Tightening talks have one virtue: prove they will remain just… talks

Posted on 15. Sep, 2014 by Jean Jacques Ohana in Weekly Focus | 0 comments

Last week saw another financial experiment of Federal Reserve tightening. Some leaks about the drop of forward guidance from the next FOMC statement were probably orchestrated by the hawks among the Federal Reserve Board of governors. First, the San Francisco Fed issued a paper where they show that surveys, market expectations, and model estimates expect [...]

Helicopter Mario vs the German hawks: the game has just started

Posted on 08. Sep, 2014 by Jean Jacques Ohana in Weekly Focus | Comments Off

 
Over the two recent weeks, Draghi has revolutionized the traditionally hawkish monetary policy in the euro zone.

In his Jackson Hole speech, on August 22, he first emphasized the lack of demand in the Eurozone calling into question the excessively contractionary fiscal policy. Then, in the following ECB meeting on September 4, he surprised the consensus [...]

How to invest in financial repression mode?

Posted on 02. Sep, 2014 by Jean Jacques Ohana in Weekly Focus | Comments Off

September 2, 2014

The G10 world is heavily indebted. As a matter of fact, the debt/GDP ratio has risen since 2007 in every G7 country except Germany (figure 1). Austerity, allegedly the solution to the debt problem, did not reduce the debt burden. On the contrary, budget consolidation worsened the economy more than it improved the [...]

Demystifying the Global Hedge Fund Index

Posted on 26. Aug, 2014 by Jean Jacques Ohana in Weekly Focus | Comments Off

Hedge Funds are supposed to generate uncorrelated returns with the main asset classes (Equities, Bonds and Commodities). The HFRX Global Hedge Funds Index, though a not perfect benchmark of the hedge funds industry, helps shedding some light on the behavior of global hedge funds over the last 10 years (figure 1).

It cannot be denied that [...]

2014: the financial mirror of 2013?

Posted on 20. Aug, 2014 by Jean Jacques Ohana in Weekly Focus | Comments Off

 
The year 2014 was supposed to be the year of global rates increases and continued over performance of developed over emerging equities markets.

Actually, the exact opposite happened in 2014, as anticipated in our research.

Interest rates did not rise (Are you so sure that interest rates will rise in 2014?) and even sharply fell further, mainly [...]

Equities’ contrasted performances: decoupling or convergence?

Posted on 12. Aug, 2014 by Jean Jacques Ohana in Weekly Focus | Comments Off

Equities’ performances have been sharply contrasted since the beginning of July: while the Euro Stoxx is down by more than 7%, the Shanghai Composite Index has gained almost 8%.

From a short-term perspective, this may look like a divergence of equities’ performances. However, when zooming out a bit, we realize that this looks more like a [...]

The predictable high yield debt meltdown…

Posted on 05. Aug, 2014 by Jean Jacques Ohana in Weekly Focus | Comments Off

The recent events on the US high yield debt market are the occasion to show Riskelia’s bubble indicator at work. This indicator is a price-based indicator of herding, rating the regularity of the price signal over different time frames ranging from 3 to 24 months. A high indicator reflects the presence of overcrowded leveraged positions [...]

When Chinese stocks wake up…

Posted on 28. Jul, 2014 by Jean Jacques Ohana in Weekly Focus | Comments Off

In a recent interview, Jeff Gundlach, the founder of the giant bond investment manager Double Line, encouraged us to look at the chart of the Shanghai Composite: “it keeps putting in lower highs but, in the last 18 months, it’s also putting in higher lows. So it’s forming a pennant formation. It will be interesting [...]

Why is the euro starting to trend lower?

Posted on 22. Jul, 2014 by Jean Jacques Ohana in Weekly Focus | Comments Off

We have anticipated the euro’s strength for more than a year against the consensus.
The main forces behind the euro’s strength are still at work:

Current account in the Eurozone is still progressing due to uncooperative and simultaneous policies of competitiveness. The Eurozone current account is nearing 3% of GDP, implying recurrent repatriation of foreign currencies by [...]

Are we reaching a turning point of the supply/demand cycle of base metals?

Posted on 08. Jul, 2014 by Jean Jacques Ohana in Weekly Focus | Comments Off

Since 2014, we have stated a disconnection between base metals. Copper and aluminum used to lag behind zinc and nickel. Zinc and nickel rose because of supply constraints. Closures of zinc mines and the Indonesia export ban of unprocessed nickel implied the rise of zinc and nickel.
Now that aluminum and copper have started to follow [...]