Global Macro Trading Journal

[Daal]

Interesting points
http://www.hussmanfunds.com/wmc/wmc111212.htm

"Thomson Reuters reports that negative earnings pre-announcements are exceeding positive ones by the largest ratio since mid-2001. Investors have eagerly accepted forward operating earnings as a basis for valuation assessments, without accounting for the fact that those earnings expectations assume profit margins about 50% above their historical norms. Unfortunately, profit margins are highly vulnerable to economic weakness, and we are beginning to observe that regularity here. "

I very much agree with the caution sentiment here. I might short reestablish my bigger sized HK short to protect myself

 

[benwm]

Niall Ferguson: Great Britain Saves Itself by Rejecting the EU
http://www.thedailybeast.com/articl...britain-saves-itself-by-rejecting-the-eu.html

 

[ralph00]

To paraphrase the great trader Jay Z, "U.K. has 99 problems, but walking away from the EU treaty ain't one."

It's amazing how the news and markets work. The result of the summit was a complete disaster, yet, by making the U.K. walking away the focus, nobody is talking about that (at least for a few hours).

Germany wants to put these countries already in the throes of a brutal recession in an even tighter fiscal straitjacket - no eurobonds, no transfers, no ECB help (though that one is debatable), just even tighter budgets. It's not going to fly back in the state capitals around the EU and if it did, would plunge the continent even deeper into a downturn.

Not adding to EUR or AUD shorts, but not ready to cover either. I expect we'll see more back and forth action for the rest of the year, with little overall movement.

 

[Butterball]

The Brits are doing the right thing by burning bridges with the EU and the EURO. The outcry in Germany and France is big as some lower-rank eggheads are demanding the UK now has to consider leaving the Euro zone -- as if trying to threaten the Brits.

Is Switzerland doing so badly outside of the EURO and EU? What about Norway? Hilarious.

 

[Ghost of Cutten]

This is a total disaster, a worse summit outcome than even the bears had imagined. Are there any reasons not to be massively short the Euro now?

 

[gmst]

Quote from Ghost of Cutten:

This is a total disaster, a worse summit outcome than even the bears had imagined. Are there any reasons not to be massively short the Euro now?

Just something to keep in back of mind. China.

Apart from that, I don't understand why is euro so strong? With this outcome from summit, it should have been down 300 pips, its down only 150!!

Edit: Different topic, but hard to explain Gold's fall.

 

[masterm1ne]

Quote from gmst:

Just something to keep in back of mind. China.

Apart from that, I don't understand why is euro so strong? With this outcome from summit, it should have been down 300 pips, its down only 150!!

Edit: Different topic, but hard to explain Gold's fall.

Euro is strong because the strong hands/smart players (not really sure who they are in currency to be honest) are accumulating it last I checked. Prices can still drop for a while even when this is going on.

Not very hard to explain gold if you think about it. Remember how most volume is automated? I'm sure there are bots out there that attempt to recognize and short breaks lower in price.... I use this method myself and can see if you are in the zone, you can make fantastic money.

 

[Specterx]

Quote from Ghost of Cutten:

This is a total disaster, a worse summit outcome than even the bears had imagined. Are there any reasons not to be massively short the Euro now?

I'm not sure why a Euro short is the play in any event. If Greece et al leave, surely that would be extremely bullish for the currency?

 

[Specterx]

Quote from gmst:

Edit: Different topic, but hard to explain Gold's fall.

The correlation between gold and stocks goes on and off, lately it's been on - similar to what we saw in late 2008, but not like late 2007, early 2009 or indeed this past July.

As long as the fundamentals for gold remain in place, just think of every decline as a gift....

 

[ralph00]

Also interesting from Hussman is his take on Sarko's claim that longer ECB loans (now 3 years) and easier collateral requirements are essentially a backdoor way for the ECB to fund sovereign debt purchases.

We've seen some theories that Europe intends to address the problem through ECB lending to banks, taking distressed debt as collateral, with the banks turning around and buying more distressed debt. Apart from the fact that this would be the sort of "legal trick" that the ECB would be unwilling to facilitate, this would imply an increase in bank leverage ratios far beyond the 30-40 multiples that already exist (which would be a disaster when tighter Basel III capital requirements kick in). In practice, depositors would flee, and you would end up with a European banking system where bank bondholders, not the ECB, would be subject to the losses, since the ECB's collateral claims would be senior. Likewise, IMF loans are always highly conditional, and are always senior claims.

As I noted last week, what investors really want isn't just for someone to buy distressed European debt, but for someone to buy that debt and willingly take a loss on it so the money doesn't ever actually have to be repaid. This is a solvency issue - a shortfall between money owed and the resources to credibly repay it. There is no legal trick to get around that. Ultimately, you either have to restore credibility, or you have to restructure the claims through default or devaluation.

Also, noted at FtAlpha

http://ftalphaville.ft.com/blog/2011/12/12/793471/the-sarko-and-corzine-trade/