How about some trade ideas. Right now, most outright stuff is just a punt on the direction of the S&P/Eurostoxx. Commodities, EU currencies, stock indices, Treasuries, all moving pretty much in lockstep. So, the better way to add real alpha is in spread trades or special situations IMO. Here are a few: long EUR/CHF - pretty simple one-way bet, the SNB says they will buy the worlds Euros at 1.20, and print ad infinitum to fund it. Downside 3.5 handles, upside at least double that amount, and it's quite possible the cross returns to PPP fair value, which is much, much higher. Meanwhile, you get paid positive carry to hold the position. Effectively it is a zero premium long-dated option. If the trade goes wrong, it will become obvious when the SNB is going to throw in the towel, and you just pitch out at 1.20 then reverse if it starts trading 1.19, 1.18 etc. Long gold, short silver, on a volatility-weighted ratio. Another simple trade - gold gets some kind of crisis bid, silver doesn't get as much of one. Silver is more weighted to industrial demand, which falls in a recession or market panic; gold is more weighted to fear about financial system solvency, which rises in a recession or market panic. Even if gold collapses like late 2008, silver will get crushed even more. Short Eurostoxx, long AAPL. Another simple play - AAPL is cheap, the fundamentals are great, and the market action has been consistently bullish; Eurostoxx is also cheap but the fundies suck and the market action is terrible. Long Eurostoxx puts. It's a bear market, macro picture is horrible, blah blah. Own December expiry puts, betting on a crash into October/November. Ok, this is a pure directional punt, but looks pretty good IMO. Any other ideas?
Don't like any of those ideas this morning. Scott Arnot with an interesting take on Apple. http://www.thereformedbroker.com/2011/09/21/notes-from-the-pimco-lunch-with-rob-arnott/ Goldman has an interesting take, saying The Twist is essentially QE3, and given duration, is essentially the same size as QE2. Market action is worrisome and may show markets no longer believe monetary policy can be effective. http://www.businessinsider.com/goldman-wake-up-this-was-qe3-that-we-just-got-2011-9
I dont think there is much of a chance that they will devalue by those numbers. It would essentially amount to a gigantic QE program and if anything CBs have been under delivering in the QE sizes
I wouldn't wanna be long EUR/CHF for all the cookies in the world. If you want the carry and the SNB floor, be long a more pleasant ccy. But then that's me talking my book.
El-Erian talks/writes too much, but this is worrisome ... http://www.businessinsider.com/el-erian-warns-on-french-banks-2011-9
Priceless. After intervening almost every single trading day of 2011 trying to weaken the real, the brazilian central bank is now trying to strengthen it
I face a dilemma right now because I'm 'making money' in terms of reals as the BRL is plunging. Even though I have some laggards in my basket(NOK, SEK), the real is doing worse than everything else(even silver!). In 2008 I had gains of this kind but since I didn't had a good alternative to buy BRL(the futures contract at the CME is totally illiquid) I just kept using a basket, well the BRL destroyed the basket and outperformed big time. I dont want to face the same issue again but the only solution I see is not so optimal I would have to buy a huge BZF position financed by borrowing from IB at 1.2%(USD rates)and liquidate most of my hedge basket. This is bad due: -The BZF doesn't pay the actual interest rate from brazil but rather the benchmark minus 300bps or something like that. Combined with the USD 1.2% from IB, I'm essentially getting screwed the in carry by legendary proportions -ETF fees -IB might overnight say 'sorry, no margin against ETFs anymore' and I face autoliquidation So it seem that I will have to continue to use a basket I believe has good fundamentals and simply refuse to invest in currencies I don't believe in and hope it works out in the long-run But if anyone has any suggestions I would love to hear it
Talk of one large US bond fund in trouble, apparently heavily engaged in EM, Pan Asia and Eastern Europe, first they bail on the bonds and then the ccy. this is also fueling fears over US banks who lend big to Templeton (one US investment bank was cited in this regard )
Why not just hold cash BRL in your IB account? N.B. assuming you intend to live in Brazil for the long-term, anything other than 50%+ of your assets long BRL is effectively a speculative position betting against the currency. For example, right now I have all my cash in US dollars and Yen. But, my long-term residence will probably be UK. So I'm basically short pounds up the wazoo. The moment I cease to be bearish on the pound, I will be 80-100% long pounds, because that is my 'flat' position. You're home currency is more risky, so a greater allocation (e.g. US dollars) is worthwhile as a hedge, but if you go below 50% long BRL then you are effectively making a huge short bet against the currency.