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Government Takes a Stake in 6 More Companies, New Total Is 30 Companies
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The Commerce Department reports government stakes in six more companies.
Showing posts with label FXE. Show all posts
Showing posts with label FXE. Show all posts
2018-01-19
2017-10-22
2017-01-05
Euro-Treasury Correlation
The first chart shows two ETFs, iShares 20+ Year Treasury (TLT) and the inverse of CurrencyShares Euro (FXE) in orange, going back a decade. Usually, FXE is inversely correlated with TLT. Since the summer, this flipped. The second chart shows TLT and FXE (not inverted) in blue.
The connection is rising interest rates, which right now are driving down the price of treasury bonds and the EURUSD exchange rate. In normal times, rising interest rates are accompanied by faster credit and economic growth around the world, and the "dollar expansion cycle" is bearish for USD exchange rates. The reverse, a global recession and credit contraction, drives up USD exchange rates. For the moment, the rise in interest rates is based on optimism, not hard data. All else equal, higher interest rates in the U.S. and consistent economic fundamentals leads to a higher USD exchange rate.
As for the future, EURUSD looks similar to SEKUSD over the past couple of years.
The connection is rising interest rates, which right now are driving down the price of treasury bonds and the EURUSD exchange rate. In normal times, rising interest rates are accompanied by faster credit and economic growth around the world, and the "dollar expansion cycle" is bearish for USD exchange rates. The reverse, a global recession and credit contraction, drives up USD exchange rates. For the moment, the rise in interest rates is based on optimism, not hard data. All else equal, higher interest rates in the U.S. and consistent economic fundamentals leads to a higher USD exchange rate.
As for the future, EURUSD looks similar to SEKUSD over the past couple of years.
2015-05-17
2014-05-25
Has the Die Been Cast in Europe?
Even though Eurozone countries (EZU) are in an uptrend, Ireland (EIRL) and Greece (GREK) slid this year. The rest of the PIIGS: Spain (EWP) has held up as well as EZU, but Italy (EWI) and Portugal (PGAL) did break down in May.
The best explanation is that Greece and Ireland sold off along with momentum stocks because if you plot GREK and EIRL against the Nasdaq, Russell 2000 and biotechnology, a similar chart pattern is clear. Italy and Portugal are tougher to explain.
It looks like a surprise win by the euroskeptics is priced into stocks and the euro. Nevertheless, I've always maintained this is political crisis, not an economic one. The main issue was never the debt levels or the economic imbalances Michael Pettis' cites in his post liked below (though these are very real), but whether the nations of Europe will find a way to solve them together. Social mood is not working in favor of the EU: nations increasingly want to assert sovereignty, best exemplified by secession movements in Scotland, Catalonia, Belgium and Northern Italy, but now most clearly evidenced by political victories for parties such as UKIP.
Most alarmingly for the pro-EU politicians is that nationalistic parties have won in the absence of crisis, during a period of relative calm. In reality, the political crisis has grown during this period of calm as social mood remained negative. Since this is a political crisis driving the markets, another crisis is more likely following the victory of euroskeptic parties. Even if pro-EU politicians want to ignore them, the rise of parties such as UKIP is now an existential threat to the domestic political order because voters have a legitimate option to express their anger. What happens in Brussels no longer stays in Brussels: national elections may turn on votes that parties take in the European parliament.
The odds of another financial crisis are higher if these euroskeptic parties win in this weekend's election, and another crisis will serve to increase the popularity of euroskeptic parties because it will force the pro-euro and pro-EU parties into more unpopular votes. The euroskeptics aren't causing this though, behind them are the voters who in a period of negative social mood, want to express national sovereignty and want to protect their own nation. Ultimately, since social mood swings from positive to negative, is that the European Union and euro are positive social mood projects that do not account for periods of negative mood. The trend is for increased centralization of power, which increases the instability of the entire system heading into a period of negative mood.
This weekend's vote will cast the die for the dissolution of either the eurozone, the EU, or both, and stopping it will require an extraordinary effort by pro-EU politicians because they are now running uphill— even if they don't realize it yet.
Related: here is Michael Pettis thinking about possible implications from the EU elections: Some things to consider if Spain leaves the euro
The best explanation is that Greece and Ireland sold off along with momentum stocks because if you plot GREK and EIRL against the Nasdaq, Russell 2000 and biotechnology, a similar chart pattern is clear. Italy and Portugal are tougher to explain.
It looks like a surprise win by the euroskeptics is priced into stocks and the euro. Nevertheless, I've always maintained this is political crisis, not an economic one. The main issue was never the debt levels or the economic imbalances Michael Pettis' cites in his post liked below (though these are very real), but whether the nations of Europe will find a way to solve them together. Social mood is not working in favor of the EU: nations increasingly want to assert sovereignty, best exemplified by secession movements in Scotland, Catalonia, Belgium and Northern Italy, but now most clearly evidenced by political victories for parties such as UKIP.
Most alarmingly for the pro-EU politicians is that nationalistic parties have won in the absence of crisis, during a period of relative calm. In reality, the political crisis has grown during this period of calm as social mood remained negative. Since this is a political crisis driving the markets, another crisis is more likely following the victory of euroskeptic parties. Even if pro-EU politicians want to ignore them, the rise of parties such as UKIP is now an existential threat to the domestic political order because voters have a legitimate option to express their anger. What happens in Brussels no longer stays in Brussels: national elections may turn on votes that parties take in the European parliament.
The odds of another financial crisis are higher if these euroskeptic parties win in this weekend's election, and another crisis will serve to increase the popularity of euroskeptic parties because it will force the pro-euro and pro-EU parties into more unpopular votes. The euroskeptics aren't causing this though, behind them are the voters who in a period of negative social mood, want to express national sovereignty and want to protect their own nation. Ultimately, since social mood swings from positive to negative, is that the European Union and euro are positive social mood projects that do not account for periods of negative mood. The trend is for increased centralization of power, which increases the instability of the entire system heading into a period of negative mood.
This weekend's vote will cast the die for the dissolution of either the eurozone, the EU, or both, and stopping it will require an extraordinary effort by pro-EU politicians because they are now running uphill— even if they don't realize it yet.
Related: here is Michael Pettis thinking about possible implications from the EU elections: Some things to consider if Spain leaves the euro
The May 26 votes might end up reminding us that the euro crisis isn’t over. The longer unemployment and hopelessness drag on, the greater the erosion of support for the establishment and the stronger the support for the radicals who want to abandon the euro.
......How much longer is the rest of Europe willing to maintain high unemployment in order to support the German economy? On May 26 we will discover, I suspect, that at least some parts of the rest of Europe have little interest in continuing to maintain the euro if that simply means that they must suffer unemployment in order to protect Germany from its unwillingness to pay workers more.
2013-11-23
2013-11-09
Paper Gold Bulls
Contrary to a lot of the talk of paper selling, what appears more likely the case is many bullish speculators are still entering the market.
2013-09-29
Fear Spike on the Weekend; Time to Invest in Chinese Stocks?
I did not and still do not expect a government shutdown. Republicans and Democrats both want to spend more money; they disagree about Obamacare. However, even if there's no shutdown, they could create enough uncertainty to rattle financial markets on Monday. If there is a shutdown, of course, things may get wild for a bit. Taking a broader view, in Greece the government said Golden Dawn is a criminal organization and arrested its leaders. In the U.S. there is the budget impasse, and in Italy, politics are also creating uncertainty.
Government Shutdown Imminent; "Obamacare-Delay" Continuing Resolution Vote
Italy in Crisis as Center-Right Ministers Resign
This is very short-term drama, although there are long-run effects. History suggests that if there is a government shut down, the long-term effect will be smaller budget deficits. Italy is more unstable because the debt crisis already began.
In contrast, turn to Asia where China is opening the Shanghai free trade zone (FTZ). The other big financial story is the opening of the IPO market; China has kept a lid on IPOs over the past few years. I still expect China will face a tough situation, probably a crisis, and the yuan will depreciate, but long-term policies are clearly moving in the right direction. This blog was named Investing In Chinese Stocks because I planned to look at non-U.S. listed Chinese stocks, but the market hasn't been terribly good and there's plenty else to write about. A look at the charts shows some Chinese shares are quite depressed relative to the rest of the globe's markets and with major reforms coming that directly impact the financial sector, the time has come to once again investigate.
I'm keeping a close eye on ADXY for a breakdown. In the short-run this could mean more pain for Chinese and emerging market shares.
To me, this chart shows euro bulls are way too optimistic. The euro has been moving higher, but the optimism visible in this chart is excessive. There is enough fuel there to take the euro back near the $1.30 level. You have to go back to spring 2011 to find this large a bullish position in the euro among speculators, back when many though the euro debt problems were being solved. Right before they exploded once again.
The same optimism appears in the gold futures market.
Government Shutdown Imminent; "Obamacare-Delay" Continuing Resolution Vote
Italy in Crisis as Center-Right Ministers Resign
This is very short-term drama, although there are long-run effects. History suggests that if there is a government shut down, the long-term effect will be smaller budget deficits. Italy is more unstable because the debt crisis already began.
In contrast, turn to Asia where China is opening the Shanghai free trade zone (FTZ). The other big financial story is the opening of the IPO market; China has kept a lid on IPOs over the past few years. I still expect China will face a tough situation, probably a crisis, and the yuan will depreciate, but long-term policies are clearly moving in the right direction. This blog was named Investing In Chinese Stocks because I planned to look at non-U.S. listed Chinese stocks, but the market hasn't been terribly good and there's plenty else to write about. A look at the charts shows some Chinese shares are quite depressed relative to the rest of the globe's markets and with major reforms coming that directly impact the financial sector, the time has come to once again investigate.
I'm keeping a close eye on ADXY for a breakdown. In the short-run this could mean more pain for Chinese and emerging market shares.
To me, this chart shows euro bulls are way too optimistic. The euro has been moving higher, but the optimism visible in this chart is excessive. There is enough fuel there to take the euro back near the $1.30 level. You have to go back to spring 2011 to find this large a bullish position in the euro among speculators, back when many though the euro debt problems were being solved. Right before they exploded once again.
The same optimism appears in the gold futures market.
2013-08-17
Gold Rally Unfinished; Euro Had Better Rally
Speculative long positions on the euro have increased sharply, but the euro remains flat. The euro should rally next week, but if it does not, these spec longs will become the fuel for a bear run.
Gold is in a similar position to the euro, but we've seen a clear bounce. The upswing in speculative longs should pull gold higher next week.
Gold is in a similar position to the euro, but we've seen a clear bounce. The upswing in speculative longs should pull gold higher next week.
2013-08-04
Gold Speculators Remain Net Long, But Not For Long?
Incredibly Important Developments In Gold & Silver Markets
That’s an interesting story, Eric. Watching what is going on there lately with the gold market, we’ve seen a very steady drawdown in the net-short position of the big commercials (the bullion banks). This week was rather fascinating because we are to a situation now where we are only about 5,000 contracts away from the commercial category being net-long this gold market.”In the futures market, there must be a buyer for every seller. It is a bet, and you can't make a bet unless there is someone to take the bet. The commercials can trade for themselves, but they are also the bookie in the futures market. If you want to go long or short, they will take the other side of the trade because they can arbitrage the risk away. It is the small speculators and hedge funds who take on risk in the futures market by taking net long or short positions. If the small speculators are all bullish, then the commercials will have a large short position. Now that small speculators are far less bullish, the net position of the commercials is shifting. However, as the chart above shows, speculators are still net long. When the speculators turn bearish, then suddenly the commercials will have a big net long position......and gold will keep falling in price.
“Going back to 2006, when this data was first released on a disaggregated basis, this is the smallest net-short position that these guys (commercials) have ever had.
I cannot recall a time when they had this small of a net-short position. So there has been a huge change going on within the internal composition of the futures market there in New York when it comes to these commercials. They are moving more and more away from the short side of the market, and more toward the long side.
And it looks like the (small) speculators are continuing to lean (on the short side) against this thing (gold). That’s what brings us back to the price action, Eric. You can tell there has been heavy resistance in gold at around $1,340 to $1360. But we can tell who is selling it (paper gold): It’s not been the bullion banks. It’s been the hedge funds and other speculative groups.
The speculators are now in a ‘sell-the-rally’ mode in gold, while the bullion banks are in a ‘buy-the-dip’ mentality. That is what has changed in this market. I want to continue to monitor this, but based on this trend there is a (strong) possibility that if gold continues to stay weak, that you are going to see even more short covering on the part of these commercials -- to the point where they may be net-long for the first time that I have on record. That itself is quite a dramatic development.”
The interesting development is the declining interest in the futures market as the bull market wanes. Bullish speculators aren't turning bearish, they are simply leaving the market and taking their gold with them.
2013-07-29
Euro still forming a head and shoulders; gold bulls make a small comeback
Speculators remain bearish on the euro this week. Gold speculators continued to see the thinning of their bullish ranks reversed, but this still looks to be a trend that has yet to complete.
2013-05-18
2013-05-04
2013-04-28
2013-01-04
Bulls are back in the euro
Euro is very weak relative to the shift in sentiment, with specs now bullish. Once again poised for a very volatile move.
2012-12-28
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