Global Macro Trading Journal

Bruce Krasting picks up on the shrinkage in the SNB's Fx holdings. He believes the bank is talking a tough line and encourages speculation the floor may be raised while it uses any move higher in the euro to unload more of them. He thinks EURCHF peg should be more like 1.00. In the meantime, they party in Switzerland.

There IS another side to the short CHF trade.

http://brucekrasting.blogspot.com/2012/05/got-edge.html
 
Quote from ralph00:
Bruce Krasting picks up on the shrinkage in the SNB's Fx holdings. He believes the bank is talking a tough line and encourages speculation the floor may be raised while it uses any move higher in the euro to unload more of them. He thinks EURCHF peg should be more like 1.00. In the meantime, they party in Switzerland.

There IS another side to the short CHF trade.

http://brucekrasting.blogspot.com/2012/05/got-edge.html
More...
Bruce Krasting is a muppet, IMHO... He, like the other guy, is ignoring the small print, in order to continue with his rant. The small print (which needs paying attention to) is that these are SNB foreign currency holdings, excluding derivatives.

One interesting point on EURCHF. A certain bank that shall remain nameless has conducted an investor poll regarding EURCHF. According to the results of the poll, an overwhelming majority of investors (93%) expect the floor to hold over the next 3 months. Only 23% expect the floor to be raised during the same period. Of those, majority is expecting a raise to 1.25. Make of that whatever you will.
 
Quote from Martinghoul:

Bruce Krasting is a muppet, IMHO... He, like the other guy, is ignoring the small print, in order to continue with his rant. The small print (which needs paying attention to) is that these are SNB foreign currency holdings, excluding derivatives.

One interesting point on EURCHF. A certain bank that shall remain nameless has conducted an investor poll regarding EURCHF. According to the results of the poll, an overwhelming majority of investors (93%) expect the floor to hold over the next 3 months. Only 23% expect the floor to be raised during the same period. Of those, majority is expecting a raise to 1.25. Make of that whatever you will.
More...

I think it's vitally important to see the other side of the trade. He's not saying the floor will give way, but that talk of raising it is just talk. In the meantime, the SNB doesn't have to load up its balance sheet with more euros.

I've found Krasting to be insightful (and leading to profits for me) on more than one occasion. I'm pretty sure you consider nearly everyone on the planet outside of yourself a muppet. Up until a few weeks ago, you were on here trashing Drobny, Kovner, and such.:)
 
ZH is full of shit 95% of the time. But a few weeks back he wrote something that seemly is totally accurate. "QE3 depends on expectations of no QE3" or something like that
Seems to capture the current situation quite well
 
Quote from ralph00:
I think it's vitally important to see the other side of the trade. He's not saying the floor will give way, but that talk of raising it is just talk. In the meantime, the SNB doesn't have to load up its balance sheet with more euros.

I've found Krasting to be insightful (and leading to profits for me) on more than one occasion. I'm pretty sure you consider nearly everyone on the planet outside of yourself a muppet. Up until a few weeks ago, you were on here trashing Drobny, Kovner, and such.:)
More...
You're incorrect. I have on occasion expressed my wholehearted admiration of Dalio, Simons and some others. I have my reservations about Soros, although I do respect his record. I have expressed some skepticism regarding the exploits of people who, in my opinion, are in the public eye too much. I never said anything about Kovner or Drobny Sr, as far as I am aware. So it's rather far from me treating everyone other than myself as muppets, as you state. Moroever, my impression is that the Bruce Krasting feller doesn't actually trade (according to what he writes on the website). Finally, I don't like financial mkt commentary that relies on newspaper headlines for content.

As to the other side of the trade, I agree and that is precisely why I found the results of the poll interesting. I have also had all sorts of lively discussions with people who are on the other side of the trade.
 
I found Hugh Hendry panel on the Milken institute quite informative. His thesis is that austerity will go on until the people just won't take it anymore and then the people will pretty much force the governments hands

I checked Bernanke's book 'Essays on the Great Depression' to see how Germany, the supposed inflationphobes, behaved and whether they reflated. The answer is, it took time, they weren't quick but eventually they initiated very reflationist policies(1934, but specially 1936) by effectively removing themselves from the international gold standard.

In 1932 and 1933 German suffered severe gold outflows which can impact the money supply if the central bank is committed to a gold standard. Thats what happened. Gold reserves plunged and they allowed that to affect their money supply(by not doing enough purchases and increasing the monetary base and M1)

attachment.php


If you look at the charts you can see that gold reserves did only one thing which was to go down(Q gold), yet starting in 1934 M1 started to rise EVEN THOUGH the money multiplier fell(M1BASE). This suggests QE like activities where most of the money sits on the banks but the part that goes out increases the money supply(Thats the part that people who say QE doesn't work, miss), among other inflationary policies

So forget their dogma. All a country need to devalue is enough pain. Keep in mind that the above reflationist policy happened a little over a decade after hyperinflation and yet they STILL did it

Does that mean the German will lead devaluation?Probably not because their economy is just fine and there is just not enough pain there. But the other countries are almost certainly lying when they claim they won't leave the euro no matter what

The political 'will' to keep things together just need a low enough GDP in order to be broken
 

Attachments

This suggests the MOST likely scenario is for the most troubled countries to leave the EUR unless the ECB reflates first which is unlikely
 
Quote from Daal:

So forget their dogma. All a country need to devalue is enough pain. Keep in mind that the above reflationist policy happened a little over a decade after hyperinflation and yet they STILL did it

Does that mean the German will lead devaluation?Probably not because their economy is just fine and there is just not enough pain there. But the other countries are almost certainly lying when they claim they won't leave the euro no matter what

The political 'will' to keep things together just need a low enough GDP in order to be broken
More...

Indeed. The million-dollar question is whether you get countries dropping from the Euro immediately, or if significant easing is undertaken at the Euro-wide level in order to hold the bloc together, or some combination of the above. If you get Euro-wide easing, there's then the question of what happens after.

I will note that to some degree all the song-and-dance about Germany's ironclad resistance to easing being a major stumbling block, is just that. In case everyone forgot the ECB just dumped eur1.3tn on the banks in exchange for dubious garbage that probably makes the Fed's balance sheet look triple-A rated. The Bundesbank, and to a lesser degree Netherlands and Finland continue to finance the current-account deficits of the periphery via the target-2 balances. Europe is experiencing capital flight at the moment but it's nothing capital controls can't fix. If I had to guess at the next major interventionist step to be undertaken, it would be an 'emergency' restriction on transferring funds out of the Euro Area.
 
You must log in or register to reply here.
Back
Top