Greece will surely default but is likely to stay in the Eurozone

Posted on 29. Jun, 2015 by Jean Jacques Ohana in Weekly Focus | 0 comments

As Greek PM Alexis Tsipras decided to submit the last proposal of its creditors to a referendum next Sunday 5th July, the Eurogroup has responded by stopping the aid program as of 30th June. As a result, Greece will be in arrears regarding the payment of its debt to the IMF but it will not [...]

How the EUR/USD could resume its downward trend just when Greece is “bailed out”

Posted on 23. Jun, 2015 by Jean Jacques Ohana in Weekly Focus | Comments Off

It is often thought that an agreement over a Greek bailout would bolster the euro, thanks to an increased confidence in the stability of the euro zone. Conversely, a default of Greece or an accidental Grexit is expected to cause a decline in the euro.

The euro has nevertheless become one of the main funding currencies [...]

Financial indicators of the Greek crisis

Posted on 15. Jun, 2015 by Jean Jacques Ohana in Weekly Focus | Comments Off

Time is running out for Greece and its creditors (IMF, euro zone countries) to find an agreement, at least one which could enable euro zone creditors to pursue the strategy carried out since 2010: “extend and pretend”. Extending the problem, by lending new money to Greece just to enable the country to pay back its [...]

June 2015: an air of June 2013 déjà vu?

Posted on 09. Jun, 2015 by Jean Jacques Ohana in Weekly Focus | Comments Off

 
Since Mid-April, all asset classes fell simultaneously: a basket of equities indices fell by 2%, a basket of sovereign bonds fell by 3.5% (i.e. a surge of 50 bps in yields) and commodities were just flat as illustrated in figure 1. An environment where all assets tumble at the same time translates a break in [...]

Index Volatility futures: tactical strategy and use for asset allocation

Posted on 02. Jun, 2015 by Jean Jacques Ohana in Weekly Focus | Comments Off

June 2, 2015

The VIX index is calculated as the weighted average of options on S&P 500. In March 2004, the CBOE introduced VIX futures contracts to facilitate volatility trading and encourage investors to use volatility to hedge equity portfolios, given the strong negative correlation between equity returns and implied volatility.

Reflecting the demand of markets participants, [...]

Where are we in the debt deleveraging process and what are the consequences for interest rates?

Posted on 25. May, 2015 by Jean Jacques Ohana in Weekly Focus | Comments Off

Apart from Germany, none of developed country is going to reduce the Government Debt/GDP ratio in 2015.

The Government debt dynamic depends on growth, inflation, leverage and primary balance. As a matter of fact, the variation in the debt ratio is given by the following relationship:

Therefore, the required primary balance to stabilize the Debt/GDP ratio is: [...]

Deleveraging on sovereign bonds and the dollar: what’s next?

Posted on 19. May, 2015 by Jean Jacques Ohana in Weekly Focus | Comments Off

Two major investment bubbles have landed since mid-April 2015: investors rushed to exit herding positions on long bonds and long dollar. For example, Bund yields increased by 60 bps and EUR/USD rose by 6% in a single month.
Both bubbles have moved in synch since 2011 and convey investors’ anticipations of a deflationary trend. The major [...]

The correction in the Risk Balanced strategy portends more attractive returns for the future

Posted on 11. May, 2015 by Jean Jacques Ohana in Weekly Focus | Comments Off

Since the end of April, a significant correction has hit bonds and equities markets altogether, a feature of financial deleveraging. As a matter of fact, Riskelia Fund has been declining 0.5% since the start of May and about 2.5% from the high reached on April 15th (the max drawdown of the fund being 3.5% from [...]

The herds are rushing to the exit on the dollar and the bonds

Posted on 05. May, 2015 by Jean Jacques Ohana in Weekly Focus | Comments Off

Last week financial markets were driven by behavioral dynamics rather than fundamentals. As showed in figure 1, the most significant moves were the euro zone bonds tumble occurring simultaneously with the sharp rebound of the EUR currency vs. USD and JPY. Both markets were rated with giant bubbles of more than 90% on a scale [...]

Global Balanced portfolios and currency effect

Posted on 28. Apr, 2015 by Jean Jacques Ohana in Weekly Focus | Comments Off

The dollar rise since the beginning of the year (in particular vs. the euro) has had a major impact on assets performance in euro and dollar terms. For instance, Figure 1 shows that the performance of worldwide equities has mainly reflected the 10% rise of the dollar vs. the euro. As a matter of fact, [...]