MarketsMuse Editor Note: For those with a “macro mindset”, i.e. investment strategy with focus on global economic events and related opportunistic and/or risk reduction themes, a.m. note from Rareview Macro’s Neil Azous in the “Sight Beyond Sight” note struck a chord, if only because Azous seems to be continuously ahead of the curve when it comes to focusing on what only becomes clear to others after the opportunity becomes a fait accompli.
“…We begin today asking two hard questions.
1. How real is the China stimulus conversation and does the Street need to temper its short-term views on local Equities?
2. Will Crude Oil and Gold begin to challenge the Commodity length?
What this means is that no one was prepared to start 2014 with a much weaker profile in China relative to outsized gains in Commodities.
So the question now becomes: What if that profile started to reverse now and have the signals of that in the market already been sent?…”…
Another critical insight:“..Despite the lower levels of liquidity relative to other local currencies very rarely does the New Taiwan Dollar (USD/TWD) show up on one of our monitors. Interestingly, the Dollar relative to Taiwan had the largest positive risk-adjust return across both regions and assets. Coincidently, the follow through also led to a multi-year trend break in the currency cross. The asymmetry on the upside now appears significant…
One explanation for that sudden move – and one that will likely not be observed elsewhere – is that significant portions of the Target Redemption Forwards (TRF) used by companies to make profits while the Yuan appreciated are domiciled in Taiwan. Remember, many highlighted CNY 6.20 as being a pain threshold for these structured products to begin to trigger losses for corporates…”
For MarkesMuse readers who might otherwise be intrigued about Sight Beyond Sight “sightings”, today’s a.m. blast to a very lofty group of sophisticated investment manager subscribers highlights the following topics…(we caveat with you need to have a macro perspective to truly appreciate this content):
- Target Redemption Forwards (TRF) Impact Taiwan?
- Did China Quietly Start a New Round of Fiscal Stimulus?
- Bank of Japan’s Public Relations Campaign Continues to Disappoint
- Does Crude Oil and Gold begin to challenge the Overall Commodity length?
- Model Portfolio Update: Add long iShares China Large-Cap ETF (FXI) position
- Model Portfolio Update: Add long large cap (SPY/DIA) vs. short small cap (IWM) position
Sight Beyond Sight provides 2-week free trial and you don’t need to submit your credit card info to get the trial..Link to the website is right here