Review of the troops after the liquidation

Posted on 01. Jul, 2013 by Jean Jacques Ohana in Weekly Focus

The global selloff which hit all asset classes at the same time made significant damage in term of financial stability.

As stated by Riskelia since March 2013, many assets were in bubble territory, in particular risky debts and equities. As showed in figure 1, equities’ exuberance is presently over.

Liquidity has clearly tightened in key systemic links [...]

2013 vs. 2006 or 2008: an air of déjà vu?

Posted on 24. Jun, 2013 by Jean Jacques Ohana in Weekly Focus

While the bonds’ selloff polarizes investors’ attention, some major forces point to a deflationary outlook in other asset classes:

As showed in figure 1, the US 5 year breakeven inflation rate dived to 1.67%, well below the Fed’s objective of 2%. As Bernanke eventually clarified the Fed’s monetary policy, there is nothing to expect from the [...]

Deleveraging dead-end

Posted on 17. Jun, 2013 by Jean Jacques Ohana in Weekly Focus

The best way to describe the ongoing market meltdown is through the lens of the performance of a typical risk-parity strategy. The latter consists in designing a dynamic portfolio which allocates the risk evenly across different types of asset classes for example equities, commodities and the so called fixed income futures (US, UK, Germany). Within [...]

What are the implications of the commodities’ debacle?

Posted on 15. Apr, 2013 by Jean Jacques Ohana in Weekly Focus

Commodities have been the poorest performer of all assets classes since 2009 which marked the recovery from the Lehman crisis.

This lackluster performance was first attributed to the persistent steep curve (contango) which penalizes the so called “commodities’ passive investors” rolling over long positions in baskets of commodities futures contracts.

Now, the poor performance is due to [...]

How to invest in a trendless environment?

Posted on 15. Oct, 2012 by Jean Jacques Ohana in Weekly Focus

Following coordinated political interventions and successive Central Banks liquidity injections to stabilize the financial system, financial markets are more constrained than ever.

Following the EURCHF floor set up by the SNB, several currencies pairs have been stuck in tight ranges (EURNOK, EURSEK, USDBRL, USDJPY …). The near zero rates environment is an attractor magnet which constrains [...]

Portfolios to hold for the long run

Posted on 11. Jul, 2012 by Jean Jacques Ohana in Weekly Focus

In times where extreme financial scenarios become possible, balanced portfolios can be built with the objective of capturing diversified risk premiums in diverse macroeconomic configurations. As shown in figure 1, there are 4 categories of assets in financial markets:

Equities represent the most risky assets, with a positive loading on each of the first two [...]

Catch the yield if you can

Posted on 19. Jun, 2012 by Riskelia in Weekly Focus

juin 18, 2012

A map of global financial asset classes shows that fixed income assets are paving the whole territory, from safe havens to risky assets. As shown in figure 2, the interest rates part of bonds significantly hedges the credit part: the variation of 5 years yield is correlated at -0.65 to the variation of [...]

The last bastions of resistance to the comeback of the crisis

Posted on 15. May, 2012 by Riskelia in Weekly Focus

From Greece to France, the last political events in the Eurozone have done nothing to alleviate the stress in the European banking system. The signals from our Heat Map are more and more worrying, with growing woes on European banks’ funding and progressive contamination of the US banks, sovereign and corporate debts. Nevertheless, the global [...]

The victory of bondholders over shareholders

Posted on 07. May, 2012 by Steve Ohana in Weekly Focus

The Friday price action, where the S&P lost more than 1.5% while the high-yield bonds progressed, is a good illustration of a long-term trend that settled in the past 10 years: the undisputed victory of bondholders over shareholders.

Compared to standard risk on assets, risky bonds (high-yield, investment grade bonds, inflation-linked securities, emerging bonds) have the [...]

Buoyant risky assets, reversing safe haven bonds, lackluster dollar

Posted on 22. Mar, 2012 by Riskelia in Weekly Focus

Figure 1 reports the tops and flops of the Radar since the start of the year. The good bets correspond to the assets which have displayed the most robust trends, materializing in steady upward or downward moves. The main investment themes of the year 2012 have been so far:

Cyclical assets with a particular emphasis on [...]