Riskelia's blog

Divergent cyclical assets… until when?

Posted on 11. jan, 2012 by Riskelia in Weekly Focus | Commentaires fermés

We have been observing since December 2011 a set of important disconnections among cyclical assets:

The cost of risk in equities markets shows signs of easing while the strain on banks’ funding remains unchanged (Figure 1)
Emerging and European currencies are in negative spirals against the US dollar while oil products display strongly positive trends (Figure 2)
Some [...]

2011, a year without trends? Not so sure…

Posted on 04. jan, 2012 by Riskelia in Weekly Focus | Commentaires fermés

Record of 2011’s successful and aborted trends

As showed in figure 1, the 19% return of our « best-of » portfolio in 2011 has been made mostly in the three months of July, August and September, with more than half of the performance generated in the sole month of August. This asymmetric behavior is characteristic of trend-following strategies: [...]

Playing the euro devaluation

Posted on 27. déc, 2011 by Riskelia in Weekly Focus | Commentaires fermés

The bullish dollar theme is undeniably linked to the « risk off » mode. As illustrated by figures 1 to 3, the explanatory factors of the G10 Currencies vs. USD theme comprise always equities factors, commodities themes, worldwide inflation bonds and short term interest rates differentials. Among the different parities vs. the dollar, the AUD is most [...]

Is dollar more precious than gold?

Posted on 20. déc, 2011 by Riskelia in Weekly Focus | Commentaires fermés

For the first time since the August 2008 deleveraging, the gold trend has gone below 10%. The recommendation is still in positive territory but it is about to go negative as showed in figure 1. Even more worrying, we come from a situation where the bubble was nearing 80%, reflecting extreme herding behavior and high [...]

Is defensive investment the best attack?

Posted on 13. déc, 2011 by Riskelia in Weekly Focus | Commentaires fermés

As most investors focus on high profile and volatile assets such as geographical benchmark equities, commodities and high yield, all our indicators point towards defensive investments:

Inflation bonds
Emerging bonds
Gold
Defensive equities (low beta) such as consumer staples and health care sectors

Among the Radar’s 30 top positive bets, six belong to a ‘defensive category’, which can be defined [...]

The euro devaluation process has started

Posted on 06. déc, 2011 by Riskelia in Weekly Focus | Commentaires fermés

It is often said that the EURUSD is a « risk on » asset. When looking for assets that are the most explanatory of EUR/USD returns, we find in decreasing order the World Inflation Bonds, the Crude Oil WTI and the spread Euribor vs. Eurodollar (figure 1).

The first two factors represent monetary effects characterizing the well-established inverse [...]

The euro zone infernal machinery: a story of collective suicide

Posted on 29. nov, 2011 by Riskelia in Weekly Focus | Commentaires fermés

In the unfolding euro zone tragedy, all protagonists involuntarily feed an infernal machinery as the inefficient euro zone institutions are driving it to a certain death. Here are the players of the tragedy with their motives:

The ECB is ‘independent’. It fights against inflation and it has extended its mandate, providing liquidity to the financial system. [...]

Does the oil complex get bullish?

Posted on 23. nov, 2011 by Riskelia in Weekly Focus | Commentaires fermés

One of the main differences between the present state of financial markets and the 2008 situation is the supportive oil supply / demand outlook. In 2008, the global commodities one year curve sharply shifted to record contango whereas it is hardly positive today. The commodities curve reflects the inventory level. Whereas a trend towards backwardation [...]

Not yet the time for re-risking

Posted on 15. nov, 2011 by Riskelia in Weekly Focus | Commentaires fermés

For sure, the trends of some cyclical assets have notably improved over the recent weeks. This improvement is noticeable at the US sectors levels (Nasdaq 100, Utilities, Consumer Staples and Health Care) in Figure 1 and in the oil complex (Brent, products and even WTI) in Figure 2. The dynamics of the oil curves [...]

The bullish dollar theme is still present

Posted on 09. nov, 2011 by Riskelia in Weekly Focus | Commentaires fermés

During the last weeks, the dollar seesawed between sharp positive phases reflective of defiance towards risky assets and sharp negative phases associated to a more optimist stance over the resolution of the financial crisis. Yet, the nervous switch between risk/risk off mode has not altered the long term dollar positive trend as showed in figures [...]