Will financial markets climb the summer wall of worries?

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

Three vulnerabilities are presently threatening the financial system:

The ongoing negative spiral on US Bonds (figure 1). Ben Bernanke made a U turn on the Federal Reserve pledge to reduce the purchase of US Treasuries thus enabling long term interest rates to fall back slightly. Meanwhile, the Federal Reserve will be under pressure to taper the [...]

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 [...]

How to invest in a low Risk Aversion mode

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

Riskelia’s heat map of financial risks (figure 1) dynamically pictures a normalized fear index reflecting more than 100 quoted risk premium in financial markets: implied volatility, credit spreads, CDS and monetary liquidity spreads like the LIBOR/OIS spread. Every type of financial vulnerability has eased since June 2012, notably the euro funding risk which had been [...]

A financial crisis without safe haven?

Posted on 25. May, 2012 by Riskelia in Weekly Focus

As showed by Riskelia’s heat map (figure 1), the contagion has spread to almost every link of the financial system. This worrying signal is confirmed by the inversion of the VIX curve which has preceded every major financial crisis since 2007 (figure 2). The performance of global equities indices in high risk aversion territory has [...]

The last bastions of resistance to the comeback of the crisis

Posted on 15. May, 2012 by Riskelia in Weekly Focus

From Greece to France, the last political events in the Eurozone have done nothing to alleviate the stress in the European banking system. The signals from our Heat Map are more and more worrying, with growing woes on European banks’ funding and progressive contamination of the US banks, sovereign and corporate debts. Nevertheless, the global [...]

Finding the trends in the shadows: the muddle through attractor

Posted on 24. Apr, 2012 by Riskelia in Weekly Focus

We have highlighted several times the noisy state of the financial system which prevents investors from discerning genuine investment themes from capricious moves derived from the “risk on / risk off” alternator.

As showed by figure 1, the average of Riskelia’s trend indicator over the last year enables to spot structural positive and negative investment trends. [...]

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 [...]

Buoyant risky assets, reversing safe haven bonds, lackluster dollar

Posted on 22. Mar, 2012 by Riskelia in Weekly Focus

Figure 1 reports the tops and flops of the Radar since the start of the year. The good bets correspond to the assets which have displayed the most robust trends, materializing in steady upward or downward moves. The main investment themes of the year 2012 have been so far:

Cyclical assets with a particular emphasis on [...]

The resurrection of the short yen

Posted on 24. Feb, 2012 by Riskelia in Weekly Focus

As a result of central banks’ addictive monetary policies, moral hazard is at a peak and financial liquidity has become the main driver of financial markets. The latter is well-characterized by Riskelia’s indicator of risk aversion, which reflects the average dynamics of costs of risks across different asset classes (credit spreads, Ted spread, banks’ CDS, [...]

Divergent cyclical assets… until when?

Posted on 11. Jan, 2012 by Riskelia in Weekly Focus

We have been observing since December 2011 a set of important disconnections among cyclical assets:

The cost of risk in equities markets shows signs of easing while the strain on banks’ funding remains unchanged (Figure 1)
Emerging and European currencies are in negative spirals against the US dollar while oil products display strongly positive trends (Figure 2)
Some [...]