Riskelia's blog

Three reasons to worry about the short-term financial outlook

Posted on 05. août, 2011 by Jean Jacques Ohana in Weekly Focus

The financial system faces the threat of an imminent breakdown. As usual, the PIIGS’ sovereign debt and the euro zone banks are at the heart of the storm. The recent statement of the German Finance Minister rejecting a « carte blanche for the widespread purchases of sovereign bonds by the EFSF on the secondary market » [...]

What does the current dry up in the wholesale funding market mean for cyclical assets?

Posted on 28. juin, 2011 by Jean Jacques Ohana in Weekly Focus

Over the last three weeks, the wholesale funding market has considerably deteriorated on several accounts:

The USD, GBP and EUR 2 years swap spread has widened

The EUR/USD 1 Year Cross Currency Basis Swap, reflecting the price to exchange dollar for euro has started to rise, reflecting increased tightening in dollar funding.

Similarly, the Euro Dollar, Short Sterling [...]

Revisiting the anti-euro crisis portfolio

Posted on 22. juin, 2011 by Steve Ohana in Weekly Focus

Despite the agreement reached on a « voluntary participation » of private creditors to the Greek debt refinancing, the solvency risk stays intact. Absent a comprehensive debt restructuring, the euro zone debt problem will not find a definitive resolution.
In this context, instability in the euro zone has resurfaced. The wave has started from OECD Sovereign debt and [...]

Short Dollar vs. Long Bonds: which theme will prevail?

Posted on 14. juin, 2011 by Steve Ohana in Weekly Focus

Grouping Riskelia’s best recommendations by cluster of correlations help to clarify the most salient themes. As of today, two main themes emerge:

The short USD against European currencies and Asian currencies associated with a short yen positioning. This theme has been in action since August 2010 and has been rotating from AUD, CHF and emerging currencies [...]

The renewed increase in financial integration: what to do?

Posted on 17. mai, 2011 by Jean Jacques Ohana in Weekly Focus

The last two weeks have shown an increase in the financial integration (or global correlation) among cyclical assets (namely equities, corporate credit, commodities currencies, emerging currencies, energy and base metals).
Technically, the financial integration is the explanatory power of the first factor in the Principal Component Analysis of the global variance. This increase reveals a rise [...]

Will the sell-off spiral be short-lived?

Posted on 10. mai, 2011 by Jean Jacques Ohana in Weekly Focus

We emphasized last week the risk of a sharp deleveraging in the commodities complex, noticing the offhand proliferation of overheated bubbles (8 in the complex). A massive joint move such as the one observed over the past week was hence to be expected, though the timing of the fall was not predictable. Notwithstanding these recent [...]

What could stop the dollar demise?

Posted on 03. mai, 2011 by Jean Jacques Ohana in Weekly Focus

For several months, the dollar has been falling against every other currency (see Table 1). The move has started in the summer 2010 when the Fed announced the second round of Quantitative Easing (QE II). The rise in cyclical assets which has been observed since then is mainly a monetary phenomenon: global growth has been [...]

Some dark clouds are looming…but the shorts may have a hard time

Posted on 19. avr, 2011 by Jean Jacques Ohana in Weekly Focus

Significant downsides on equities, commodities and carry trades have been observed since the beginning of the last week, challenging the Radar’s main themes.
As for now, our indicators still point to an environment favorable to risk taking, at least in the short term:

The risk aversion stays very low and reflects a positive environment for cyclical assets. [...]

Why will the yen depreciate?

Posted on 12. avr, 2011 by Christophe Lerolle in Weekly Focus

The yen is rated among the most bearish recommendation against a basket of G10 currencies and there are three main reasons why yen is likely to depreciate against the other currencies:

Risk Aversion has markedly evolved towards negative territory which bodes well for risk taking. In particular, figure 3 shows that filtering the short yen when [...]

Can the euro zone climb the wall of worries?

Posted on 07. avr, 2011 by Jean Jacques Ohana in Weekly Focus

The EUR/USD strong and steady rise to 1.42 may seem strange as the political risk in the euro zone has reached a climax.

Indeed, Ireland and Greece have been supposedly rescued but the rates they pay to European Financial Stability Facility are too high (resp. 5.8% and 5%) to help them curb the rise of their [...]