The LFB

Global Market Wrap: U.S. Equities Test 13-month Highs

Thank you. Once the sessions are wrapped we post Usd updates (three a day) at TheLFB.com go to the Forex News feed and the articles are in there. We have passed the question on.

Gold, Oil and the Dollar

In the article we state "and soon after the reversal of oil prices from record highs began." understanding the lag effect of dollar values in the correlation to oil.

There is nothing trivial at all in reversing the dollar values, especially when so many dollars are held in reserve across the globe, and petro-dollar and fiat currencies rely upon it. Trading is following the law of probability, and looking for the pattern that went before to once again happen again.

The dollar reversed from these levels previously, and there is nothing to say that will not happen again. Fiscal deficits and budget explosions, do not take away from the fact that the dollar has two sides to it; internal U.S. use that is comfortable with it being weak, and international use in commodity and reserve values. There is nothing trivial about it at all, and putting the options aside, there is every reason to think that the dollar will gain in strength in the near-term.

Thank you for the feed-back.

Trading Oil with Options

With the greatest respect Prof. Banks to your esteemed career that is very impressive, there is a huge void between the academic side of the market, and the traded side of the market. Those who can, trade. Those who do not, write. There are some who do both, and they tend to be the ones whose trading is simple, and writing is clear. Academics and trading do not mix, and as can be seen in the initial comment to the article, the academic view is sometimes held on a lofty perch. This ‘aint Grandpa’s market, as some would say.

Trading Oil with Options

Thanks Brandon, agreed. Trading options and futures is easy, planning the potential, limiting exposure, and capping expectancy is the hard part for most. So, we will stick to our 30 years of trade desk knowledge, that has stood us in good stead, and do the hard part; planning the trade. This is not a complicated market, the expectancy of those not educated in the arena they trade is what makes it complicated.

Equity Markets and GDP: Growth Questions

Angel

1. Does the stock market anticipate the economy six months in advance,
as many claim?

I would need a few days to build an econometric model to check this relationship out, but a quick look tells me that the relationship between the S&P return and the future 6 month GDP rate is weak.


2. What economic growth rate is implied by the S&P today?

I actually took this approach the other way around, what would be the S&P return based on the current GDP growth rate. However, to answer your question, 2009 Q3 S&P return, of roughly 10%, points out to a 6% growth rate in annualized terms for Q3. The Q3 foretasted GDP is 3.20%, according to the latest estimates.

King of Currency: The U.S. Dollar Hedge

The concept of a stronger dollar overall has limited appeal, but as an asset class there is no other currency that comes close to challenging the dollar dominance as the ultimate risk play. As a vehicle to hedge, it is unsurpassed in regard to value, leverage, and ease of purchase.

A Strong Dollar is another story all together, because once forward growth and interest rate variable get back into focus, the equity/risk percentage correlation will be reduced a little, ultimately increasing the cost of hedging any portfolio with a spot dollar trade, but leaving the hedging principle firmly in place.

The Pound's Drop Shows the Emperor Has No Clothes

The spiders web effect; a pull here, creates a push over there. It would not be a surprise, and better to get it out there ahead of time, rather than throwing Monday Morning quarterback articles around!!

Global Economic Demand Required: All Applicants Accepted

Thank you!

Oh, So Now There Are No Green Shoots?

Agree 100% on the forign stocks, the XLF is screaming that is struggling to hold fair value.

The banking sector in the U.S. does not compare in any way to the ‘safety’ of overseas banks in regard to long term bank deposit and foreign exchange currency ratings, from Standard & Poors, Fitch, and Moody’s. The top 50 globally rated banks from the GFMag yearly 'Safe Bank' survey show some statistics that Stress Test followers, and Green Shooter's, may find surprising.

There are thirteen newcomers to the list; a 20% replacement ratio rate from 12 months ago. The highest ranking bank is Germany’s KFW, Singapore and Finland added major players to the list, with two of Singapore’s entrants matching Deutsche Bank and Bank of Montreal’s credit ratings.

Spain and Canada moved into the top ten with Banco Santander and Bank of Canada. Some casualties to the list include Citi, Bank of America, Barclays, and Royal Bank of Scotland.

The U.S. has no banks in the top 20, and just five banks in the top 50 list.

4 of the top 7 are German

9 of the top 10 are European

14 of the top 20 are European

5 of the top 20 are Australian or New Zealand

2 of the top 20 are Canadian

33 of the top 50 are European

France has as many top 50 banks as the U.S. and a far higher overall ranking with 3 of the top French banks within the top 20, and one, CDC, in at number 2 on the list. European and Australian banks dominate the overall rankings.

The five U.S. banks in the top 50 are Wells Fargo (21), US Bancorp (26), Bank of New York Mellon (34), JP Morgan Chase (45), and tied for 50th with three overseas banks is BB&T.

Hmmmmm, the flight to safety, on a bed of green shoots. Looks as though the flight to safety may have to be re-written in the post-credit crisis environment.

Oh, So Now There Are No Green Shoots?

Great thoughts in this article.

Apparently nobody told the Green Shoot brigade that the Trough part of the global business cycle takes a while to get out of, and while the sentiment may be changing the fundamental releases take a long time to make up the lag factor between optimism and reality aligning.

How can ever-increasing weekly jobless numbers, and increasing national unemployment rates hitting 10%, lead to the private sector being expected not to post similar numbers to the previous months bloodbath in job losses (rhetorical).

There is little wonder that the market cannot get global interest to move prices in any market, in any direction, when the future outlook is as blurry as the analyst and forecasters are making it. Fair value is as elusive right now on any given market than it has ever been.

Forget year-end targets and talk of the recession ending in Q3 or Q4 because, the reality is most analysts would stand as much chance of pinning the tail on the donkey as they would getting the Thursday close number on the S&P; let alone calling for the bottom of the most savage of global financial melt-downs that has ever been seen.

This is a traders market right now, one that is built for reactive, contrarian thinkers who are prepared to take a shot at the links that drive forex values actually holding for more than 30 minutes; because in reality that is all that is being offered right now.

Short, sharp bursts of order flows that break up a choppy market, and then reverse as quickly as they hit. Not good to look at, frustrating to look back on, but there for those who are opinion free, and ready to work with what is right in front of them, rather than trying to deal with what they want things to be.

Good read, good thoughts, thank you.

How Well Correlated Are the Global Markets?

You are welcome, thank you for taking the time.

Major Currency Pairs Positioned for a Breakout Attempt

This may answer it Dave, it is a pivotal time. seekingalpha.com/insta...

Why Buy Dollars?

Agreed Jordan, just this time round there is no rule book to work from, and the debt based system is lacking a major component; accountability.

No M3 numbers, disjointed TIC data, a CPI report that looks as though the Riddler from Batman put it together (oh wait, Mr Alan Greenspan may have worked on M3 and CPI reporting), and now a 'Strong Dollar' policy getting spouted at each opportunity. Hmmmm, something just does not add up, whatever our individual opinions are.

Thanks all, for the feed-back.

Daily Currency Forecast: Euro Trading Comfortably

Good call on the need to watch Euro at 1.4000, this may turn into as big a swing point as hitting 1.6050 once was. This swing point however has the Carbon Tax and inadequate economic reporting to thank for maybe allowing the common currency to get legs, and expand the exponential growth that the new world order is looking for in Euro dollars.

Dramatic Change In Usd Note and Bill Values. Where Is The Truth?

Rember the Wizard of Oz, and the black curtain that housed the truth? Looks as though the Treasury may be back there too, peddling away to generate enough noise to keep things quiet, if you know what we mean!