Friday, October 30, 2009

Living in a risk-on risk-off world


US GDP came out yesterday at 3.5% for the third quarter and investors ran to find risky assets. The last two weeks before GDP saw negative stock markets and tepid economic news. Risk-off was the trade. There is no clear intermediate-term view for the markets. I say intermediate because there is a the general belief that for the longer-term equities should move higher in a recovery, bonds should fall and the dollar should be in a downtrend as long as the Fed QE-type program is in place. Investors are looking for a confirmation in an news immediacy that they should invest. If they do not have the right conditions, then we move immediately back to safety.

This switching behavior has been the market characterization for the last nine months. We have an underlying trend which is stock up, commodities generally up, bonds flat, and dollar down. But don't get too comfortable with this environment because there will be short-term reversals which clear out some of the opportunistic traders and provides continued risk. We are seeing this risk come back in the form of higher volatility.

This is the environment we are living in and there seems like there is little tat has changed this behavior.

Thursday, October 29, 2009

Ceres and short-sightedness

An interesting piece of trivia

"The statue of Ceres on top of the Chicago Board of Trade Building has no face. The powers that be at the CBOT at the time had determined that no building would ever be taller than the CBOT building, so it was not necessary to put a face on Ceres. No one would ever be close enough to see her face, these short-sighted men thought."

from John Lothian