bad timing.
But no matter, has now changed anything in what I have written this weekend? No, absolutely not! The risk has increased significantly in the markets. Even if the implied volatilities of the options (ie, VIX, VDAX etc.) declined, the actual volatility is dramatically high (EuroStoxx50: +10.3% on Monday; -4.7% on Friday, which is already amazing!), And this is not a good sign for future development. Despite the rally after the auxiliary Pact: The raw materials (measured by the S & P GSCI), the past week a minus end, as many carry trades (including the most popular at present, the AUD / USD). A word about the raw materials: the contango in the oil price increases is currently huge. A very bearish signal for the price of oil.
Although Europe is in the media center, Greece is, as I said last week, only a symptom of the growing problems in the financial sector. This is particularly evident in Alan Greenspan's favorite stress indicator, the Libor-OIS spread. During the debt crisis of the old Alan had thought the crisis would be over when the spread falls back below 25 basis points (x-axis in the chart). (All of this good explanation: http://sohalt.wordpress.com/2008/10/08/indikatoren-der-wirtschaftskrise_1/ The entry dates from October 08, ie near the peak of the crisis)
In August 2009, then this was definitely the case. He then stabilized on a pre-crisis level of about 10 bps. Now the interesting, despite € 750 billion package and ECB intervention in the bond market, this indicator is the last days continuously on Greenspan's old mark stress. Why is that? My guess: just as much at the last time at the end of the QE-Programme. (See last week)

The markets currently seem to me like a drug addict who is in withdrawal. Your drug is cheap money from the Federal Reserve and its problem: the withdrawal has just begun. This will no good take.

For all chartists have an interesting long-term chart, which I liked very well. (Originally said of dshort.com ) Dow Jones since 1915, ran a few weeks ago approached the old resistance / support line, it forms a cross with the 2000 Top opposition.


So I let it be good for this week.
Until next time!
Greetings
Franz

Saturday, May 8, 2010

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my usual mustard on the current market situation 8.5.10

Hi hope you see my comments have been missing a lot.
The last weekend was the theme of Greece so dominant and regular U-turns at Hilfszu and -Shaped cancel that the situation could have simply offered too many opportunities that I hardly had written my comment, already to stand like an idiot. And I will prefer to pick me for other occasions. Is already enough to give it. ;)
Have a couple of times cited the headline: "Greece Is Europe's Bear Stearns, But What Will Be Its Lehman" Maybe Greece Bear Stearns and Lehman is simultaneously or in succession. I do not know, was in the matter but ever optimistic. Big statement I want to make not. (Just this: I tend to lately, not Greek euro coins to spend more but to keep me in the Expectation that in future they might get even collector's value;.)
I think all this now but not quite as particularly important for financial markets. Greece, I see now that is not the cause for the current crisis, but only as a symptom, as well as the Thursday crash after an allegedly erroneous trade.
The real reason I see in the fading risk capital. And that in turn is a story that I've written frequently lately, namely the quantitative easing program of the Federal Reserve, or rather its end.
See if you please include the commentary from 5.4.
http://franzlischka.blogspot.com/2010/04/mein-ublicher-senf-zur-aktuellen.html (There is also the link to my previous comment from 7.3. In which I wrote about the slightly complex background a bit more).
Again, why is this rather dry subject of my opinion, maybe strength for the financial markets than what happens on the streets of Athens? It's simply about the dimensions. The aid program for Greece to € 110 billion to be difficult (or now, but 150?) And run over 3 years. (This is no new money to be created, but only borrowed money that Greece would have otherwise borrowed without a crisis in the financial markets themselves.)'s Largest (but not the only) sub-program of the QE of the Fed, however, the purchase of mortgage Backed Securities (MBS) for a period of 15 months in the amount of $ 1.25 trillion (!) Derived directly from the printing presses! This could be along with Greece, Portugal and Spain, probably Italy, fund out for a few years.
So now is the program (for now) and displays the history is much faster now than I ever thought about the markets. Here are the updates of the charts from 5.4.

The impact on the volatility is huge. The downward trend in volatility has turned clear

Only recently, the realized volatility (Chart: S & P 500 20-day volatility since 1950) to historical low level dropped. And only 1 ½ years after the biggest financial crisis in 70 years. Chart: black the upward trend in the volatility since the end of the 2nd World War II is (why the upward trend is, I write is another time in detail), red linear regression over time. From far below-average volatility in early April, we are already above-average values:

With the palm turns almost any risk trade in the last 12 months.
Zb European Corporate Spreads:

is really interesting things when you then the relationship between the QE-dates and the crisis in the euro area is considered:
10-year government bond spreads of PIIGS countries to Germany, gecapt for readability at 6%. (Now the Greece-spread is already at over 9%)

The 1 QE-Programme was still no effect, with the 2nd marked but the spreads of Greece (red) and Ireland (orange) their tops. When the program ended, the new crisis began to escalate.

What is the message of this? Ultimately, all are
Risky Assets for the last 2 years only a single trade was. Either rose or fell anything everything. And it was all driven by the trillions from the printing presses of the Federal Reserve.
shares:

Commodities:

carry trades (Chart Australian Dollar):

emerging market currencies (Chart Brazil Real.)

So what I'm saying is, think I am clear that the whole risk trade was driven by money from the Fed, and this is now no reason to fear that everything will engage the reverse gear.
Yes, the economic data are currently excellent. Unfortunately, they were also the 2007 (and in many countries, even early 2008). Meaning, this has not necessarily mean much now. Finally, run ahead of the stock markets and the economic recovery was in general only by the boom in corporate bonds, etc. possible.
I see the strong data is a problem: The QE-end was like a huge increase in interest rates, but with an ISM of around 60 it is difficult for Bernanke, the soon to reverse, start to say his helicopter and re-bills to raise the already maligned bankers. Only when the U.S. should put the end of the year on the brink of recession and triftet inflation to zero (base effect driven and by lower commodity prices is very likely) ...

... and then when the markets re-lying on the floor, then Bernanke can start a new QE-Programme which is then likely to be even larger than the previous. Then it's time to buy stocks and Co, but until then, we should perhaps better hide under the covers. I think that is not a funny summer.
And also hope that China will save the world economically, I'd rather not share. Nearly 3 weeks after my last comment, broke through the Chinese stock market short-term upward trend, thus confirming the long-term downward trend. And having given a "Death Cross" (opposite of the "Golden Cross" 50-day line (red breaks) 200-day line (yellow) to bottom, a very very reliable trend indicator) was formed. See chart technically from real bad:

The negative here: the market is actually in the last few years, a precursor to the other markets have been (orange: China Mainland, green: MSCI World, blue: MSCI Emerging Markets):


seem short term, the markets now, but something about nervously, and perhaps come at the weekend now, but a clear signal from the EU to Greece & Co, but anwirft to Bernanke again the printing press is, for me the only question, then where the next crisis breaks.
Nevertheless much fun. ;)
LG
Franz