Get Markets Right

Hot Topic – DPJ wins – Deep Pain Jammed LDP

The victory for The Democratic Party of Japan (DPJ) and their party leader Mr. Yukio Hatoyama is not a surprise. Though, after almost 50 years LDP government leadership of the second largest economy in the world, I certainly think the political change in Japan is a Hot Topic. This is a short view on what we can expect of political changes and what to watch out for as an investor and in corporate treasuries.

DPJ will surely try to outlive two headlines from their election campaign. One is to change the export dependent economy into a domestic demand economy. Second is to loosen the tight bands between the government and the large…

China – Oops! Minus 20% – time to get nervous ? Not yet

To be honest, the China piece required the deepest thinking, so you get some extra. When a stock market drops 20% within 2½ weeks, and furthermore in an economy that lives on a public boost and excess liquidity the thinking needs to be accurate. The drop was over a period long enough to be traded, and not just a couple of days with panic. This makes the set-back more remarkable.

The boost and the bubble

The equity market got a boost from the very famous anti recession package. It’s ok that this supported the stock market, but the bubble like rise since March is caused by the sharp lending increase…

Foreign Exchange – EUR/USD will reach 1,5000 this autumn

EUR/USD

It is long time ago since I have seen EUR/USD trading in such tight range as it has for some time. When we have these situations some players tend to sell volatility too late, it also happens these days.

Some investors have bought “Double-no-touch” options with barriers at 1,3900 and 1,4500. It means that EUR/USD has to trade within the defined range until maturity. Betting that something will stay within a range is equal to sell volatility. The EUR/USD volatility has gone down for a long time so from a volatility perspective some are selling at the lows. It feels like the typical trades that some are done when the range is about…

Global equities – The bulls are still in the lead – but for how long ?

The uptrend in global equity markets is still intact and some factors will be supportive in September. The very important gold digger mood among private investors, who believe in the V-shape recovery means a lot for the uptrend. This combined with plenty of funds to invest and professional money managers being behind going long stocks all in all creates a natural demand.

I am also behind the curve, as the frequent reader knows, I didn’t believe in the V-shape recovery, and still don’t. The consequence is, that I am forced to recommend to enter the market when it goes up despite I am uncomfortable with the…