October Rolls On

Though it's the case every week, this week's issue of The Economist is simply quite excellent. China is the cover story and there's a good piece on Airbus as well which I'll recap shortly.

Key economic data for the upcoming week (GMT):

Sunday, 14 October 2007

2145 NZ Q3 consumer prices (1.0% q/q)

2145 NZ Q3 consumer prices (2.0% y/y)

2300 NZ September performance of services index

2301 UK October Rightmove house prices (-2.6% m/m)

Monday, 15 October 2007

0030 Japan Bank of Japan Governor Fukui speaks

0430 Japan August industrial production (3.4% m/m)

1230 US October Empire manufacturing index (14.7)

1230 Canada September leading indicators (0.3% m/m)

1525 US Treasury Secretary Paulson speaks

2300 US Federal Reserve Chairman Bernanke speaks

Tuesday, 16 October 2007

0600 Germany September consumer price index (0.2% m/m)

0715 CH August retail sales (3.3% y/y)

0830 UK September consumer price index (0.4% m/m)

0830 UK September retail price index (0.6% m/m)

0900 Germany October ZEW, economic sentiment (-18.1)

0900 Germany October ZEW, current situation (74.4)

0900 Eurozone October ZEW, economic sentiment (-20.3)

0900 Eurozone September consumer price index (0.1% m/m)

1300 US August TICS net long-term capital flows (US$ 19.2 billion)

1300 US August TICS total net capital flows (US$ 103.8 billion)

1300 Canada Bank of Canada interest rate decision

1315 US September industrial production (0.2%)

1315 US September capacity utilization (82.2%)

1700 US October NAHB housing market index (20)

2350 Japan August tertiary industry index (-0.5% m/m)

Wednesday, 17 October 2007

0030 Australia August Westpac leading index (0.2% m/m)

0500 Japan August coincident index (83.3%)

0500 Japan August leading economic index (30.0%)

0830 UK Bank of England Monetary Policy Committee meeting minutes

0830 UK August ILO unemployment rate (5.4%)

1230 US September consumer price index (-0.1% m/m)

1230 US September consumer price index, ex-food and energy (0.2% m/m)

1230 US September housing starts (1.331 million)

1230 US September building permits (1.322 million)

1230 Canada August wholesale sales (2.0% m/m)

1800 US Federal Reserve Beige Book

2350 Japan Net equities investment (¥274.1 billion)

2350 Japan Net bonds investment (¥52.0 billion)

Thursday, 18 October 2007

0045 US Kansas City Federal Reserve President Hoenig speaks

0130 Australia Reserve Bank of Australia monthly bulletin

0530 Japan September nationwide department store sales (1.4% y/y)

0530 Japan September Tokyo-area department store sales (4.5% y/y)

0830 UK September retail sales (0.6% m/m)

0900 CH October ZEW survey, expectations (-26.7)

0900 Eurozone August trade balance (€4.6 billion)

0800 Eurozone August construction output (0.0% m/m)

1230 US Weekly initial jobless claims (308,000)

1230 US Continuing jobless claims (2.521 million)

1230 Canada August international securities transactions

1400 US September leading indicators (-0.6%)

1430 US Cleveland Federal Reserve President Pianalto speaks

1600 US Philadelphia Federal Reserve President Plosser speaks

1600 US October Philadelphia Fed index (10.9)

2100 US European Central Bank President Trichet speaks

2350 Japan August all-industry activity index (-0.4% m/m)

Friday, 19 October 2007

0130 Australia Q3 import price index (0.1% q/q)

0130 Australia Q3 export price index (0.3% q/q)

0600 Germany September producer prices (0.1% m/m)

0830 UK Q3 GDP (0.8% q/q)

0830 UK August index of services (1.0%)

1100 Canada September consumer price index (-0.3% m/m)

1100 Canada September consumer price index, core (0.1% m/m)

1200 Spain European Central Bank member Gonzalez-Paramo speaks

1400 US Federal Reserve Chairman Bernanke speaks

1400 US St. Louis Federal Reserve President Poole speaks

(Source: GCI Financial)

Busy Busy

I've been in London for more than two weeks now, almost forgetting about the blog. The market has been tremendously bullish yet apart from my EADS position (which I'll discuss below) I haven't traded at all. See, in late September I was approached by two firms at the same time, a decent-sized hedge fund and a privately-held equity investment company based in London. Some of the people behind the two firms I've known for years and that's how they "found" me. Basically, I was asked to take a seat on their advisory boards where I would take part in overall strategy and asset allocation decisions.

At first, I didn't know what to think. For almost two years I've thrived as an independant and enjoyed every second of it. I swore I would never get tangled up in corporate life again. Also, if I accepted their offer, what impact would it have on my own operations? A couple of days was spent thinking about it and then I signed on having flown to the City (must admit it was nice being back). Anyway, the pay package and the terms were lucrative and so I said yes.

On to EADS (Airbus is a subdivision of the company) - how about that for a start!? I bought @ 21.60 on 27-Sep and will be looking to add to my position on a meaningfull retracement. What are my arguments for buying a European aircraft maker ?

• The long trend of the market remains up
• The nature and tendency of the aviation industry is sound: basically, it's Boeing, Airbus and everybody else. Demand for commercial airliners is growing at a stellar clip and Airbus expects the demand toward 2025 to be worth an estimated $2.6T. The US remains the biggest market whereas China and India is growing rapidly in terms of available routes and passenger numbers.
• Trend of the selected company's affairs: this is the greatest unknown within the investment case. Certainly, most would argue that EADS is trending toward improvement after more than 18 months of awful performance in the stock price as well as the boardroom (usually, the two go together). The major X factor is the Airbus A380 - the mega jetliner that the company is pushing hard after numerous setbacks. I'm eyeing several key deals recently (like the one with British Airways, see earlier post) and more are bound to come at the expense of Boeing. This week, the latter announced 6 months delays to their newest airliner, the 787. Airbus paid dearly for late deliveries of the A380 and I'm confident Boeing will too in turn making the investment case for EADS that much better.

I'll leave it up to you to judge the management and the earnings potential of the company. Needless to say, I liked what I saw.

Have a nice weekend.

October

Carry trades flying, Equities close to pre-correction levels and the "Bernanke Collar" remains firmly in place. What's not to like but the Dollar??

This week's data:

Sunday, 30 September 2007

2350 Japan Q3 Tankan large manufacturers’ index (23)

2350 Japan Q3 Tankan large manufacturers’ outlook (22)

2350 Japan Q3 Tankan non-manufacturing index (22)

2350 Japan Q3 Tankan non-manufacturing outlook (23)

2350 Japan Q3 Tankan large all-industry capital expenditures (7.7%)

Monday, 1 October 2007

0630 Eurozone European Central Bank President Trichet speaks

1400 US September ISM, manufacturing (52.9)

1400 US September ISM, prices paid (63)

2330 Australia September AIG performance of manufacturing index (52.4)

Tuesday, 2 October 2007

0900 Eurozone August producer price index (0.3% m/m)

0900 Eurozone August unemployment rate (6.9%)

1400 US August pending home sales

2301 UK September Nationwide consumer confidence (94)

2330 Australia October Reserve Bank of Australia interest rate decision

Wednesday, 3 October 2007

N/A UK Bank of England Monetary Policy Committee interest rate meeting

0130 Australia August retail sales (0.9%)

0900 Eurozone August retail sales (0.1% m/m)

0930 UK September BRC shop price index

1215 US September ADP employment change (38,000)

1400 US September ISM, non-manufacturing (55.8)

2330 Australia September performance of service index (51.6)

2350 Japan Foreign net equities investment (-¥157.0 billion)

2350 Japan Foreign net bonds investment (-¥1.160 billion)

Thursday, 4 October 2007

0210 Japan Bank of Japan Deputy Governor Iwata speaks

0500 Japan Bank of Japan Deputy Governor Iwata speaks

1100 UK Bank of England interest rate announcement

1145 Eurozone European Central Bank interest rate announcement

1230 Eurozone European Central Bank President Trichet speaks

1230 US Weekly initial jobless claims (298,000)

1230 US Continuing jobless claims (2.551 million)

1230 Canada August building permits (-11.3% m/m)

1400 US August factory orders (3.7%)

1400 Canada September Ivey PMI (58.5)

Friday, 5 October 2007

0500 Japan August leading economic index (72.7%)

1100 Canada September unemployment rate (6.0%)

1230 US September non-farm payrolls, net change (-4,000)

1230 US September unemployment rate (4.6%)

1230 US September average hourly earnings (0.3% m/m)

1900 US August consumer credit (US$ 7.5 billion)

(Source: GCI Financial)

Good September For Risky Assets

Quite a comeback in September for everything risky. The jury is still out wrt. whether the long trend of the market is rolling over after a 5-year bull market. EM and Asia are on fire! Anyway, the noise from the financial press is reaching pathetic levels and I'm prompted to quote Wyckoff:

As always, everyone seems to be guessing while evermore impatient.

Have a nice weekend.

She really is excellent...



Love this Youtube comment: "kate knows she is "perfection" and she knows Fat American women know she is "perfection".......get a life pigs....learn to eat healthy like Kate!"

Principal Investment: EADS

Since I started writing on this blog I've confessed that my long-term portfolio remains 100% in cash simply because I couldn't see anything worth investing in.

Until now.

As you know, I trade to invest but right now I don't see any reasonable investments. That has changed recently and I'll write up the investment case over the coming weekend. At all times I aim to stay true to my investment principals and a stock has finally met my criteria: EADS (in Paris).

Stay tuned for more on this excellent company which has been beaten down for more than a year because of A380 delays and management turmoil (the latter I'll refer to as the "French Premium"). With BA's order today, EADS looks a lot better to me...

UPDATE: Long USDCAD @ 1.0060

CAD correlation to the energy complex is fading and still think parity will hold support as AUDCAD has broken higher.

Bought USDCAD again @ 1.0030, average entry price @ 1.0045.

Very busy day: German ILO, US and NZ GDP, PCE Core, Home Sales, Japanese GDP.

"Easy Ben" also speaking at 17.00 GMT.

Bought USDCAD @ 1.0060

As mentioned earlier today.

UK and US Data

Goodmornin'

We have UK GDP and US Durables today as the BOE joins the ranks of liquidity-injecting CBs. Lots of interesting subplots:

• AUDCAD breaking above 8750 and thus lifting USDCAD away from parity
• Bond market sees inflation perking up (just like XAU)
  
• Nasdaq 100 trades above pre-correction levels
• GBP remains extremely weak, subprime worries seem to center on UK not US right now.
• Canadian CP also feeling the pain - http://www.bloomberg.com/apps/news?pid=20601109&sid=as9QkuEv9Wqw&refer=home
  
• Crude must correct!

I'm flat currently but I'll consider picking up USDCAD on a 20-30p retracement. Short-term target 1.0180.

Update: Short AUDJPY @ 99.76

Took profits @ 99.16 (+60p)

Been reading about UK economics, especially their subprime industry. It looks pretty ugly and it amazes me how the BOE has turned dovish quickly. Are they better informed? Sentance was rather "scared" of what to come in a speech given in Leeds yesterday.

The market has already discounted much of the bad news...

A New Week

Totally forgot my NFL picks yesterday but you shouldn't worry about that: in weeks 1-2 I was 0-4. So, better to concentrate on speculation then. Markets are coming off a terrific week that saw the Fed cut 50 bp and equities subsequently screamed higher.

I expect a slow start to the week and then volatility to pick up Thursday and Friday with lots of important data (see below).

Still short AUDJPY @ 99.76

Monday, 24 September 2007

0900 Eurozone July industrial new orders (4.4% m/m)

1300 US Dallas Fed President Fisher speaks

1630 US Federal Reserve official Evans speaks

1700 US Federal Reserve Chairman Bernanke speaks

2350 Japan August Bank of Japan Policy Board meeting minutes

Tuesday, 25 September 2007

0500 Japan August supermarket sales (-2.8% y/y)

0800 CH August UBS consumption indicator (2.261)

0800 Germany September Ifo, business climate (105.8)

0800 Germany September Ifo, current assessment (111.5)

0800 Germany September Ifo, expectations (100.4)

0830 UK Q2 total business investment (0.8% q/q)

1300 NZ Q3 Westpac consumer confidence (111.4)

1400 US September consumer confidence (105)

1400 US September Richmond Fed manufacturing index (7)

1400 US August existing home sales (5.75 million)

1400 US August existing home sales (-0.2% m/m)

1430 Austria European Central Bank member Liebscher speaks

2130 US Philadelphia Fed President Plosser speaks

2245 NZ August trade balance (-NZ$ 791.0 million)

2350 Japan August merchandise trade balance, total (¥666.5 billion)

Wednesday, 26 September 2007

0000 Australia July leading index (0.4%)

0610 Germany October GfK consumer confidence (7.6)

0830 UK Q2 GDP (0.8% q/q)

0830 UK Q2 current account (-₤12.2 billion)

0930 CH September KOF leading indicator (2.06)

1230 US St. Louis Fed President Poole speaks

1230 US August durable goods orders (5.9%)

1230 US August durable goods, ex-transportation (3.7%)

1510 Eurozone European Central Bank President Trichet speaks

2245 NZ August building permits (-15.5% m/m)

Thursday, 27 September 2007

0210 Japan Bank of Japan Policy Board member Suda speaks

0300 NZ September NBNZ business confidence (-33.8)

0500 Japan September small business confidence (47.5)

0600 Germany August ILO unemployment rate (6.2%)

0600 UK September Nationwide house prices (0.6% m/m)

0755 Germany September unemployment change (-15,000)

0755 Germany September unemployment rate (9.0%)

0830 UK July index of services (0.8%)

1230 US Boston Fed President Rosengren speaks

1230 US Q2 GDP, annualized (4.0%)

1230 US Q2 price index (2.7%)

1230 US Q2 PCE, core (1.3% q/q)

1230 US Weekly initial jobless claims (311,000)

1230 US Continuing jobless claims (2.544 million)

1400 US August home sales (870,000)

1400 US August new home sales (2.8% m/m)

1530 Australia Reserve Bank of Australia member Lowe speaks

1700 US Federal Reserve Chairman Bernanke speaks

2130 US Federal Reserve Governor Mishkin speaks

2245 NZ Q2 GDP (1.0% q/q)

2330 Japan August jobless rate (3.6%)

2330 Japan August overall household spending (-0.1% y/y)

2330 Japan September Tokyo-area consumer price index (-0.2% y/y)

2330 Japan September Tokyo-area CPI, ex-food and energy (-0.2% y/y)

2330 Japan August CPI (0.0% y/y)

2330 Japan August CPI, ex-food and energy (-0.5% y/y)

2350 Japan August industrial production (-0.4% m/m)

2350 Japan August large retailers’ sales (-2.5%)

2350 Japan August retail trade (-2.5% m/m)

Friday, 28 September 2007

0030 Australia September TD Securities inflation (0.5% m/m)

0500 Japan August housing starts (-23.4% y/y)

0500 Japan August annualized housing starts (947,000)

0500 Japan August construction orders (-10.4% y/y)

0600 Germany August retail sales (0.6% m/m)

0645 France Q2 GDP (0.3% q/q)

0730 Italy European Central Bank member Bini Smaghi speaks

0900 Eurozone September consumer price index (1.7% y/y)

0900 Eurozone September consumer confidence (-3)

0900 Eurozone September industrial confidence (5)

0900 Eurozone September economic confidence (110)

0900 Eurozone September services confidence (20)

0900 Eurozone September business climate indicator (1.41)

0930 UK September GfK consumer confidence (-4)

1230 US August personal spending (0.4%)

1230 US August personal income (0.5%)

1230 US August PCE deflator (2.1% y/y)

1230 US August PCE core (0.1% m/m)

1230 US August PCE core (1.9% y/y)

1230 Canada July GDP (0.2% m/m)

1345 US September Chicago PMI (53.8)

1400 US Atlanta Fed President Lockhart speaks

1400 US August construction spending (-0.4% m/m)

1400 US University of Michigan consumer sentiment (83.8)

1415 US San Francisco Fed President Yellen speaks

1700 US St. Louis Fed President Poole speaks

1715 US Federal Reserve Governor Mishkin speaks

(Source: GCI Financial)

Carry Trades

That's a very simple way to put it but she's definately on to something.

I know for a fact that trading rooms and strategists currently have a plan to "scale people back into carry". Most cite the stock market and how it has finally turned higher. So, FX operations are once again looking for the same juicy trends that's been on offer since 2005. Only problem is, nobody knows if a new regime is upon us and so this particular strategy will fail immensely if everybody loads up again only to get slammed sometime in the fall/vinter.

What most people seem to miss right now is the state of the Japanese economy. It's quite awful, infact, it's been slowly deteriorating during the summer and some economists have increased the odds of a recession there. So, long JPY positions aren't a sure thing. My best idea is to stick with CHF. From both a risk-reduction standpoint and a slowing growth theme, CHF should do very well. Add to this that the SNB is nobody's bitch. Roth (along with BOE's King) are the only CB chiefs that you can respect these days and they'll fight inflation before bailing out speculators and creating massive moral hazards.

End of the Week

Just sitting on a short AUDJPY position.

Today's data:

N/A Germany European Central Bank members Papademos and Stark speak

0300 NZ August credit card spending (7.8% y/y)

0700 CH European Central Bank President Trichet speaks

0800 Eurozone July current account (€5.9 billion)

0800 Eurozone September PMI, manufacturing (54.3)

0800 Eurozone September PMI, services (58.0)

0800 Eurozone September PMI, composite (57.4)

0900 Germany Federal Reserve Governor Mishkin speaks

1230 Canada July retail sales (-0.9% m/m)

1230 Canada July retail sales, ex-autos (-0.3% m/m)

1245 US Philadelphia Fed President Plosser speaks

1235 US Federal Reserve Governor Warsh speaks

FOMC, AUDJPY

FOMC equals "Friend of Market Committee" I guess. What a find mess we have on our hands. Bernanke is murdering the dollar, 'nuff said.

Anyway, with the 50 bp cut I decided to end my little long USD adventure (steepeners too). It was painful but not a big deal. I never get in a position where I can't fight back the next day. And remember, only a portion of my wealth is dedicated to trading. I still can't see any solid long-term investment opportunities that offer decent entry points right now and so I'll mostly trade short-term from here.

With Tuesday's risk-loving bonanza, carry trades are closing in on serious resistance levels. I like AUDJPY above key fibo 99.40, coinciding with the early August low.












Trade: sold AUDJPY @ 99.76.

That's Fast!

I'll be back with some lvls/trading templates for the FOMC.

Until then please see this

Holding USD, Waiting for the Fed

A bit of range trading today and a stampede out of Pounds. I'd like all the fucking idiotic economists to explain again how well the subprime crisis is contained. Now, we're seeing bank-runs!? Who knows what will happen to Northern Rock. If the Fed keeps rates unchanged tomorrow, it's down the toilet for this lender.

Again, I don't see anything close to 50 bp tomorrow. How could they possibly defend such an action? Bernanke can either get it incredibly right tomorrow or incredibly wrong. If it was my decision to make I'd send a message to speculators once and for all: the party is over?

What a minute, "you're a speculator", you say. True, only I think I'm a bit more true to the game than all the carry-trading idiots out there. A bubble, like the one in credit or Chinese equities, is an opportunity to speculate in a collapse. Being massively long such risky assets and and then demanding that central bankers spike the punch bowl again is simply ridiculous.

Long USD vs. CAD and EUR (entered @ 1.0431 and 1.3888 respectively). Continue to hold steepeners.

Tuesday's data:

N/A Japan Bank of Japan interest rate decision

0130 Australia August imports (-4.0% m/m)

0310 Australia Reserve Bank of Australia Governor Stevens speaks

0715 CH Q2 industrial production (-4.7% q/q)

0715 CH Q2 industrial production (7.3% y/y)

0800 Spain European Central Bank member Ordonez speaks

0830 UK August consumer price index (-0.6% m/m)

0830 UK August consumer price index (1.9% y/y)

0830 UK August consumer price index, core (1.7% y/y)

0830 UK August retail price index (-0.6% m/m)

0830 UK August retail price index (3.8% y/y)

0830 UK August RPIX (2.7% y/y)

0900 Germany September ZEW, economic sentiment (-6.9)

0900 Germany September ZEW, current situation (80.2)

0900 Eurozone September ZEW, economic sentiment (-6.1)

1230 US August producer price index (0.6% m/m)

1230 US August producer price index (4.0% y/y)

1230 US August PPI, ex-food and energy (0.1% m/m)

1230 US August PPI, ex-food and energy (2.3% y/y)

1300 US July net long-term TIC flows (US$ 120.9 billion)

1300 US July total net TIC flows (US$ 58.8 billion)

1700 US September NAHB housing market index (22)

1815 US Federal Open Market Committee interest rate decision

(Source: GCI Financial)

NFL Picks

Finally the weekend is here after a less-than-stellar five days of trading (I'll recap tomorrow).

On to much more important things, i.e. the NFL. "The Patriot Act" or "CameraGate", at least one has to admit that sports writers and the blogosphere are on fire these days. So many angles to cover so little time. I like the Pats but this ordeal still worries me. I think this is Belichick's last year as a head coach because come January he'll be fed up with the booing and comments like "sure, you won, but you're a damn cheat!" Quite a shame, of course, but why on earth carry on with the signal stealing when warned?

Anyway, on to my picks. I've decided on a fixed format after week 1, meaning I'll only pick two games and respect the lines (using Bodog). So, after last week, I'm 0-2 (W-L). Phew!

So, who do I like this week? Well, for some reason, bookies aren't that sure Seatlle will win their division. Considering the state of the Rams, Cardinals and Niners, that's a mistake. Jets stand to get a boost from a new QB while facing a depleted Ravens team...

Week 2 Picks
Seatlle (-3) over Arizona
Jets (+10) over Ravens

Last week/season: 0-2.

Can't wait for the Pats-Chargers game, just imagine all the subplots.

Friday The 14th

BOE bailout of Northern Rock (the chart had been pointing in that direction for months) and Greenspan didn't really get how subprime lending could hurt the economy. Jesus! "Easy Al" finally opens up, just in time for his book launch.

GS' Alpha Fund down 22% in August. Apparently, these rocket scientists were long AUDJPY for most of last month. Again, I don't care what "disruptions" occured - losing 22% in 20 trading days is pathetic and I bet the whole crew over there is ashamed. At least that's what I'm hearing.

Crude oil holding near $80, another good day in equities but volumes remain low. Everybody's waiting for the Fed on Tuesday. Only retailers throwing darts right now.

Remaining long USD vs. CAD and EUR along with steepeners throughout the curve.

US retail sales coming up today.

0000 NZ August PMI survey (54.6)

0430 Japan July industrial production (-0.4% m/m)

0430 Japan July industrial production (3.2% y/y)

0430 Japan July capacity utilization (105.8)

0600 Germany August consumer price index (-0.1% m/m)

0600 Germany August consumer price index (1.9% y/y)

0600 Germany August consumer price index, harmonized (2.0% y/y)

0800 Italy July industrial production (-0.1% y/y)

0900 Eurozone August consumer price index (-0.2% m/m)

0900 Eurozone August consumer price index (1.8% y/y)

1230 US Q2 current account balance (-US$ 192.6 billion)

1230 US August import price index (1.5% m/m)

1230 US August import price index (2.8% y/y)

1230 US August advance retail sales (0.3%)

1230 US August retail sales, ex-autos (0.4%)

1230 Canada Q2 labour productivity (0.7% q/q)

1230 Canada July manufacturing shipments (-1.8% m/m)

1315 US August industrial production (0.3%)

1315 US August capacity utilization (81.9%)

1400 US September University of Michigan consumer sentiment (83.4)

1400 US July business inventories (0.4%)

(Source: GCI Financial)

Enough USD Weakness For Now!

Tuesday's Fed announcement coming closer so let the second-guessing begin.

I've sold 1m USD calls and added some steepeners (2/5, 2/10). Fair prices all the way through the curve, if you must know.

USDCAD daily chart: certainly bottom of the range and everyone being short because of the 2-month H-S pattern would need to cover if today's session posts a hammer. This is what I think will happen.












I'm the most leveraged I've been since starting out as an independant trader.

Impact of August's Macro Data

I have no idea who Mr. Schlossberg is but this report is useful if you're trading breakouts (which I do from time to time).