Specs increasingly bearish on yen. Are they wrong?

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Quotable

“Uncertainty is an uncomfortable position. But certainty is an absurd one.”

― Voltaire

Commentary & Analysis

Specs increasingly bearish on yen.  Are they wrong?

Based on the positioning in Japanese yen – US dollar futures, as measured by the weekly Commitment of Traders Report (COT), speculators are increasingly bearish about the prospects for the Japanese yen as you can see from the chart below:  

Net short positions for speculators has grown to 112k contracts based on the latest COT report; the biggest short positioning since late June 2015. 

Given the considerable weakness in the US dollar lately, likely because of the collapse of President Trump’s Agenda and ongoing re-rating of global central bank rate hiking campaigns relative to the US Fed, why would so many become bearish on the yen?  READ MORE...

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Revisiting the Mundellian Trilemma (Dilemma) & Emerging Markets…

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Quotable

““Anyone who spends too much time thinking about international money goes mad.”

--Charles Kindleberger

 Commentary & Analysis

Revisiting the Mundellian Trilemma (Dilemma) & Emerging Markets…

The Mundellian trilemma says policy makers can control only two of the three main variables in global finance, but not all three at the same time.

“…it is not feasible to have at the same time a fixed exchange rate, full capital mobility and monetary policy independence. Only two of the three may co-exist (according to the Mundel-Fleming logic),” writes Helene Ray, of the London School of Business, International Channels of Transmission of Monetary Policy and the Mundellian Trilemma

In fact, in the world where we live, reality has overwhelmed theory—the Trilemma has morphed into the Dilemma. Why?  It’s because global financial markets are inextricably linked through investing, funding, collateral, and trade flows to name a few.  These linkages create increasingly complicated feedback-loops which are not accounted for in modern neoclassical economics. READ MORE...

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Buy Commodities? Why? Well, because the stocks/commodities ratio says so…

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Quotable

“The most difficult thing in markets is knowing how to wait for a big move that you know is going to come.”

--Woody Dorsey

Commentary & Analysis

Buy Commodities?  Why? Well, because the stocks/commodities ratio says so…

Based on the Stocks/Commodities ratio chart we have been following and sharing for the last several years, it’s now time to start buying commodities; at least in a greater proportion to stocks.  Why?  Well, because the Stocks/Commodities ration just made a round trip and interestingly even the timing is symmetrical. READ MORE...

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US dollar getting hammered; the pound still an open question on the spread…

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Quotable

“I sneezed and lost sight of the skylark.”

--Yayu (taken from Zen in the Markets)

Commentary & Analysis

US dollar getting hammered; the pound still an open question on the spread…

062717 soros quote.png

Today, real world developments in the form of an extremely surprising bullish speech from European Central Bank President Mario Draghi triggered prevailing expectations in a very positive way for the euro—it is soaring against the dollar. READ MORE...

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Sell EUR/NOK when (if) oil stops falling…

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Quotable

“Suiting the correct tactics and strategies to each situation may be considered the mystery of life.”

--Victor Niederhoffer, The Education of a Speculator

Commentary & Analysis

Sell EUR/NOK when (if) oil stops falling…

Bottom line: The current yield spread favors Norway; expected yield spread favors Norway; and growth expectations favor Norway. It strongly suggest once oil prices stop going down (we don’t know when that will be; but we do know they will stop going down at some point) one of the best intermediate-term trade setups should be short EUR/NOK... READ MORE...

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Gold, interest rates and dollar correlations in front of the Fed

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Quotable

“Anything that endures over time sacrifices its ability to make an impression.”

--Robert Musil

Commentary & Analysis

Gold, interest rates and dollar correlations in front of the Fed

061317 fed-says-2.jpg

Lots of ink is being spilled by analysts and pundits world over in an effort to provide some clarity on what the Federal Open Market Committee will do and say tomorrow.  Given that a quarter-point hike in the Fed Funds rate seems well-baked into the cake, emphasis on what Janet & Company say tomorrow will be most important. 

A look at a couple of tight correlations...READ MORE

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Gold and Interest Rates - Joined at the hip! Dollar implications?

US interest rates edging higher yesterday and this morning so far.  Still seems the intermediate-term key for the US dollar

..and we continue to see that correlation between rates and gold…the chart below compares gold futures and 10-year yields (inverted to see the correlation)…higher yields equates to lower gold prices; and higher yields likely equates to higher US dollar prices…at least according to the ongoing correlations

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