Wednesday April 18, 2007 - 03:46:01 GMT
Share This Story
Black Swan Capital - www.blackswantrading.com
â€˘ The New Zealand dollar rose to the strongest in 22 years after a report showed inflation was almost twice the pace the central bank predicted, boosting the prospect of higher interest rates. (Bloomberg)
â€˘ 10-year bond yields- US in 3rd placeâ€¦
Tuesday, April 17, 2007
(%) Country Maturity Yield (%) Latest Spread
Over Treasurys* Previous
6.000 Australia 10 5.968 127.8 5.963
3.750 France 10 4.228 -46.2 4.248
3.750 Germany 10 4.179 -51.1 4.204
1.700 Japan 10 1.700 -299.0 1.705
8.750 U.K. 10 5.084 39.4 5.075
4.625 U.S. 10 4.690 ... 4.737
*in basis points
Source: Reuters and WSJ
â€˘ Key Reports Due (WSJ):
7:00a.m. MBA Refinancing Index. Previous: -4.0%.
â€śSome weasel took the cork out of my lunch.â€ť
FX Trading â€“ Decoupling extraordinaire!
Is it illogical to suggest the bidding up of stocks expresses a degree of confidence? According to the stock analysts I listen to on occasion, I donâ€™t think itâ€™s an illogical thought. Many seem to view the stock market that way. US stocks are approaching their all-time highs. And that makes a lot of traders and investors happyâ€”and probably has a decent secondary â€śwealth effectâ€ť to help US homeowners think less about the sting of lower housing prices.
Bringing this back to the US dollar, itâ€™s interesting to see such a dichotomy, or decoupling, among major asset classes in the same countryâ€”both of which are supposed to express some degree of confidence in said country. The divergence between US stocks and the US dollar is striking. We know there is no reliable correlation between stocks and currenciesâ€”but this is getting ridiculousâ€¦take a look at the week chart comparing the two below:
Itâ€™s always interesting to us to listen to people tell us how much they hate the dollar, but love US stocks. We do understand the earnings translation thing, helping multi-national company earnings, but to be so confident on one side of the US fence and so negative on the other still has us confused. Itâ€™s just one of many things to add to the growing list of things that confuse us on a regular basis.
Okay, what is this â€śmajorâ€ť decoupling telling us? For one, it is telling us relative to the value of the dollar, based on the US dollar index, stocks have NEVER been more expensive. We are well into new high valuation territory using this index (S&P 500 Index divided by US$ Index), as you can see in the chart below:
It leads to another question of course; are stocks too high or is the dollar index too low? Or are both a bit out of whack?
Not sure this little exercise helped at all. But it may shed some light on the fact that two major US asset classes are viewed with completely different lenses. And over time, thereâ€™s a good chance that may change.
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."