Wednesday, Jul 11, 2007
US stocks have now peaked
The Times: Dollar hits euro low as credit fears widen
The liquidity crisis is gathering pace.
The S&P500 has put in a triple top and IMHO will be up to 20% off its highs by the end of the year
Prepare for all asset classes to get hammered in the rush for liquidity.
Posted by sold 2 rent 1 @ 07:35 AM (168 views) Add Comment
11 Comments
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1. p. o. o. r said...
I'll be watching the markets with interest over the next few days - I have a feeling that currency, shares and housing is going to dominate the news for the next few weeks.. Then we will have another interest rate rise...
2. Stoatgobbler said...
I think that cable nudging higher, and the de facto tightening implied by that may stay the BoE's hand a little bit. I'm a big seller of the USD now, and I think this will begin to unlock the artificial, far from equilibrium situation we have in Asia, which will cause rates to push higher, the eventual end result of which will be me buying a big fat house in Chelsea for 27k. Or something.
3. Stoatgobbler said...
Whilst I'm at it, CDS spreads over BOBL has exploded this morning. Risk aversion is the talk of the town, perhaps this is the strat of the rush for the exit.
4. Mrmickey said...
At some point in time the Bank of Japan will have to raise rates to save the Yen from collapse that will mean toast for the carry trade and toast for the US dollar.
5. mrmickey said...
At some point in time the Bank of Japan will have to raise rates to save the Yen from collapse that will mean toast for the carry trade and toast for the US dollar. You can kiss goodbye to all those cheap goodies from the far east.
6. p. o. o. r said...
Does anyone know what percentage of our imports are paid for in USD - the exchange is now over $2 to £1, however I remember going to the USA 5 to 7 years ago, and the rate was only $1.44 to £1. So lets say over the next couple of years the $ returned to say $1.5 = £1 that will push prices on our $ imports up by 25% - How would that hit the UK economy, surely that would cause a few inflation problems for the MPC.
7. Stoatgobbler said...
But of course the higher GBP cost reduces the inflationary effect - de facto tightening...
8. dohousescrashinthewoods said...
We set up a head of steam in global imbalances and the pressure has been building.
Even if they could hold it this time, it would be harder to hold next time.
I don't get a sense that anyone had a strategy for unwinding it in an orderly way - they just kept putting it off and figured it wouldn't blow on their watch.
Not exactly a sustainable, wise or considerate strategy.
9. monty said...
Stoatgobbler
Just curious, but what are you selling the dollar against? It the cheapest it's ever been in 10 years against most of the majors. Good luck finding that £27k Chelsea pad. :-)
10. Stoatgobbler said...
Cheers monty, still looking!
I'm looking for 2.10 cable, so have some exposure there, but really looking for a big dislocation in USD/Asia so picking up sub 100 strikes in USDJPY, expiry 9 months to a year ish, depending on price. Cheap by anyone's standards, thanks to vol being crushed for so long. Hunting the black swan...
11. Scouser said...
Great point p.o.o.r . The US is ahead of us in their economic cycle. The fed has already taken most of its action and the US is already taking the pain. Equally though this will pass and the US will be on a recovery trend before the UK ( and probably whilst the UK is still struggling to cope with high rates). It will be interesting to see what the exchange rates do then. Buying oil at $72 or more when sterling is at $1.50 would be an unpleasant scenario.