Monthly Archives: August 2016

Confusion Reigns Supreme.

It has been an awfully hot summer in Spain. I did well enough (you can always do better) while sail racing intensely with my team, and, sadly, it’s time to engage in something more substantial. Not that I really crave for substance at this “Prozac” time of the year. I love the pleasures inherent to my bourgeois way of life that, save for my adrenaline generating sail racing, and abundant brainstorming, blend nicely with “easy economics”. So let me disclose my current emotional bias in favor of the Welfare States, Easy money, Easy credit, Liestatistics, Hail Mary passes, NIRPs, QEs, and bubbles of all kinds. They all increase the apparent NAV of our accumulated wealth. Next step is hugging good old Heli-Ben -and I’m real close to that right now.

No, I am not drunk! But I’m not serious anyway. This summer has further eroded my year to date return, as the sovereign spreads -and all others- collapsed to mind-numbing figures (considering the underlying fundamentals). I underestimated the quest for yield, and CB resolve, once again. On top of that, and confirming the fact that bad news rarely travel on their own, the Fed managed to contain and reverse, USD appreciation -that didn’t help.  My new updated return YTD is only 3% by now. When you are not happy, it helps to laugh at yourself -and anything that moves as well.

For an insight of the logic of these moves, I cherry picked two charts, on the fundamentals of the Italian Sovereign spread.20160713_italy_07d2b89a7-57ae-4550-8ddd-498409cc7bbc

And another two, related to the consistency of the USD weakness of late. Of course, in the new CB economic textbook, an upswing in the Ted spread is a clear precursor of an imminent dollar depreciation (excess dollars around?!!!). Am I being too sarcastic for my own good?8-TED-spreadABOOK-August-2016-TIC-TED Continue reading