When Chinese stocks wake up…

Posted on 28. Jul, 2014 by Jean Jacques Ohana in Weekly Focus

In a recent interview, Jeff Gundlach, the founder of the giant bond investment manager Double Line, encouraged us to look at the chart of the Shanghai Composite: “it keeps putting in lower highs but, in the last 18 months, it’s also putting in higher lows. So it’s forming a pennant formation. It will be interesting [...]

Are precious metals getting more precious?

Posted on 02. Jul, 2014 by Jean Jacques Ohana in Weekly Focus

The dynamic of the gold’s constellation has considerably improved over last weeks. The trend indicators of gold, silver, palladium, platinum and gold miners are represented in figure 1. All of these markets have at least a correlation of 50% to gold and many of them have actually led gold in the rally.
Following geopolitical tensions with [...]

Do not forget to hold Japanese stocks!

Posted on 24. Jun, 2014 by Jean Jacques Ohana in Weekly Focus

As showed in figure 1, Japanese equities are coming back to the forefront with a remarkable positive dynamic. Since the beginning of 2014, the USD/JPY used to offer better perspectives than Japanese equities. This trend has however reversed since May 2014 so that Japanese equities now present better risk/reward than the short position on the [...]

Increase in equities + decrease in yields: what is behind this joint dynamics?

Posted on 03. Jun, 2014 by Jean Jacques Ohana in Weekly Focus

Since the start of the year, interest rates drifted lower including in core sovereign debts (US, UK, Japan, Germany) while global equities rose. As a matter of fact, the US 10 years rates dropped around 50 bps, the German 10 years Bund rate tumbled 60 bps whereas the MSCI World index increased by 3.3% before [...]

Time to load up on haven assets

Posted on 14. Apr, 2014 by Jean Jacques Ohana in Weekly Focus

We have documented here and here the progressive decoupling of risky assets, as well as the breakup of the traditional negative correlation between equities and safe haven bonds. These two phenomena marked the end of the so-called “risk on/risk off” paradigm which characterized the post-2008 world until Draghi’s “whatever it takes” speech in 2012.

What we [...]

The revival of emerging markets: a W or a just the pursuit of the L?

Posted on 08. Apr, 2014 by Jean Jacques Ohana in Weekly Focus

Emerging markets have been engulfed in a vicious spiral since the Fed’s tapering last year (Figures 1 and 2). The rise of US rates has triggered important outflows from deficit countries, resulting in depreciation of their currencies and debt/equity assets.

A first tentative bounce had occurred in the fall of 2013, but, unfortunately, it has been [...]

How to clone commodity indices for the better

Posted on 01. Apr, 2014 by Jean Jacques Ohana in Weekly Focus

Commodities’ performance has been lackluster since 2006 (Figure 1). On table 1, we note that, even though the spot performance was very good, it was eaten up by the negative roll return. This is due to the steep contango of commodities’ forward curves from 2006 to 2012.

However, Figure 2 shows a revival of the commodities’ [...]

Long Bonds and long Equities altogether

Posted on 10. Feb, 2014 by Jean Jacques Ohana in Weekly Focus

As liquidity comes back to risk seeking territory (figure 3), equities are likely to rise again but surely less than in 2013.

Nevertheless, the uncertainties about the emerging countries’ outlook will weigh on financial markets and deteriorate the global economic outlook. As a matter of fact, Chinese authorities will maintain a tightening mode in liquidity so [...]

Risk comes back in force

Posted on 27. Jan, 2014 by Jean Jacques Ohana in Weekly Focus

The contagion of emerging markets woes to other developed markets has changed the course of the financial system. The equities’ slide is not only the effect of the unexpected contraction of the Chinese PMI data. It also reflects the forced unwindings of overcrowded speculative equity positions. Riskelia’s bubble score indeed exceeds 70% on several US [...]

The People’s Bank of China is playing brinkmanship with its own banks

Posted on 23. Dec, 2013 by Jean Jacques Ohana in Weekly Focus

December 23, 2013

China is experiencing a second dry up of interbank liquidity in 2013. Chinese banks hoard cash in a context of increasing defiance over the Chinese banks’ access to liquidity.. As showed in figure 1, the Chinese repo rate is nearing the level reached at the climax of the turmoil in June 2013. Nevertheless [...]