Global Macro Trading Journal

[ralph00]

Speaking more to that point, Europe may be 2011's news. Friday's downgrades, the increased likelihood of a hard Greek default, Portugal heading into Greece territory, and the unraveling of the Irish "success" story aren't moving the meter a bit. Folks can keep covering their eyes, but the ECB has unleashed QE - and there's another LTRO coming up in late February that will probably blow the doors off the first one. Ben Bernanke lies in bed at night with a woody dreaming about easing as much as the ECB has. Short of revolution hitting the streets, the "crisis" is averted for the time being.

China will be of more import to risk assets in 2012 H1.

 

[ralph00]

Chovanec ... Real real estate investment growth in China was 20% in 2011. If it goes to 0 in 2012 (and signs are it's doing just that), China GDP growth goes to 6.6% - hard landing territory, and that's not even taking into account the knock-on effects in other industries.

http://chovanec.wordpress.com/2012/01/17/bbc-chinas-2011-gdp-numbers/

Rally in AUD is market gods bearing gifts, but I've promised myself not to do any trading until back from the beach. Let's hope things hold together for another 2 weeks.

More required reading on Oz/China is my man Anthony Doyle

http://www.bondvigilantes.com/2012/...he-winter-but-will-it-fly-back-in-the-summer/

The obvious catalyst for the popping of the great Aussie bubble is China, as that’s essentially all that matters if you’re taking a view on Australia’s economy. Almost 70% of Western Australian and Queensland mining exports go to China. If China has a hard landing then Australia is in serious trouble, and even if it has a soft landing then Australia may be in trouble anyway. If China wobbles or the Australian housing market starts to correct, the RBA would be forced to cut interest rates as it did late last year, reducing the Aussie Dollar’s appeal as a higher yielding currency. The Aussie Dollar is only just over 3% below its strongest ever on a trade weighted basis, and we think that leaves it looking very vulnerable. With the market pricing in a reduction in the RBA cash rate of 1% to 3.25% by August, will the hot money fly away from Australia in the summer?

 

[CPTrader]

Quote from dhpar:

if EUR goes to hell you want to get your monies converted into DEM. The best way to assure of that is to own the German debt. DEM has a huge trade (favorable) imbalance and should get stronger compared to other EUR components - similar to what CHF would do.

i am baffled why one need 1 page of ET discussion for such a simple thought. scaling in a short swiss position is an easy trade imo...

What other alternatives exist to have EUR deposits instantly converted to "NewDEM" upon a German exit of the EUR?

Would EUR deposits held in German banks automatically convert to "NewDEM"?

 

[Martinghoul]

Quote from CPTrader:
What other alternatives exist to have EUR deposits instantly converted to "NewDEM" upon a German exit of the EUR?

Would EUR deposits held in German banks automatically convert to "NewDEM"?

Ha... That is the bazillion $$$ question and one can imagine all sorts of interesting scenarios (especially, in light of the TARGET2 imbalances). The reality is that nobody really knows.

 

[atticus]

Quote from Martinghoul:

Ha... That is the bazillion $$$ question and one can imagine all sorts of interesting scenarios (especially, in light of the TARGET2 imbalances). The reality is that nobody really knows.

Where does the Euro trade prior to such an event? Parity (eurusd)?

 

[Martinghoul]

Quote from atticus:
Where does the Euro trade prior to such an event? Parity (eurusd)?

I dunno... Depends on who's in it at that point, I suppose. If we imagine that all the Club Med coconuts have dropped out by then and all you're left with are Germany, Holland, Finland, etc, EURUSD is likely to be at nearer 2. I suppose in that case there's no reason for them all to go their separate ways, but who knows. On the other hand, if the Club Med exit and the dissolution of the EUR coincide, EURUSD is likely to trade at parity or lower in anticipation. The moral of the story for me is: buy strangles.

 

[Daal]

Quote from Martinghoul:

I dunno... Depends on who's in it at that point, I suppose. If we imagine that all the Club Med coconuts have dropped out by then and all you're left with are Germany, Holland, Finland, etc, EURUSD is likely to be at nearer 2

Maybe after years but the immediate effect of countries dropping shouldn't be a rally in EURUSD in my view. Its going to be a bank run situation where capital is going to be running. Some of that will stay in the EUR zone and go to Germany but a good chunk will probably go to other currencies. This scenario seems particularly likely given that a sell-off will be self-reinforcing(Why stay in Germany when you are being hit by capital losses)

There is also the effects of whether the aggregate of the countries that leave produce a capital account surplus or deficit(I haven't thought about this deeply, Buiter probably has some kind of article on this) , along with the EUR cash selling by citizens

 

[Debaser82]

Quote from Martinghoul:

Ha... That is the bazillion $$$ question and one can imagine all sorts of interesting scenarios (especially, in light of the TARGET2 imbalances). The reality is that nobody really knows.

The Belgian branch of Deutsche bank falls under the German deposit insurance...

 

[ralph00]

Quote from Martinghoul:

I dunno... Depends on who's in it at that point, I suppose. If we imagine that all the Club Med coconuts have dropped out by then and all you're left with are Germany, Holland, Finland, etc, EURUSD is likely to be at nearer 2. I suppose in that case there's no reason for them all to go their separate ways, but who knows. On the other hand, if the Club Med exit and the dissolution of the EUR coincide, EURUSD is likely to trade at parity or lower in anticipation. The moral of the story for me is: buy strangles.

Um ok, yeah $2, but not before hitting $0.75 first.

 

[dhpar]

Quote from CPTrader:

What other alternatives exist to have EUR deposits instantly converted to "NewDEM" upon a German exit of the EUR?

Would EUR deposits held in German banks automatically convert to "NewDEM"?

most of it was answered by Martinghoul already.

but also you could go for strong German exporters to Asia (e.g. BMW) or even German utilities (e.g. RWE). the later has the advantage that it is cheaper...