Friday, March 27, 2009

America is a country that doesn't know where it is going but is determined to set a speed record getting there. Laurence J. Peter

A few Friday notes...

I have finally entered long Bunds @ 123.50 ish with stop below yday close - see chart below...also as a indirect play vs. EEC being promised too much ahead of G-20 next week I have entered EURSEK long, both in cash- and options.... 11.30 call.

(Click to enlarge)

This mornings piece by Ambrose Evans-Pritchard got things in motion and then Medley apperently "confirmed" ECB going for 50 bps and if not QE - then certainly Q-easing.


Keep it light - Cash 75% - 15% allocated to short EURUSD in option & Gold, 5% in bunds, and now 5% long EURSEK..... been tough weak for sceptic like me... and I am sure the "hopers" will have another go at the upside.. I still wonder, how would a week without an interventio or plan look like? The more I study and read, the more it becomes clear the "fast money" buying this market is day traders and always bullish fund managers, while the seasoned Macro guys either stay close to cash or wait for better levels to sell...

Expensive March for this manager, but.....enjoy the week-end...

Safe trading,



Anonymous said...

Hi Steen.

I rarely dare to disagree with you but i have started to lean a bit on the side of long euro.

You see, the roman armies in their final days, when they would suffer defeat they would poison the land the wells and everything in sight so that nobody would inherit the land that once was roman.

It seems to me that most of the theories out there on the collapse of the EU and the euro currency are just poisoning the well, for the euro.

There can be no doubt that the dollar is finished. If the final demise comes a year from now or 10 years from now it makes no difference. The road to devaluation is going to be down hill, a bumpy and painful one.

Euro is currently trading at 1.30ish levels. One would think that a currency that is about to be devalued and die, in the same manner as the US dollar and the pound, would be showing statistically the same patterns and above all would be trading near or below parity levels with the dollar, given the fact the euro is young and on week political grounds.

The Euro has managed so far to stay nicely above par with the dollar, close to par with the pound, now in it's second year of this crisis. Further more statistics show that in contrast to the US and English money supply, Euro money supply has gone down to about 5.9%. Simply from a quantitative point of view the Euro is a much more likable currency.

One would think if the ECB is about to pull a QE like the British and Americans have done money supply would be shooting higher.

It seems highly unlikely that the ECB would go down the same road. not that i trust in the wisdom of Jean-Claude Trichet but QE in the Euro zone would be difficult to apply for political reasons. It would require the agreement of all member states who have verities of different problems and who disagree on the policies that should be undertaken. Even if they agree to such a thing, in the end it would prove to be divisive as states would complain of preferential treatment by the ECB. QE is simply impossible. It will spell the end of EU.

Strange thing, once states in the united states of America used to have the power to check and balance the policies of the federal government, somehow the EU has become to a certain extent very similar to the early US of A. Divisions among member states are prohibiting the undertakings of mad policies like QE etc.

If there was anything that is worrisome about the EU and the EURO is the socialist nature of these states. If the EU where to collapse it would be because of this. Just as the National Socialist policies that the US is undertaking are proving to be probably their final act as a super power.

Once it was said the the EURO would not survive it's first crisis by a "certain someone". The question has now become, What if the EURO not only survives but it does so trading at current levels. Where will the EURO be trading at, during the peak of the next boom.

mindaugas said...

Agree to the comment above. EU is far too divided politically, nationally and economically to unleash such a WMD as QE. On top of the reasons above I would add mu 0.02$:

1)there is a number of semi-independent central banks, which are not in the EURO zone (Scandinavia, Baltics, CEE), but part of EU. I doubt whether QE could be separately applied in those countries, especially given the fact that some of them have a fixed peg to EUR.

2)Also, a different state of economy - continental EU vs. other economic hotspots (PIGS, CEE, Ireland). While the earlier might be in need of QE action, the latter have to worry about the government debt, public spending and overall currency situation.

And shorting gold, Steen? Quite a contrarian view in light of global QE, don't you think?