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The Biggest Event Risks In June

The Biggest Event Risks In June

Today being the first day of June, and the start of the last month of the first half of 2016, we thought it would be aptly appropriate to list down some of the biggest event risks that June will bring. These are the known unknowns — uncertainties which we already know about but not their outcomes.

The biggest risks in June (in our opinion) will be the EU referendum by the UK in the later part of the month, the June ECB monetary policy decision and press conference, the June FOMC statement and interest rate decision, and lastly the BoJ's monetary policy decision.

We feel markets will likely be most sensitive to these types of events, having chopped around for almost half a year now. There is great anticipation for guidance on where to go next, and we feel markets will likely take cues from central banks, chiefly the Fed.

Deutsche Bank: "We See No Further Upside For European Equities..."

Deutsche Bank: "We See No Further Upside For European Equities..."

It seems like more and more of the big names are turning bearish on risk. Day after day of directionless trading, huge intraday swings in the equity markets, and a very confusing macro backdrop has bred a lot of frustration amongst investors and traders, ourselves included.

We ardently advocate staying on the sidelines because we just don't know what is going to ensue. Yes, we have our own biases (with whatever we discussed about here, here, and here) but these biases aren't going to be beneficial in anyway unless the markets start trending again, which at this point is highly unlikely.

The number one principal for both small and big players would then be to preserve capital and ride out the volatility.We prefer to stay very lowly exposed or not exposed at all.

Here's Why Dumping Risk & Buying Cash Might Be The Smartest Move This Year

Here's Why Dumping Risk & Buying Cash Might Be The Smartest Move This Year

It's been an extremely busy first week of 2016 for Business Of Finance. Global markets are in a state of frenzied chaos, much like a chicken running around without its head.Only this time every risk asset has been sold with reckless abandon while liquidity is conversely bid to the moon. Anyone who shorted risk, went long volatility, and stayed in cash since Christmas week would be gleefully grinning at the poor folks who are trapped in 2015's outdated ideologue 

While we are hard pressed for time, we feel we need to put this piece out to give readers a first glance of what 2016 might be like for the markets all across the world. We have a feeling 2016 may be markedly different from the past 5 years where cash might actually be the best performing asset. Yes, being in cash is a position in and of itself.

In layman's speak, you ether go big or go home in 2016. At least that's what we think. You could make a hack a lot of profits or loose your shirt in the kind of markets we've been greeted with so far. So buckle up, sit tight, sell risk and buy cash.

Guest Post: China Is Not What It Seems

Guest Post: China Is Not What It Seems

On June 12, we saw carnage in the Chinese stock markets. The Shanghai composite has since tumbled in just three weeks, 30% from its seven-year high, wiping out more than $3 trillion worth of wealth.

What is even more curious is the stock market boom starting in June 2014, which saw the index surging up 110% to a seven-year high of 5166 points in June 2015, just before the crash.

Does this irrational exuberance in the Chinese stock markets make sense, especially with arguably ugly economic figures?

The fear of losing out in the great bull run has caused many young Chinese investors to employing excessive leverage. Over the past few months, margin finance has risen from a mere 1 trillion yuan to 1.46 trillion yuan in march 2015. 

And there we have it. The equation explaining the bull run in the Chinese market: Increase in retail investor participation + increase in leveraged stock trading.

 

Bill Gross: "Nightmare Panic Selling" Coming

Bill Gross: "Nightmare Panic Selling" Coming

When Bill Gross speaks, the markets better listen. At Business Of Finance, we reserve a great reverence for Mr Gross not only for his adept ability to foretell mega trends in the financial markets, but also because the man has a rare talent in piecing everything together to form investment thesis that have proven to work well.

Retail investors and traders now have access to very complex financial instruments such as bond fund and volatility ETFs, and more recently funds that are synthesized using cross currency total return swaps on extremely illiquid markets such as a ferrous commodity contract that trades on a futures exchange in China.

Bill Gross' latest investment outlook titled "It Never Rains In California" delves into the reasons why the bond king believe a fat tail may be in the making, and why investors and traders should be prepared for it by having enough liquidity when the boat tips.

Do retail investors and traders really know what they have involved themselves with? We hope so, but logic tells us otherwise.

April Review & Looking Forward (Part 2: Strategy)

April Review & Looking Forward (Part 2: Strategy)

In Part 1 of this note reviewing the eventful month of April, we spoke about how the tide was shifting in many of the developing economies with Europe's economy and financial conditions showing good signs of improvement while the American economy was undoubtedly slowing. We also spoke about macro economic cycles and how such polarities in the major economies have created exclusive opportunities in the financial markets.

With the current market climate hallmarked by panic, fear, and ephemeral swings, we have detected a couple of opportunities over the last couple of weeks that look promising in their own rights. In the last 2 weeks alone, a few records have already gone down the record books. This is heaven for opportunists.

In today's note, we wish to share our views and ongoing opinions on how we view the current market landscape and the strategies that we are and will likely be implementing to take advantage of the substantially different dynamics in today's environment.

April Review & Looking Forward (Part 1: Analysis)

April Review & Looking Forward (Part 1: Analysis)

April is set to close with a bang on what is easily the busiest week in terms of economic data releases for a long time. We have various sets of CPI and employment data releases from Europe the developed economiesGDP figures are also set to hit the wires, chiefly from the UK, US, and Canada

Central banks will be in hard focus where Australia's RBA fired the first salvo, followed by the FOMC, with New Zealand's RBNZ following suit. The BoJ will also hold its press conference. It is safe to say the market's attention will be fixated on the US 1Q15 GDP figures and the ensuing FOMC statement and press conference.

In this note, we will briefly go over some of the key developments we have seen in April across the globe from the American economy, to the renewed conflagrations in the tug of war between Greece and its creditors, to China's economic woes and financial troubles.

In Part 2, we will touch on the various markets we cover, present our views and purported strategies to trade them going forward.

China's Stock Buying Mania In 3 Charts

China's Stock Buying Mania In 3 Charts

Back in December, we wrote about how China was playing Palov's dog when on one hand it tried to clamp down on "excessive" speculation, while continuing to provide fodder for hungry speculators with the other. Fast forward 4 months and the results of the Politburo's efforts become evident, and rather grotesquely so.

As Xi Jing Ping along with his administration continues attempting to orchestrate a soft landing of China's economy, much to the hilarity of those that actually watch real economic and financial data emanating from the world's second largest economy, it seems the retail community has been much less patient about another economic growth renaissance and has taken their tokens directly to the financial markets in hopes of striking it big. 

If readers need a definition of what a mania is, the charts below should shed some light. Enjoy..