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Steen's Chronicle August 2014

Steen's Chronicle August 2014

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Published by zerohedge
Steen's Chronicle August 2014
Steen's Chronicle August 2014

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Published by: zerohedge on Aug 04, 2014
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08/09/2014

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Steen’s Chronicle: Three things can’t be hidden long: The sun, the moon and the truth (Buddha)
This week saw US GDP rebound an impressive 4.0% taking the run rate for GDP in 2014 to 2.3% still shy of the ambitious 3.0% the consensus firmly believe in. Wall Street is busy selling strategies on how to hedge the coming hike in policy rates from Fed and we are, again, told how rates will explode. This narrative will implode and shortly if I look at Saxo Bank's JABA models:
Main Macro and Market calls:
 
Fixed income will outperform all assets class’ in 2014
 – View established in Q4-2013. Long 1.5% Danish Government bond, Long Bunds futures, Long 10 Y USA.
 
US Dollar will sell off in H2 of 2014 – NEW VIEW
. Long EURUSD and adding short USDJPY. Targets: 1.40+ and 96.00 USDJPY. Yield in US will accelerate to downside in  Aug-Nov.
 
Germany will reach negative growth by Q1-2015
 & France will be in recession. Euro growth reach zero again. 2014 another lost year in economics and non-reforms
 
Inflation expectations will bottom in Q4
major buy signal for gold, silver and more importantly mining.
 
Short Dax since 10.
000 - and still believe in 25-30% correction in H2-2014 as projected all year.
 Geopolitical risk will see keep energy prices elevated – leaving the consumer with less disposable income and companies with thinner profit margins. ========================================================================
ALPHA Positions: (all of which is more than three month old except EURUSD and Crude) Fixed income:
Long Bunds since November 2013 / Long 10 Y since April – adding IEF on this “Fed scare”
Equity
: Short DAX only
Commodities:
Long Sep. WTI Crude (since two weeks ago)
FX:
Long EUR/USD from yesterday just below 1.3500 in Sep. Futures, Short AUDUSD Sep Futures (one month old), short ZAR calls – and looking to sell USDJPY ========================================================================
BETA positions:
Long 80% fixed income since Q4-2013 – mainly Danish government bonds, Bunds and IEF. Long 15% long equity: AA, INVN, VALE – looking to buy mines, insurance companies and utility in Germany. Major short position not confirmed yet. Cash 5%
 
 
The world will see lower growth & lower yields in 2014 - yet another lost year in non-reforms and easy money
There is no denial Q2 GDP was good, neither that the US has created more jobs (mostly part-time though), but…… that the Fed is ready to take a risk and go early on raising interest denies history and even logic. Furthermore, the US GDP was always going to rise in Q2 – Our JABA models had this outlook from late last year:
SAXO BANK Economic JABA model on US GDP
(*) The Saxo Bank JABA model is a proprietary model that uses lead and lags from multiple business & economic vectors to predict future moves. The pink dotted line is GDP – note how is rises in Q2 only to collapse into Q1/Q2 2015 US GDP has averaged 2,0% in the last five years I don’t see it rising from this low-trend level and on the GDP I have following comments: 1.) From the 1
st
 GDP release to the final 3
rd
 correction the net change is on average 1.46% since 1970s – I see Q2 being 2.5% if not 2.0% offered by its third correction
 
 2.) Tax receipt data does
not
 confirm the uptick: 3.) US GDP has been reduced to an exercise in measuring
inventories
. It’s extremely volatile but also important to note they are way above their average for the last eight quarters further more in the last five years US GDP has grown 2% per year – when you exclude inventories the so called Real Final Sales even Q2’s numbers was? Yes – 2%!

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