Sunday, March 16, 2008

Weekend Perspectives and Ideas


* More Weak Dollar - Remember when the yen was the world's weak currency? It's been on a recent tear vs. the U.S. dollar (above). Indeed, just about every major currency has fared well vs. the dollar, as the Bernanke Fed pursues quantitative rate easing in the face of bank and credit market challenges. The two-year yield on U.S. Treasury debt is 1.48%. Compare that with 6.31% in Australia; 13.06% in Brazil; 3.08% in Germany; and 3.82% in the U.K. and you can see why global investors may not be attracted to the USD. Even the yen, yielding a paltry .57% for its 2 year government debt, is relatively attractive, given perceptions of the U.S. economy and continued difficulties within the U.S. financial system.

* Bursting Bubbles - Flight delays from Florida to Chicago gave me an opportunity to read "Greenspan's Bubbles" by Bill Fleckenstein (McGraw Hill, 2008). The book questions Greenspan as an economic forecaster and then takes readers on a review of Fed policy and consequences from 1995 through the present. An interesting subtext to the author's argument is the misplaced optimism (exuberance) placed on progress, whether it's the productivity/technology revolution ("the New Economy") or financial engineering. It's an easy, short read and an illuminating context for the current unwinding of the housing market and related debt instruments.

* Bears Out in Force - Excellent, excellent summary of sentiment data from Trader's Narrative. We are seeing historic levels of bearishness from a variety of indicators. See also the post from A Dash of Insight: No one is bullish.

* Tracking Your Performance - I see that Trader DNA has developed some new tools for futures traders to track and analyze their performance, including a Web-based service. They've also compiled a number of performance-related articles, including several of mine.

* Hot Industry - Brain fitness is seen as a hot industry going forward, with applications for both clinical and normal populations. I believe we'll see greater application of these tools in trading environments going forward.

* Excellent Quote - Trader Mike offers an excellent observation from Art Cashin. So many traders have come of age in the last few years when we've had lower volatility and a bullish trend. That includes many prop and fund traders. As a result, we seem to swing from unbridled optimism to the depths of fear and despair and back again.

* Falsified Data - Barry Ritholtz offers a hard-hitting critique of the CPI numbers.

* Bearish Stearns - Here's a nice mashup of perspectives on the BSC situation from Research Recap.

* Emerging Strategies - Richard Wilson offers his views of up-and-coming hedge fund strategies. Here's his listing of hedge fund website resources.
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2 comments:

Brandon Wilhite said...

Tomorrow ought to be interesting, since USD/JPY opened up about 100 pips against USD (same with the futures). I think I've finally gotten the hang of dealing with these markets though, so luckily I was positioned in such a way as to take advantage.

The Greenspan book sounds interesting. I'm really not well versed in economics, but from what I can tell much of this is his fault. I blame him more than Bernanke.

BW

Brett Steenbarger, Ph.D. said...

Congrats, Brandon, on getting the hang of these currency markets. They've surely rewarded the trend followers!

Brett