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 [...]

The Japanese kiss of death: reflation in Japan, deflation elsewhere

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

Japan eventually undertook a very aggressive monetary quantitative easing policy. As Gavyn Davies pointed out, the Bank of Japan (BOJ) announced the largest liquidity injection ever carried out by a Central Bank in a developed country.

This monetary innovation marks a complete shift compared to what has been done in Japan during the last 20 years. [...]

Is there a scenario where Government yields significantly rise? Not so sure…

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

As OECD Government yields are still near their lowest levels ever, it is mentally convenient to think that the only path is a rise in interest rates. By the same token, many analysts recommend borrowing money now since yields are expected to sharply increase in the future.

After 6 months of abundant liquidity and steady increase [...]

Bubbles on High Yield and Emerging debts on the verge of bursting

Posted on 04. Feb, 2013 by Jean Jacques Ohana in Weekly Focus

We raised an alert on growing mimetic buying behavior on high yield debts in November 2012. These insatiable flows towards risky debts were reflected in Riskelia’s bubble indicator above 60%. The bubble indicator scores the regularity of price moves over various time frames. When it is approaching 100% on specific assets, their prices dynamics are [...]

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 [...]

Hedge fund performance: alpha or beta?

Posted on 08. Oct, 2012 by Jean Jacques Ohana in Weekly Focus

Is hedge funds’ performance the reflection of managers’ skill or the premium associated to different forms of liquidity and tail risks?

By looking at figures 1 to 3, we realize that the average hedge fund performance looks more and more like the one of a short put on the S&P 500, with low correlation to equities [...]

A Chinese metallic thorn in the bulls’ side

Posted on 27. Mar, 2012 by Riskelia in Weekly Focus

The successive central banks interventions have improved the overall liquidity in the financial system. The banks’ funding is ample in the US and close to normal in Europe. The fluidity of transactions is reflected in the implied volatilities of equities, oil and carry trades (figure 1). A positive liquidity environment (characterized by a negative risk [...]

From deflation to inflation: the Central Banks’ world of extremes

Posted on 17. Mar, 2012 by Steve Ohana in Weekly Focus

As central banks are literally flooding the world with liquidity (Figure 1), the Radar’s recommendations on oil and precious have surged by staggering 60% and 80% since the beginning of the year while the recommendations on grains and base metals have increased by a more modest 30% (Figure 2).

As shown in Figure 3, the EURJPY [...]

What does the emerging currencies meltdown foretell?

Posted on 20. Sep, 2011 by Riskelia in Weekly Focus

For sure, the event of the week has been another form of quantitative easing: the agreement reached by the developed countries core central banks (Fed, ECB, BOE, BOJ, SNB) to provide unlimited dollar funding to European bank.
Meanwhile, cyclical markets have responded in contrasting ways. As equities rose, credit markets were less enthusiastic and emerging currencies [...]

The dollar turns bullish: prepare for a wild move

Posted on 13. Sep, 2011 by Riskelia in Weekly Focus

Riskelia’s indicators have swiftly turned bullish on the dollar. The most striking negative trends are those of the TRY (the oldest one), the Eastern Europe currencies (the youngest one) and some key currencies linked to global growth (MXN, RUB, ZAR).

The summer financial crisis had spared the currencies so far but the recommendations on the dollar [...]