The advent of “muddle-through” assets

Posted on 31. jan, 2012 by Riskelia in Weekly Focus

The month of January is marked by a complete shift in themes across cyclical assets:

Sectors performance rotated from defensive sectors (Food & Beverage, Health Care) to cyclical and banking sectors (Banks, Insurance, Automobiles & Parts, Basic Resources)
Emerging equities have started to emerge as performance leaders
The most cyclical commodities (cyclical precious, base metals) have clearly outperformed [...]

2011, a year without trends? Not so sure…

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

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: [...]

Does the oil complex get bullish?

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

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 [...]

Cyclical assets signals: are we heading to recession?

Posted on 06. sept, 2011 by Riskelia in Weekly Focus

Financial markets can provide good signals on the global economic outlook. Indeed, in a financial 1crisis such as the one we went through in August, some assets may reflect banks funding contraction and a credit crunch earlier than economic indicators. As Georges Soros put it, financial markets and the real sphere have a reflexive interaction, [...]

Inflation vs. deflation: the puzzle goes on

Posted on 06. juil, 2011 by Jean Jacques Ohana in Weekly Focus

Riskelia’s map of financial markets is an innovative visualization tool that provides an instantaneous snapshot of salient market trends and their interconnections.
In a first stage, the assets with high absolute recommendation (score) are selected. High score assets are then grouped by clusters to form salient market themes. The cross-theme relations are finally represented by means [...]

Euro-zone sovereign solvency risk and systemic contagion

Posted on 13. déc, 2010 by Jean Jacques Ohana in Weekly Focus

From the latest 5 Yrs CDS quotes of various euro zone countries, we can infer the implied cumulative probability of default.

The one year probability of default p may be deduced from the following approximate relationship:

where s represents the CDS price and R represents the recovery (presumably around 35%/40% for OECD countries). This relationship is obtained [...]

The future of the current deleveraging: soft landing or depression?

Posted on 01. juin, 2010 by Steve Ohana in Weekly Focus

We had signaled the expansion of massive financial bubbles on multiple risky asset classes since 2009: equities, corporate credit, depletable commodities, emerging debt and carry trades. Unsurprisingly, these dangerous patterns unfolded into a global deleveraging, as demonstrated by the chart below:

The last four instances we experienced such a deleveraging were in 2000, 2004, 2006 and [...]

Is Chinese Real Estate bubble popping?

Posted on 12. mai, 2010 by Jean Jacques Ohana in Weekly Focus

Maybe the European debt issues have distracted investors from paying attention to the signs of weakness in the alleged “growth zone”: Asia and specifically greater China.
For more than a month, Riskelia’s Trends and Bubbles Radar has identified a major weakness: Chinese real estate. The Trend stands at -68% with no specific bear exaggeration. This signal [...]

Sovereign debt vulnerability and systemic risk

Posted on 10. mai, 2010 by Jean Jacques Ohana in Weekly Focus

The chronicle of the financial events of the last three months has been crystal clear:
A global bubble on all risky assets developed since the unprecedented accommodative policy set up by Central Banks and Governments. From a monetary point of view, global rates were set around 0% and liquidity injections in the US have not been [...]

Sovereign debt problem and the risk of financial dislocation

Posted on 27. avr, 2010 by Jean Jacques Ohana in Weekly Focus

We have emphasized several times that the weak link of the financial system is sovereign debt solvency and that the latter is closely linked to European Banks and Cash liquidity. Now this scenario is materializing as confirmed by Riskelia’s Financial Markets Radar.
Greece’s solvency problem has turned into a major liquidity crisis preventing Greece from refinancing [...]

Older Entries »