We currently see a correction of the massive selloff, which triggered some panic all around the financial space. Investors, espec leveraged guys started to panic, bears who had been chasing it before and missed the break started to panic, aaaaaand especially the guys at ECB started to panic: "WTF??? Collapse in bonds when we do QE? + EURUSD up to 1,15 from 1,05 when we wanna fck our ccy? .... Guys Let's just frontload QE to May and June!" .... ah yeah, and don't forget to inform our best Hedge Fund manager friends a day before... ;-)
I can tell you stg, which historically and statistically is probably true: fckrs tend to fck things up in the long run! + They always try to fck around meanwhile a bit :-)
But seriously... this Central Bank is probably the most idiot of all. I don't say everybody is so stupid there, but as an institution its a crap IMHO. They are always behind the curve, they let the mkt to frontrun them for 8 months, they started somthing totally unnecessary, as I still believe QE was not and is not necessary in terms of fighting against deflation. (Where is deflation???). They cause further asset bubbles and force the whole world into excessive and irrational risk taking, which had and will have even more serious consequences.
And this is the point we arrive to Bunds (and to long end European bond yields in general)
Look at what happens when mkt suddenly loses confidence and all its buying power on an extremely leveraged product! Look at the chart and think what a move like this causes to P/Ls and VaR limits. Think about what could have happened if ECB had not stepped in to intervene.
This pattern will repeat more times, and it will be more and more dangerous. Why? Because Bund and European yields' pricing is simply stupid and can not be fundamentally justified at these levels in the long run. They are just distorted by central planning.
"Believe me", in a longer period of time (e.g. 5-10 years) nothing is bigger than the mkt itself, not even a Central Bank! And what is mispriced will be repriced to reality, and will be repriced even quicker if you force investors to pick up dimes in front of a bulldozer. This means the ECB may think they are powerful, but through leverage their power is multiplied to form a monster, and the monster they create can finally destroy everything. Do they have an exit strategy for this?
So for the future I think the following is the risk: ECB heats leverage further, while macro picture improves quicker in Europe, but they don't acknowledge it. EUR startes to be squeezed and stregthens, bonds start to sell off from time to time, periferia spreads widen, this will cause more volatility and more repricing of risk valuations and models, at some point it will hit equities too. If meanwhile CPI picks up (and people forgot what a beast it can be when it starts to jump), commodities will generally reverse from bearish to bullish, espec when EURUSD reverses.
Anyway, this is just a theory for the future. Until and then trade the charts and price action which stand for itself!
I can tell you stg, which historically and statistically is probably true: fckrs tend to fck things up in the long run! + They always try to fck around meanwhile a bit :-)
But seriously... this Central Bank is probably the most idiot of all. I don't say everybody is so stupid there, but as an institution its a crap IMHO. They are always behind the curve, they let the mkt to frontrun them for 8 months, they started somthing totally unnecessary, as I still believe QE was not and is not necessary in terms of fighting against deflation. (Where is deflation???). They cause further asset bubbles and force the whole world into excessive and irrational risk taking, which had and will have even more serious consequences.
And this is the point we arrive to Bunds (and to long end European bond yields in general)
Look at what happens when mkt suddenly loses confidence and all its buying power on an extremely leveraged product! Look at the chart and think what a move like this causes to P/Ls and VaR limits. Think about what could have happened if ECB had not stepped in to intervene.
This pattern will repeat more times, and it will be more and more dangerous. Why? Because Bund and European yields' pricing is simply stupid and can not be fundamentally justified at these levels in the long run. They are just distorted by central planning.
"Believe me", in a longer period of time (e.g. 5-10 years) nothing is bigger than the mkt itself, not even a Central Bank! And what is mispriced will be repriced to reality, and will be repriced even quicker if you force investors to pick up dimes in front of a bulldozer. This means the ECB may think they are powerful, but through leverage their power is multiplied to form a monster, and the monster they create can finally destroy everything. Do they have an exit strategy for this?
So for the future I think the following is the risk: ECB heats leverage further, while macro picture improves quicker in Europe, but they don't acknowledge it. EUR startes to be squeezed and stregthens, bonds start to sell off from time to time, periferia spreads widen, this will cause more volatility and more repricing of risk valuations and models, at some point it will hit equities too. If meanwhile CPI picks up (and people forgot what a beast it can be when it starts to jump), commodities will generally reverse from bearish to bullish, espec when EURUSD reverses.
Anyway, this is just a theory for the future. Until and then trade the charts and price action which stand for itself!
