Three reasons supporting a strong euro

Posted on 12. Aug, 2013 by Jean Jacques Ohana in Weekly Focus

Even though the dollar has been strong vs. emerging currencies and commodity currencies, the euro, since the beginning of the year, has recently been even stronger than the dollar (figure 1). The consensual “bear euro” view has failed to materialize. This prediction, which is based on the premise that the euro depreciation would be the [...]

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 [...]

My name is “Bond”, guess my first name

Posted on 22. May, 2013 by Jean Jacques Ohana in Weekly Focus

Stories about the burst of bonds bubble have recently flourished as US interest rates have risen over the last weeks. We show in this study that bonds are not a homogeneous asset class. We have chosen to map corporate credit debt, sovereign and emerging bonds along two dimensions:

The first dimension characterizes the “risk on” or [...]

Political divergence, rates convergence

Posted on 29. Apr, 2013 by Jean Jacques Ohana in Weekly Focus

As the disagreements between France and Germany are exposed (at last) to the public, the race of Eurozone rates to the bottom seems unstoppable (figure 1).

The rates move conveys two signals, one being positive, the other one negative:

The good news is that the spreads between German and peripheral debts have shrunk, showing a decline of [...]

Can Italian rates still be pushed higher?

Posted on 22. Apr, 2013 by Jean Jacques Ohana in Weekly Focus

In the past weeks, it has become hard to envision a scenario that could cause peripheral rates to go up. However serious the political gridlock in Italy, however gloomy the growth prospects in Europe, however nervous the commodities and stock markets, the downside of Euro zone peripheral debts could never materialize.

We have observed [...]

The euro zone tyranny should turn into a federal democracy or will necessarily collapse

Posted on 25. Mar, 2013 by Jean Jacques Ohana in Weekly Focus

The Cyprus crisis is interesting, not only for its specificities but as a reflection of general Eurozone woes.

Cyprus banks collected deposits, including abundant money laundering from Russia and Europe. They promised high returns to depositors and took inappropriate risks to meet their promises. Cyprus is also a place where money transits from Russian or European [...]

Throw out the Eurozone crisis by the financial door, it will come back by the political window

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

Three years after the outbreak of the Eurozone crisis, we know now with certainty that this crisis is not whatsoever a sovereign debt crisis. OECD countries which issue debt in their own currency have no problem to fund their debts. UK, US, Japan, Switzerland, Sweden, Norway, Australia all have different solvency and external balance features. [...]

An equities bubble is swelling now: drawing lessons from past episodes

Posted on 11. Mar, 2013 by Jean Jacques Ohana in Weekly Focus

Global Equities markets are evolving in bubble as showed in figure 1. Riskelia’s bubble indicator measures the regularity of price dynamics over various time frames. An excessive degree of monotonicity in price dynamics characterizes mimetic behavior among market participants who will simultaneously sell their accumulated positions when complacency is called into question by adverse fundamentals. [...]

The euro zone is losing the currency war

Posted on 21. Jan, 2013 by Jean Jacques Ohana in Weekly Focus

Since the improvement in the risk appetite, investment flows have driven the euro higher vs. every major currency (figures 2 and 3). As showed in figure 1, the insatiable quest for yield has driven investors’ appetite for the euro as a carry trade currency. As a matter of fact, the average 2 years Euro MTS [...]

The Japanese reflation experience should be a model for the euro zone

Posted on 14. Jan, 2013 by Jean Jacques Ohana in Weekly Focus

Japanese Prime Minister Shinzo Abe is not an economic thinker. He is rather nationalist, populist and aggressive towards China. Meanwhile, his unique ability to ignore the conventional austerian wisdom deserves to be highlighted.

Japan carries out a unique experiment within the G10 countries, by combining both monetary and fiscal stimulus. After urging the Bank of Japan [...]