Where are we at the moment and where we going...

Been a while since my last post, several reasons for this, at personal level I been having some serious health issues and at a more professional level been busy and studying the markets and finance as whole quite a bit lately.


The World economy is decelerating quite a bit and by the way this is the official number , which is well know in many cases not to be a the true picture on the "ground":

The chart represents the three big engines of the world economy, the US,China & Germany and all are in a declining rate of change, even after further stimulus efforts made by the 3 central bans, The fed, the PBOC and the ECB, so in my opinion the action taken for example by PBOC in cutting RRR and the rate on deposits / Loans for 1 year maturity has not been extreme enough to "provoke" consumers & business to increase internal demand, please see the link bellow, another big problem is facing is the fact that the world economies are decreasing their demand for Chinese products, being the export markets one of their biggest GDP contributor is causing a serious headache to Chinese policy makers, plus the fact that their plans to offset this loss of external demand, by increasing their internal demand is not working as fast as they wanted, all this becoming one the main issues for Chinese monetary and economic policy, this kind of problems in the Chinese economy will translate to less raw commodities demand, as for example oil and copper, therefore I am bearish in those commodities and commodities in general, even after the problems caused by the Iran embargo by the EU is already in at work, the problems with Nordic countries disputes between Governments and unions of oil workers, which led to same loss of output. The problems at present with high price in corn, soy beans which may lead to a spill over to other food commodities/products, I believe are temporary and the recent spike in prices will abate, and I could go on with examples.

Global central banks interest rates

Europe is in a recession, is getting worst, and all the structural problems we saw as a cause to the last year and beginning of this one, which caused severe losses in the financial markets, with the banks being right in the middle of the epicenter, all those problems are still there, have not been dealt with in structural way and will come to daunt us sooner than later,however this problems may be kicked down the road again, as soon the ECB comes up with the LTRO3, which will give a bit more time to banks to heal their impaired balance sheets, with some more relevance for the case of Spanish and Italian financial institutions, I also believe even with the latest 100B Euros lifeline for the Spanish banks from the EU, this will not be enough plus Italy will also going to need to rescued, gain sooner then many people may expect. 


I hope I am wrong, because if that will be the case, it will be because economies in the EU are doing much better, which will lead to the only solution for the "illness" of much of the southern Europe economies and the PIIGS, which summarizing is economic growth. However as I mention before at the moment I am bearish and prepared with some positions in place, in the form of options and some futures, to be exact I am short WTI @ 87.50, Short Gold @ $1615, Short the Euro @1.25 and short Eurostoxx 50 and will adjust accordingly and probably even increase my shorts!


That is for today, this is where I stand at the moment, I am bearish Europe and the the main world economies, but of course there is plenty of buying opportunities out there, in the many growing economies around the world!

Too much will look bad, too little will look dangerous, so what is the right amount?

LTRO day ,finally after a couple of months of speculation on the amounts that banks would take in the 2nd round of quantitative easing by the back door from the ECB, we finally know the exact amount...€530B which was better then some extreme estimation's that were predicting that banks would take close to a €1Trillion!

There are two points here which are important to take out from this latest take from the banks, firstly is the fact that the first feared stigma related to the banks taking money from this tenders and that would be a sign of weakness, is completely out of the window, actually it seem that the opposite is true, secondly the fact that banks encounter themselves in a bit of a paradox in terms of the amount they should bid for, this because too little would signal a lost opportunity in enhanced earnings,even if small, through the use of the funds in possible carry trades and of course the refinancing needs at a very cheap rate, but on the other hand, if they take too much, markets can see it a sign of weakness, so I believe this latest round was at the just right amounts, where markets will feel comfortable with +€1 Trillion injected by the ECB since December 2011 and the banks will have excess liquidity to put to work or through the Sarcozy trade, where they buy investment grade governments bonds as the case of Italy and Spain which still yield over 5% and make a profit in the spread, once they borrowed it at 1%, giving a helping hand to the European governments to fund their deficits at cheaper rates, plus the spill over probably will go to chase riskier assets, giving a lift and feel good to the markets.

Is it 2008 all over again!?!

I am writing and the Us markets yet to close are in a complete meltdown, this time not because of their own banks but because of the mess in Europe sovereign debt and the poor financial positions Europeans banks are in, due to the exposure on the debt they have to countries as the likes of the PIIGS countries!


Also not helping is the lack of coordinated actions by the major central banks around the world, which finally last week made a coordinated intervention because of the long due shortness of US $ and the lack of access from some Europeans banks had to fund their US $ needs, so they announced a new start of swap line between the major CB and the FED.


Yesterday also the FED spooked the markets, with their lacklustre operation "twist" , which in the end is just a maturity transformation exercise and didn't announced any mew stimulus measures, which the market, ahead of it self had priced in, so once it was confirmed nothing more new was coming from the FED, the only rational reaction would be to correct expectations...

At this precise moments the SPX is trading at the major support and the 50% fibo retracement from the 2009 lows at 1120 if we closed below this level I believe is a cascade down to the next support which is at 1050!

Are we in recession??!!

Are we in a recession already?
According to the latest data it seems or we are already or very close, at least in the US, and if the US economy is in recession and still being the biggest in terms of nominal $ in the world, probably the world economy will follow suit, even as the EM economies are forecast to keep growing at healthy levels, but not enough to off set the weak US and European economic present state.


Let's look at this great chart (courtesy of John Mauldin and street talk advisor's):

As we can see in this chart the US economy is already or very close to recession, and even this being a new formed index, not just the creator have a great street credentials but also the components they used are leading indicators and highly correlated to predicting correctly recessions/growth!

At the same time we have the serious problems in Europe, where not just governments are cutting spending, to balance their overstretched finances plus the banking system there is insolvent, at least mostly of it, therefore will create more pressure in the GDP growth because banks are cutting the amount of money loaned to the broad economy, as a result we saw for i.e last week a lower then forecast German GDP, which is not just the powerhouse of Europe but also is the backer of the ESFS fund created to support the weaker peripheral economies as the case of the PIGS.

The last week, after a start with a relief rally, saw in the end, big losses in all major indexes, not just for the lack of conviction by investor in this market but also because August is a weak month anyway as many traders/investors are in holidays.

In my opinion we still didn't saw a low in this market, as the bond markets are telling us, because it keep going lower in terms of yields, which is a sign that worst times are to come, when investors are willing to accept rela negatives yields to park their money, this is normally a good sign and more we are not seeing an inverted yield, which means recession on the way or already present, because of the QE programs created by the FED which artificially maintains short term  yields low.

Resuming WE ARE GOING LOWER!!

Follow my live trades through twitter @techcherry!!

What a day...what a week!!

After almost two years of silence in my adventures of blogging I am back and what a week to be back, worst in a blog where I talk about how to make money in the markets, economic issues and anything I feel is pertinent!

Yesterdays we saw a sell off only equal to the dark days of the crisis of 2008, where we saw the Dow jones index (Index of the 30 largest industrial US companies) plunging over 530 points...Ouchhh!

Why you may ask, well several reasons, but mainly is the debt problems in Europe, which started with the peripheral countries, the so called PIGS (Portugal, Ireland, Greece and Spain), but now the problems are spread to the 3rd and 4th biggest European economies, Italy and Spain!
To add to this already complex problem, now we add as well the problems with US economy, with the anecdotal fight over the debt ceiling raise, where the both main parties try to use this event to score points with their electorates and extended the debate to include deficit reduction; not that this issue was not over due, but the moment and the event the utilise to raise this debate just created more uncertainty to the markets and in the end deliver little results for the "bang" it created!?!

So, this weeks sell off was just a reflex of the investor sentiment that it is out there, coupled with the increasing evidence that the  world economy is slowing down faster than previously thought, and as result OIL for example felt to $85 handle, price level not seen for a few long months, and oil normally is a leading indicator of things to come!!

Waiting on the sidelines !

With the S&P500 still creeping higher , maybe we will finish higher for the 6th week on a row, I am at the moment still on the sidelines with the kind of approach of wait and see.
The main reason, even with earnings coming better then expected for now on 2:1 ratio I honestly cannot see the fundamentals supporting this rally, but there we go ,the markets are not rational !
More and more at all levels I see and ear reasons for this market to go down, but it still keep goig higher, so I wonder who or what is supporting this rally, on of the most compelling arguments I heard (zerohedge) has been the big quant funds have been "catch" is some bad shorts positions so they been "hedging" against it, which it makes sense in a lot of ways and support the fact of the market been inching higher at relative low levels.
I truly believe we are getting ripe for a violent reversal to the downside, where I am just waiting for, or to get to 874 level or return back to under 841 level to jump on the waagon of the shorts...
Just some tought's

blogging ...

Hi finnaly I am going to start a kind of journal in this site, I already have a blog where I try to put some trading reccomendations and some positions I get in , plus some views on different things, it is where at http://justrade.blogspot.com/
but on this blog pretend to do more like a journal !
Lets see if I can keep up to date...