Category Archives: Eurozone

France FDI – Emerging Market?

Investment in France fell 77% last year according to the UN’s report on Global Investment Trends (here), to $5.7 Billion.

That’s the report that kicked things off,  since it’s been downhill. The Figaro picked it up with: Les investisseurs étrangers délaissent la France and try to make a disaster bad thing look normal, by saying  the data is volatile and the charts look more like peaks and valleys. Ok but… As support they refer to an outdated document from the Banque de France. Strange.

The FDI inflows for the top 20 economies are here, find France…

FDI Top 20 2013

And once Zerohedge got a hold of it (here), you could count on an interesting perspective.

Foreign Investment In France Crashes 77% In 2013 (Most On Record) To 26 Year Lows And they do a great job with charts…

 FDI France

I couldn’t help thinking that Google’s sale (and loss) of Motorola to Lenovo surpasses a full year of foreign direct investment in France.

Have a great weekend.

Calvin Screaming

Market Manipulation

Calvin ScreamingEvery so often I get thinking about The Manipulated Market. When markets defy logic to such an extreme degree only one of two explanations is possible. 1) Either your understanding of the forces that move markets is so fundamentally flawed that migrant farm work might be more rewarding; or 2) forces are at work which neither the press, bloggers, twitterers, or even Ben Bernanke have the courage to ‘expose’, question, criticize, regulate, or remotely ‘deal with’.

To Big To Fail = Big Enough To Manipulate.

We’re living through a sort of post 9/11 self-reflection while at the same time struggling with the contradictions of rising ‘wealth’ and shrinking disposable income. Capitalism is taking a hit, privacy is taking a hit, and the free market altar seems to be experiencing Alzheimers under stimulus ad infinitum. Some traders make every effort to avoid any and all ‘macro’ inputs to their trading strategy and focus only on: charts, price action, measurable ratios, divergences, volatility, etc. etc. etc. Those traders, presumably investment bank equity desks, and your friendly neighborhood algo are doing well… Very well.

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Credible Confusion

For those watching the gyrations of the S&P Futures, the sceptics are being vindicated. How long will the weakness last is unsure (though I have an idea), but; fear is seeping into the market. The strategy I’ve been following is written about obtusely here, here, and here. The list of red flags which have been raised over the last month is long, and taken individually the market might have easily overlook each. Yet even as the elephant in the room, Mr. Bernanke, tied the lose ends together as optimistically has his communication strategy would permit, traders started looking for an exit.

So that’s all well and good, but what now? The elephant has spoken. Continue reading

Sun and Wine

The ongoing spat between China and Europe is heating up. In response to Europe imposing tariffs on Chinese solar panel manufacturers, China has started to target  (“investigate”) southern European Wine Exports. Now, here in France that’ll touch a nerve, just when we finally get some sun.

Interesting. There’s a bit of deja vu here.

Europe claims Chinese manufacturers of solar panels are selling them below manufacturing cost, in other words, they’re dumping their product on Europe and killing local manufacturing. The European commission is claiming 25, 000 jobs are at risk without the imposed tariffs. Jobs are something Europe needs desperately. In the press there’s conflicting information on the real tariffs. Obviously, they’re in serious posturing/spin mode. Bloomberg, says tariffs as high as 67.5%, Reuters is reporting that they’ve created a ‘initial duty’ of 11.8%.

Last October the US Commerce Department did essentially the same thing (New York Times). Solar has been a political hot potato for the Obama administration. It surprises me that China wasn’t more sensitive to this risk, if they are in fact dumping. So almost a year later they’re taking on Europe. Or Europe has decided to react, depending how you look at it. In either case, it’s a very aggressive stance, and a bigger deal than most people realize.

This US-China Market Review from last Spring, articulates the strategic importance that China places on its Solar Industries.

China is prepared to invest RMB 3 ($480 billion) in the clean energy and energy conservation/environmental protection sectors over the next five years.

As well as its agressive stance:

To hold an advantageous position in future international competition, we must accelerate the fostering and development of strategic emerging industries, control the key and core technologies and related intellectual property rights, and enhance our capability for independent development.

It looks to me like China’s success has been putting pressure on both the US and Europe. Is it possibly the West has failed to innovate around renewable energy and now they’ve decided to rely on protectionist tariffs? Throw in the towel? If that’s the case, it’s hypocritical at best.

Or is China being too aggressive and dumping product to secure a monopoly in renewable energy? They’ve staked these industries out as strategic, and have admittedly a cancer causing reliance on Coal and Oil. I can see why China’s investing heavily. I can also see why they’re fuming. But hitting French wine…

I’ve been intrigued for a few years with solar companies, you can see my early posts on First Solar. So considering the latest spat, I was wondering if Chinese solar companies are trading differently than, First Solar (FSLR) for example.

FSLR-SOL-JASOThe answer is: not really.

So is there a trade here? It’s worth thinking about…

EUR-USD Chart

Something Is Always Parabolic

Gold's Parabolic Fall

The surprise yesterday was gold. We’re always looking for congruence within the paradigms we’ve learned to believe in. I had heard somewhere gold was a safe haven play. During periods of fear or worry, in theory, we should see gold rise while money moves away from risky assets (like the S&P).

That didn’t happen yesterday.

We’ve been told over and over gold is a safe asset, real money. Those rules are too simplistic and after getting burned a few times we start doubting our basic notions. And the press doesn’t bother with details. If gold is up they’ll say “The Fed” and if gold is down, “Cyprus”. In reality information we never see is what drives these markets. In the case of gold it might be sovereigns buying (or selling), Fed fear, short covering, muppet trading, shenanigans in a dark pool, an Asian holiday, or a sublime combination. Traders scramble for an explanation, they scramble to mount another paradigm, to justify tomorrows trade. I do it, you do it, that’s the game.  The game gets easier though when you accept that you’re basing a decision on incomplete, simplistic, and probably false, information. I can tell you categorically, whatever your model is, it’s wrong. In all cases, even Goldman Sachs, a Central Bank, or a sneaky congressman will eventually find his assumptions, wrong. Continue reading

S&P Futures Chart

SPY S&P Futures – Just Part of the Churn?

S&P Futures ChartWatching the schizophrenic twitter kids, you’d think we’re falling off a cliff today. Maybe today’s the day, but it’s been the same for about 2 weeks now. Risk-on, Risk-off – day in, day out. The momentum looks extra convincing today, or does it? The S&P futures chart is unique in my trading memory. It looks to have doubled-up in volatility, yet look at the VIX, we’re at 13, and holding lows, hardly panic. Option players are counting on the Fed’s steady bond buying. Even Gold is playing along with its consisitent downtrend. No worries, right?

My humble opinion is that the VIX is undervalued here, the 10 year bond has been churning as well, but easing upward. In fact, maybe Bitcoin has just taken over from the VIX as a more appropriate fear index! Parabolic…

If the VIX is undervalued, check out some long straddle’s here, the only caveat is that if this churn continues you’ll get burned, adjust quickly…

Cyprus

Cyprus Depositor Haircut – Europe…

CyprusThis weekend a scary thing happened to Cypriots and anyone keeping money in Cyprus (think Russians). If you have under 100,000 Euros before the banks open on Tuesday you will donate 6.75% to the bailout of Cypriot Banks. In return they’ll give you stock. Now if you have over 100,000 Euros you can count on donating 9.9%. Solidarity…

What should you expect on Monday?

Lots of very pissed off savers and empty bank machines. Think how you would feel coming back from a weekend 10% poorer, because the government, the ECB, and your trusted bank decides to confiscate your savings.

Backpedaling might be on the agenda, in either case, this is sending some fear into the markets, it’ll surprise me if the markets shrug this off. As little as Cyprus is for the EU, the precedent will put fear into the Italian, French, and Spanish markets. Today the parliament was presumably going to ratify the money grab. But they’ve just postponed the debate until Monday, which probably means there is dissension in the political ranks… If the measure is rejected The Question will resurface. How does a country exit the Euro Zone? Presumably, Cyprus is the least painful to throw under the bus but that question has a consistent habit of killing the buzz. And that’s what’s going to happen this week. Buzz Kill.

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