Market Thinking

making sense of the narrative

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Month: October 2019

Rugby and Markets

Markets are often emotional things, never more so than last Saturday, when England produced a fantastic performance to beat the favourites New Zealand in the semi finals of the Rugby World Cup in Japan. After the game, the immediate question Read more…


Rotations and Trend Changes

The $ has lost momentum, as have the major $ bond indices, all of which have had a tremendous run year to date, suggesting profit taking as year end starts to come on the radar. Also very interesting to note the continued unwind of the momentum over value trade in Equities (click on header for more)


Politics and Markets

Sterling is rallying for market reasons more than politics, but the DXY is rolling over suggesting a possible rotation back to non US Equities is coming. This also makes sense as and when Wall Street starts to at least partially price in Elizabeth Warren. While almost all her declared policies are bad for the S&P, it is her stance on fracking that threatens a genuine financial crisis and a mortal blow to almost the whole US ‘alternatives’ sector (click on header for more).


Making sense of currencies

The following post is a long form read about the principles of Market Thinking as applied to currencies. The short take-away is that most of the market’s mental models about currencies arise from a combination of theory and practical experience of the boom/bust behaviour of emerging markets over the last 75 years. Taken as snapshots, these models can appear confusing and contradictory; sometimes growth is good for an exchange rate, other times bad. Sometimes it is all about the current account, other times it doesn’t matter at all and only interest rates are important. Other times none of it seems to work. Not only do we try to make sense of which narrative works when, we also note that most developed market exchange rates move within a + or minus 10% range which means limited real world impact. And this includes Sterling over Brexit. Moreover, despite frequent attempts to treat China as an emerging market for FX purposes, it refuses to behave as such, leading to multiple failed narratives here too. (click on header for more)


Modest good news has an exaggerated impact.

As Mark Twain once said, “it’s not what you don’t know that kills you, it’s what you know for certain to be true that turns out not to be”. As such, the sharp response in markets to assorted mildly positive Read more…


Tesla… S,3,X,Y Models and now a pickup and a semi

Forgive the rather obvious innuendo, but it was in fact intentional by Elon musk to label his cars this way. The point of the post is that as Tesla completes its line up, the cars are losing their competitive advantage, Read more…


The New BoE governor needs to be a technocrat.

The UK press are once again discussing the candidates for the next Governor of the Bank of England, focussing primarily on the political ‘suitability’, but I would put in a plea that we need to see a technocrat rather than Read more…


When the bigger fool……is you

In our current upside down world of investment, where bonds are bought for capital gain and equities for income, and where an obsession with low volatility has driven a dangerous rush by institutional investors into ‘alternatives’, such as Private Equity, Read more…