Summer doldrums

Just got back from vacation and a quick check round sees I didnt miss much !

Commodities and Oil stil with no floor in sight.

Equity markets esp. China continue to be in corrective mode with the decline continuing

US rate hike - I had said 50:50 Sept but I am now favouring 40:60. Inflation still looking a bit soft and any dependence there was on China providing a sustained growth story are well and truly over.

Commodity currencies still looking south.

Thinking cap back on and time to make some money.

Greece Is The Word; Or Is It ?

It looks like the long term memory has not failed investors. With GFC not really that far behind us it would appear that investors just dont want to get caught out on either side. Volatility a bit all over the place lately and the fear of contagion is high. Lets put some perspective around the Greece economy though as it is roughly the size of Vietnam. Ten years ago or perhaps even today if someone told you that Vietnam fundamentals are looking very shaky would the world start to panic?? My two cents worth is perhaps its not a Greece issue but rather whether the European Union is strong enough to hold itself together and whether as a collective the decision making qualities are intact - it is of course very difficult when governments still have autonomy. If one country was to leave, would others which faced a similar fate in the future be next.

The highlight for me though is there did not seem to be a robust governance structure or oversight as to how governments accomplished tasks after the last round of funding. A number of other "Club Med" countries appear on the surface to have done the right thing - but just how did Greece end up this way. The tangled web we weave my friends !!

Personally I am more worried about China and whether China will assist or hinder the global growth story.

Equity Sell Off

screenshot_Wed_Jul_08_14.45.59Source:Bloomberg

Equity markets continue to sell off with concerns over both Greece and China. Shenzhen is in a freefall at the moment even with the local Gov't doing everything to encourage investment - I think a little bit of desperation there. Other markets are coming off today in Asia as well and we are definitely in a risk off mood. Need to be extra vigilant and not do anything rash to exacerbate portfolio losses. On the other side if you have continued to be short commodity currencies (why wouldn't you be ?) then happy days.

Shenzhen Composite Index – Buy on Dips ?

screenshot_Sat_Jul_04_16.09.41Source:Bloomberg

I don't think so. When the market goes up over 100% in just over 5months you know someone is going to get hurt. Down over 30% since the June high I know I am sitting on the sideline of that one. Meanwhile the PBOC continue to loosen monetary policy to keep the economy moving ahead. The old adage of what goes up must come down should not be forgotten even in China.

IMM positioning

Net shorts continue to increase in all currencies except the cable and swissy. The NFP number of 223k last Friday missed expectations and when one considers this with some mixed results of late including home sales a September rate hike is more like 50:50. Lets wait to see what the CPI numbers to be released in the upcoming weeks show. With Euro and Jpy shorts at extreme I suggest that perhaps we wont see a major move just yet.

Kiwi shorts just continue to grow. With CB rhetoric very dovish there is only one way this bird is walking.