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

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 [...]

Developed vs. emerging stocks: mind the gap!

Posted on 08. Jul, 2013 by Jean Jacques Ohana in Weekly Focus

The divergence between the trends of connected assets conveys a very different type of information than the decorrelation between their daily returns. While the latter corresponds to a genuine change of status (e.g. one of the assets shifts from “risky” to “safe haven” or the other way round) and is very rarely observed, the former [...]

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 [...]

Commodities dismal performance conveys global deflation pressure

Posted on 02. Apr, 2013 by Jean Jacques Ohana in Weekly Focus

Despite supportive liquidity and global monetary easing from Central Banks, commodities have been unable to perform since 2011. Commodities had the worst returns among every asset class over the past 250 days. Commodities, currencies and basic resources equities sectors have been under pressure, as illustrated by figure 2.

The poor performance of cyclical markets such as [...]

The intriguing commodities decoupling

Posted on 18. Feb, 2013 by Jean Jacques Ohana in Weekly Focus

Commodities are undoubtedly related to equities of commodities’ producers and commodity currencies. From a fundamental point of view, commodities’ producers own exploitable deposits of commodities which will be extracted and sold should commodities prices exceed the extraction cost. Hence, equities of commodities’ producers should trade like a call option on commodities. In the same token, [...]

Policy driven financial markets: why 2013 may be far different from 2012

Posted on 31. Dec, 2012 by Jean Jacques Ohana in Weekly Focus

The anatomy of financial market returns shows that all assets apart from base metals rose in 2012 (Figure 1).

Despite the unprecedented liquidity provided by Central Banks, the performance was however highly contrasted across the different assets. The risky bonds stand out remarkably with Sharpe ratios above 3 for emerging debt, high yield corporates, investment grade [...]

Why Quantitative Easing alone won’t make commodities rise

Posted on 10. Dec, 2012 by Jean Jacques Ohana in Weekly Focus

The performance of risky assets since 2011 has been highly contrasted (figure 1). The Iboxx High Yield provided by far the highest risk-adjusted return. Whereas equities and precious metals have ended close to neutrality over the last two years, there has been a rift between the positive total return performance of Agriculture and Oil on [...]

What’s next after the corporate credit bubble?

Posted on 19. Nov, 2012 by Jean Jacques Ohana in Weekly Focus

Investors passively investing in High Yield bonds have caught a return of 10% in the US and 18% in the euro zone. Similarly, emerging bonds have returned around 16% since the start of the year. The causes of this risky bonds’ mania are well-known: faced with negative real yields on the so-called safe haven [...]

Liquidity in Hong Kong: Why is the Hang Seng over performing?

Posted on 29. Oct, 2012 by Jean Jacques Ohana in Weekly Focus

Since the Federal Reserve QE3, capital inflows have crowded into Asian markets and specifically Hong Kong. Under the currency board system adopted by the Hong Kong Monetary Authority (HKMA), the Hong Kong dollar is permitted to trade between 7.75 and 7.85 to the US Dollar and a breakthrough of the range triggers intervention by the [...]

What could wake up the stalling gold?

Posted on 22. Oct, 2012 by Jean Jacques Ohana in Weekly Focus

Given the coordinated quantitative easing undertaken by Central Banks, the sharp correction of gold vs. all paper currencies is surprising to say the least. The gold is worth less than it was just before the Federal Reserve announced an open ended QE III, whereas the decision undoubtedly surprised market participants.

The gold rise has stalled so [...]