Macro-Strategy Synopsis: China is the Story, Not Crimea

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?


Neil Azous, Rareview Macro LLC
Neil Azous, Rareview Macro LLC

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