Friday, May 2, 2014
April Trading Performance +25.2%
Significant volatilty between 10th and 22nd of the month helped trading in FTSE MIB Future - Did not trade any silver this month.
Monday, April 21, 2014
Wages and Inflation Divergences in EU - The Challenging Puzzle of EU eco integration..
Shuman Foundation put together a
"breakdown per country of the development of unit labour costs since 1999
between the contribution made by inflation (GDP deflator), the real
average compensation and productivity. Unit labour costs are defined as
the ratio between the real average compensation and productivity. The
ratio between real unit labour costs (RULC) and nominal unit labour
costs (NULC) is naturally inflation (GDP deflator). Hence we see the
decisive importance of divergences in inflation (see graphs page 9).
The example of Italy is striking. The wage share (or the real unit labour costs) has barely risen over this period. Above all the development of nominal unit labour costs therefore reflects that of prices. Real unit labour costs have stagnated, for the simple reason that wages and productivity have followed a common trend of stagnation. Productivity gains have been zero, slightly negative even, likewise the average salary. The lack of productivity gains is a major economic problem but which must not be confused with a wage drift. These two problems are different and call for different solutions. Wage reductions whatever the cost, mass unemployment and more generally the economic confusion that goes together with a recession and a credit crunch only worsen the dynamics of productivity. This is what we could see in Portugal.
In Germany the decrease in real unit labour costs resulted (until 2008) from the productivity gains which were not felt in the average real wage (which only rose slightly over this period). These productivity gains were quite moderate, barely more than a total of 10% over nine years. France actually experienced a similar development in its productivity but over the same period the real average wage developed in line with productivity, which implies stable real unit labour costs. In Spain the real wage decreased over that period with stagnating productivity, resulting in a sharp drop in real unit labour costs. However the cumulative inflation of over 40% drove the nominal unit labours cost upwards. A healthy situation would comprise significant productivity gains, similar wage increases and an almost homogeneous inflation rate between the various countries of the euro zone."
Source: Foundation Robert Shuman - eu
The example of Italy is striking. The wage share (or the real unit labour costs) has barely risen over this period. Above all the development of nominal unit labour costs therefore reflects that of prices. Real unit labour costs have stagnated, for the simple reason that wages and productivity have followed a common trend of stagnation. Productivity gains have been zero, slightly negative even, likewise the average salary. The lack of productivity gains is a major economic problem but which must not be confused with a wage drift. These two problems are different and call for different solutions. Wage reductions whatever the cost, mass unemployment and more generally the economic confusion that goes together with a recession and a credit crunch only worsen the dynamics of productivity. This is what we could see in Portugal.
In Germany the decrease in real unit labour costs resulted (until 2008) from the productivity gains which were not felt in the average real wage (which only rose slightly over this period). These productivity gains were quite moderate, barely more than a total of 10% over nine years. France actually experienced a similar development in its productivity but over the same period the real average wage developed in line with productivity, which implies stable real unit labour costs. In Spain the real wage decreased over that period with stagnating productivity, resulting in a sharp drop in real unit labour costs. However the cumulative inflation of over 40% drove the nominal unit labours cost upwards. A healthy situation would comprise significant productivity gains, similar wage increases and an almost homogeneous inflation rate between the various countries of the euro zone."
Source: Foundation Robert Shuman - eu
Tuesday, April 15, 2014
Thursday, April 10, 2014
Tuesday, April 1, 2014
March Performance - not good
-2.66% for March - been away for most of the second part fo the month - will be trading hard to push NAV for April - Traveling mid-April to South America, so will need to wake up a 4AM there to trade EU markets.. Will see what I can do this month.
Tuesday, March 18, 2014
Update on Trading performance
After few months off trading while relocating from Brasil to Switzerland, I m back at my trading desk.
I ll start today posting performance results for my trading account net of transactions costs.
I m running now exclusively a short-term trading subset of the macro strategy I used to communicate on in this blog.
Typical portfolio gross exposure is around 250% of equity.
Position concentration is high (1 to 3 trading position at a time).
Trading frequency is significantly higher than in the macro strategy
Daily risk is around 2% NAV
Trading focus has been on Italian MIB equity futures (ST1 Index) since started trading in late Nov.
December 2013: +18.72%
January 2014: +2.68%
February 2014: +8.51%
I ll start today posting performance results for my trading account net of transactions costs.
I m running now exclusively a short-term trading subset of the macro strategy I used to communicate on in this blog.
Typical portfolio gross exposure is around 250% of equity.
Position concentration is high (1 to 3 trading position at a time).
Trading frequency is significantly higher than in the macro strategy
Daily risk is around 2% NAV
Trading focus has been on Italian MIB equity futures (ST1 Index) since started trading in late Nov.
December 2013: +18.72%
January 2014: +2.68%
February 2014: +8.51%
Friday, August 16, 2013
Short US 10yrs future - Still a juicy trade - for now..
US eco data have been improving steadily since late 2012 despite the impact of the increasing fiscal tightening (cf GDP sector contribution in graph below).
The US job and real estate markets also improved dramatically with jobless claims now reaching post crisis low while US existing home inventory is at 2005 levels.
On a theoretical basis, while global central banks are continuing to implement very accommodative monetary policies, financial markets should continue to reprice the improving growth environment in US curve (not to mention the potential impact of the FED reducing its pace or mix of credit instrument buying). A simplistic historical comparison between industrial production level, GDP growth and jobless claim level and the US yield curve shows that 10yrs rates should be closer to 3.5% rather than 2.85% as they are trading now.
In a more factual manner, US equities just experienced a 8-9% rally in two months on the back of reassuring FED speech about QE reduction, positive macro data and stabilizing rates (10yrs rates consolidated at around 2.6% after June move). US equities are now in a trending range as investors are looking for clue to see where the next marginal change (up or down) will occur : eco growth or financial conditions ?
Unless we witness a large deterioration in US growth data, US yield curve should continue to steepen in sympathy with the current price action. As usual : price action inertia backed by marginal change in key contextual macro data. As such, unless growth surprise significantly to the upside, the sensibility of US equities to US yield curve steepening should increase significantly in the month to come. The debate of US debt ceiling in Sep/Oct could also exacerbate price action movements. US rates are therefore the main risk factor to follow currently for US equities and to a lesser extent for risk on a global basis (if large move in yield level).
Overall, US 10yrs yield appears poised to reset its upward trend while US equities should grind lower so that investors can take the "rate risk" at cheaper levels.
The US job and real estate markets also improved dramatically with jobless claims now reaching post crisis low while US existing home inventory is at 2005 levels.
On a theoretical basis, while global central banks are continuing to implement very accommodative monetary policies, financial markets should continue to reprice the improving growth environment in US curve (not to mention the potential impact of the FED reducing its pace or mix of credit instrument buying). A simplistic historical comparison between industrial production level, GDP growth and jobless claim level and the US yield curve shows that 10yrs rates should be closer to 3.5% rather than 2.85% as they are trading now.
In a more factual manner, US equities just experienced a 8-9% rally in two months on the back of reassuring FED speech about QE reduction, positive macro data and stabilizing rates (10yrs rates consolidated at around 2.6% after June move). US equities are now in a trending range as investors are looking for clue to see where the next marginal change (up or down) will occur : eco growth or financial conditions ?
Unless we witness a large deterioration in US growth data, US yield curve should continue to steepen in sympathy with the current price action. As usual : price action inertia backed by marginal change in key contextual macro data. As such, unless growth surprise significantly to the upside, the sensibility of US equities to US yield curve steepening should increase significantly in the month to come. The debate of US debt ceiling in Sep/Oct could also exacerbate price action movements. US rates are therefore the main risk factor to follow currently for US equities and to a lesser extent for risk on a global basis (if large move in yield level).
Overall, US 10yrs yield appears poised to reset its upward trend while US equities should grind lower so that investors can take the "rate risk" at cheaper levels.
Thursday, July 4, 2013
Central Banks Bull - ECB and BOE decided to offer a strong summer to investors
Today both BOE and ECB announced strong commitment to their current monetary policies.
ECB: "Rates will remain accommodating for extended period of time"
BOE: " the implied rise in the expected future path of bank rate was not warranted by the recent developments in the domestic economy"
(...)
Both statements are (at least to me) relatively surprising in light of a) the recent improvement of the most volatile segment of both the UK (PMI at 2 years high) and EU (Periphery countries + France PMI at 6 months high) economies and b) historical hawkish tone of ECB.
Anyway, these are most welcome comments from central banks!
It changes significantly the outlook for EU and UK equities for the short-term: as growth is improving slowly from low levels (i.e without any large change and/or surprise), marginal changes in financial conditions are the key risk factors in this low growth environment.
Today we ve just being offered another large change/boost (at least in commitment + EUR going down contributing to it) in EU/UK financial conditions.
More importantly, global equities market price action is stabilizing (downtrend force receding) from a sharp two months correction which erased around 10% gains in UK/EU. Investors are therefore now much better positioned to buy at these levels - as usual : price action inertia backed by marginal change in key contextual macro data.
I therefore started to significantly increase the net equity exposure from 0% to 40% (with Ibex first) of the portfolio + long again Italian bonds. I plan to add to UK equities and EU equities in a couple of days as the up trend develops/confirm itself and decelerate a bit. It will allow to deploy capital with higher probability of success.
ECB: "Rates will remain accommodating for extended period of time"
BOE: " the implied rise in the expected future path of bank rate was not warranted by the recent developments in the domestic economy"
(...)
Both statements are (at least to me) relatively surprising in light of a) the recent improvement of the most volatile segment of both the UK (PMI at 2 years high) and EU (Periphery countries + France PMI at 6 months high) economies and b) historical hawkish tone of ECB.
Anyway, these are most welcome comments from central banks!
It changes significantly the outlook for EU and UK equities for the short-term: as growth is improving slowly from low levels (i.e without any large change and/or surprise), marginal changes in financial conditions are the key risk factors in this low growth environment.
Today we ve just being offered another large change/boost (at least in commitment + EUR going down contributing to it) in EU/UK financial conditions.
More importantly, global equities market price action is stabilizing (downtrend force receding) from a sharp two months correction which erased around 10% gains in UK/EU. Investors are therefore now much better positioned to buy at these levels - as usual : price action inertia backed by marginal change in key contextual macro data.
I therefore started to significantly increase the net equity exposure from 0% to 40% (with Ibex first) of the portfolio + long again Italian bonds. I plan to add to UK equities and EU equities in a couple of days as the up trend develops/confirm itself and decelerate a bit. It will allow to deploy capital with higher probability of success.
Tuesday, July 2, 2013
June Performance: -0.53% / up 7.23% since March 15th
End of the month portfolio risks consist only of 15% long USDJPY position. No equity nor rates risk.
Current price and macro configuration do not warrant any long equity risk in EU and US for the time being. I actually built a small short $SPX position (10% NAV) held with a tight stop.
US : Largest risk factors to watch : US 10y. Waiting for macro data to improve meaningfully from there (PMI released today do not point to any acceleration for the time being + fiscal drag will have its largest impact now). In the absence of improving macro data, need US 10yr rates goes back toward 2.2% - 2.3% / or another leg down in US equities.
EU: Largest risk factors watch: Eco growth. EUR weakness is a prerequisite for GDP growth as fiscal austerity is undermining private sector demand i.e positive current account contribution is the only potential growth engine in the current environment. PMIs continue to show a stabilizing industrial production at low level. With German elections in September, their is probably a 3 months window for France, Italy, Spain, Portugal to reduce austerity pressure on the back of historical high unemployment. This remains to be seen.
Italian bonds are trading at attractive levels again. I ve bought and sold it at the end of June and looking to add long to it at lower levels.
Ibex and FSTE MIB should provide the most upside - looking to trade it tactically again (like in April).
Japan: Lonely traveler - Macro data continues to improve as expected, looking to re-enter long + AUDJPY long.
EM: Largest risk factor to watch: Eco growth. Most macro data are flashing red: growth, inflation and most recently in Brazil people anger. Most currencies (INR, BRL, RUB etc..) continues to correct on a different set of reason, notably widening current account deficit, lower growth and higher rates in the US. Difficult to see where growth will come from without significant fiscal stimulus there. Moreover, on a relative basis, US and Japan should be much more attractive to investors.
Overall, baring any significant change in price action or in macro data, I continue like in early June, to see more asymmetry being positioned short equities (except Japan).
Current price and macro configuration do not warrant any long equity risk in EU and US for the time being. I actually built a small short $SPX position (10% NAV) held with a tight stop.
US : Largest risk factors to watch : US 10y. Waiting for macro data to improve meaningfully from there (PMI released today do not point to any acceleration for the time being + fiscal drag will have its largest impact now). In the absence of improving macro data, need US 10yr rates goes back toward 2.2% - 2.3% / or another leg down in US equities.
EU: Largest risk factors watch: Eco growth. EUR weakness is a prerequisite for GDP growth as fiscal austerity is undermining private sector demand i.e positive current account contribution is the only potential growth engine in the current environment. PMIs continue to show a stabilizing industrial production at low level. With German elections in September, their is probably a 3 months window for France, Italy, Spain, Portugal to reduce austerity pressure on the back of historical high unemployment. This remains to be seen.
Italian bonds are trading at attractive levels again. I ve bought and sold it at the end of June and looking to add long to it at lower levels.
Ibex and FSTE MIB should provide the most upside - looking to trade it tactically again (like in April).
Japan: Lonely traveler - Macro data continues to improve as expected, looking to re-enter long + AUDJPY long.
EM: Largest risk factor to watch: Eco growth. Most macro data are flashing red: growth, inflation and most recently in Brazil people anger. Most currencies (INR, BRL, RUB etc..) continues to correct on a different set of reason, notably widening current account deficit, lower growth and higher rates in the US. Difficult to see where growth will come from without significant fiscal stimulus there. Moreover, on a relative basis, US and Japan should be much more attractive to investors.
Overall, baring any significant change in price action or in macro data, I continue like in early June, to see more asymmetry being positioned short equities (except Japan).
Monday, June 24, 2013
Subscribe to:
Posts (Atom)