Time to buy VIX? (2)

Why is VIX perfect?

Because the index is traditionally moving in the opposite direction of the US indices. But, unlike them, its downward potential is limited to about 10, or just below that limit - about 20 percent of its current levels.
Unlike six months ago, however, when US indices suffered from total lack of volatility and traded only at new and new record values, the unthinkable happened and volatility erupted, bringing this index to levels over 30 for a moment.
After a long recovery of indices, the indicator returned again to its lowest values. But the danger of a new eruption is much greater than half a year ago.
Or, the index can easily and quickly double, and why not, even tripling its value, with limited potential for decline. Or a yield-risk ratio of 5 - 20% drop, versus 100% growth.

Time to buy VIX? (1)

What's happening on US stock markets can be described as extremely dynamic and dramatic. But, as they say, we've already seen something like that before. Two times. And just before a drastic drop in US indices by more than 40 percent. Yes, I recall 2000 and 2007.
And while it does not necessarily have to end the same way - with crisis and crash (although it is possible, given that it has already passed 10 years since the last crisis), at least we can enter the "bearish cycle" - that is, a decrease in indices of more than 20%.


How?

The scenarios of the events in above mentioned two years, and then witnessing a fall in the index of more than 40%, seemed this way:
Reporting a historical record => Correction between 8 and 13% for about four weeks => Upward test for the next three or four months => Unsuccessful breakthrough or minimal false break at the top => Direction down to test the lowest value of the correction => And finally break down when breakthrough at the stated lowest value. Does it seem familiar to you?
If you think that a similar scenario can be formed at the moment, you can trade it with the VIX.
And the moment of his purchase is "ripening" again. Because the volatility index is again starting to look like an "asymmetric investment" - one with a limited drop potential and unlimited growth.

Italy is diving in a deeper political crisis (2)

Overall, the bond market in the euro area has become chaotic after the published documents.
In fact, Italy's debt problem is becoming more and more obvious. The country's debt to GDP is at the expense of 132%. And by adding to this size the much larger size of Italy than Greece, what could be the consequences for the EU?
For comparison, the debt of Greece, which was saved by its European partners, amounts to 180.8%.
According to Italian publications, two of the top populist parties, following the inconclusive results of the March elections, intend to ask the ECB for a 250 billion-euro debt relief program.
According to the 39-page document, there is also a possibility to look for a way out of the eurozone. This is a proposal the two parties have made in the past.
Following the publication of the report, the two populist parties have said that this is an old version that has been seriously modified. Particular attention was paid to the part leaving the eurozone, saying that the single currency is not in doubt at the moment.

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Italy is diving in a deeper political crisis (1)

The inability to form a government in Italy after the leaders of the populist parties have withdrawn leads to the country's entry into a deepening political crisis.
The Five Star leader has said he is considering an impeachment proposal for President Sergio Matarela, while anti-immigrant party leader Mateo Salvini has hinted at a conspiracy and a call for new elections.
Meanwhile, the euro has depreciated against the dollar, in an environment of increasing political uncertainty in Europe.
More and more analysts are concerned that the next financial crisis in Europe may begin in Italy.
The two populist parties have already hinted that they would want to alleviate conditions from Europe, the country's overwhelming debt.
The latest attack on United Europe has become a reality in Italy. Huffington Post Italia prints a government offer in mid-May, according to which populist parties in the country are planning to ask the ECB for debt relief of 250 billion euros.
After the report, interest rates on 10-year Italian bonds reached their highest levels in two months. Interest on government bonds and other euro area countries rose, with Greek 10-year bonds rising by 25 basis points.

Citigroup: Interest rates of 4-4.5% on ten-year US bonds are possible

For global financial markets the situation sounds like a return to normal. The sale of US government bonds, which triggered an increase in interest rates to levels unseen in many years, points to "normalization" on the market, according to Citigroup.
The bearish breakthrough in the world's largest bond market is an underestimated risk, according to Mark Schofield and Ben Nabaro, from the US investment bank. A similar phenomenon in bond markets has not been since the financial crisis, experts recall.
Recent comments suggest that investors are more attached to the scenario where rising interest rates and a strong dollar hinder recovery and lead to a reduction in interest rates rather than a scenario in which interest returns at pre-crisis levels.
These comments come true in an environment of return to global debt markets, with interest rates on 10-year bonds rising above 3.05 percent, a very high level of resistance.
The bulls, with regard to US bond investors, point to the rise in oil prices and overestimated market expectations as the main reasons for interest rate rises above the psychological limit of 3%.
The positive performance of the US economy as well as inflation would justify a premium between long-term and short-term bonds, which means we can see an increase in interest rates on 10-year bonds to 4-4.5%, according to Citi.
Even if they do not reach such levels, raising interest rates on 10-year bonds can in itself create a self-stabilizing mechanism. It is for this reason that many traders believe that interest on this kind of US bonds will decrease rather than continue to rise.
Interest rates of 4.5% are not Citi's base scenario. This is a hypothetical scenario. However, this scenario should not be so overlooked by the market and seems to be underestimated, the bank said.

Long positions in the dollar are modern again

The bets on the dollar are again up-to-date after weakening the tension between the US and China and the postponement of the trade war.
In addition, the expectations are that the Fed will raise the interest rate at its next meeting in June, after failing to do so in May.
The dollar index added 2% since the beginning of the month to date, according to FactSet statistics.
The net long positions of speculators for the week until May 15 are again on a positive territory, for the first time since mid-March, just before the first quarter of Fed's interest rates hike for the year.
Better expectations are already evident in the spot market, where the dollar is booming, against the backdrop of the improvement in the interest rate differential, according to Jane Foley, Rabobank's chief currency strategist.
Investors are monitoring outgoing data for further evidence of the market sentiment and the future direction of green money.
In the first two weeks of May, leverage accounts held net long positions in dollars for the first time since January, according to Stephen Gallo, head of the Forex Trading Unit at IMO.
The US dollar is experiencing exceptionally strong growth, according to Mark Chandler, global strategist at Brown Brothers Harriman. This is a function of rising interest rates and the gradual rise in confidence that the Fed will raise interest rates three times this year, not twice as expected, the expert added.
The next Fed meeting on interest rates is on June 12-13. Futures indicate a 95% chance of raising interest rates by 25 basis points next month.

The bitcoin at $20,000 by the end of the year?

After the bed start for the bitcoin for the past week and falling momentarily below the 8,000-dollar psychological limit, the cryptocurrency started the new week with growth.
The bitcoin rose momentarily over $8,500 for a coin yesterday. After reaching the highest level of $8,575, the cryptocurrency went back below $8,400. Late last night the bitcoin was exchanged at $8,370.
However, according to many experts, not everything is lost to the bitcoin. Yes, it may not be able to overcome the $10,000 psychological limit and go back down, but we will hardly see $6,000 again, analysts say.
There are also some very optimistic experts about the future of the cryptocurrency.
For example, according to Rodrigo Marquez, CEO of Atlas Quantum, one of the Brazilian cryptocurrency trading platforms, a drop below $8,000 for the bitcoin can be identified as a finding of the bottom. He expects the bitcoin to go up and reach the psychological limit of $20,000 in six months. This is the highest value for the bitcoin in history reached in December of last year.
Apparently the expert expects a repeat of the scenario from last year and a strong rally in the last months of this year.

Jens Weidmann - the next President of the ECB?

Jens Weidmann reports that he is ready to succeed Mario Draghi as the next president of the ECB. The strongest trump to the head of the German central bank so far is that he wants the position. But if this is enough to get the role of the most important "central banker" in Europe, we are yet to see.
Weidmann believes that every member of the Governing Council of the ECB should have a willingness to contribute to monetary policy and under another role, the German said in a special weekend interview.
According to Weidmann, public discussions about who will inherit Draghi at the end of his mandate from the end of 2019 began "too early". The European authorities will hardly decide who will be Dragh's heir this year, Weidmann said.
Weidmann became head of the German central bank in 2011. So far, he refused to comment on his chances of being a heir to Draghi and a key candidate for the ECB's post.
Weidmann is considered to be one of the most aggressive Eurozone members of the Monetary Committee.
The expert, however, is expected to have a lot of competition for the post. So far, other representatives of the Monetary Policy Committee have expressed their wish for the position of Draggi. One of them was Erkki Liikanen, the head of Finnish central bank. On Saturday, he said he was open to considering the proposal for this post if invited.
Weidmann has not once and twice announced the recent ending of the ECB's incentives. The eurozone is doing well and its economy does not need such incentives, says the German candidate.
The next ECB interest rate meeting will be on June 14th. It is expected to give more clarity about the future of monetary policy.

A record number of billionaires and wealth around the world

There are more billionaires in the world right now than ever, according to a new study of the Wealth-X Billionaire Census.
The number of the richest people in the world has risen by a remarkable 15% compared to last year and by the end of 2017, it now amounts to 2 754. The peak of 2 473 from the 2015th year was overcome.
The synchronization of world economic growth and stock market stock prices was the main reason for the accelerated growth in the number of billionaires, says the report.
Asia's billionaires have grown the most, rising 29% in the past year, compared with 11% for North and South America and 9% for EMEA.
As a result, the number of billionaires in Asia exceeded that in North America for the first time in history. There are 784 billionaires in Asia, compared to 727 in North America.
The global fortune of world billionaires rose 24 percent, to a total of $8.2 trillion. Again, Asia's billionaire wealth has risen steadily, from 50% in the past year, compared with 22% in the Americas and 12% in the EMEA.
The growth of Asian billionaires comes mainly from China, Hong Kong and India.
In terms of cities, most billionaires live in New York, followed by Hong Kong, San Francisco, Moscow, London, Beijing, Singapore, Dubai, Mumbai and Shenzhen.
The universities that produce the most billionaire include Harvard, Stanford, University of Pennsylvania, Columbia, MIT, Cornell, Yale and others.
In terms of industries, finance, banking and investment intermediation, the biggest share in the creation of billionaires, followed by industrial conglomerates, real estate and industry and technologies.

Gold below $1300

Quotes of gold fell sharply in trading on Tuesday, losing more than $15, overcame key support for 1300 and reached $1292 per troy ounce by the end of the session.
The yield of US ten-year bonds rose to a maximum over the past seven years, reaching a growth rate of 3.05%. For the first time since 2008, the income from investments in US government securities has become comparable to the yield of the stock market. Retail sales in the US grew by 0.3% in April, as predicted. On an annualized basis, retail sales grew by 4.7%, while expenses outstripped inflation, which was 2.5%. From the speeches of representatives of the Fed in recent days, it was possible to conclude that the regulator can raise the interest rate above 3%, which will lead to even greater growth in yield bonds.
The World Bank published its forecast for 2018, according to which the price of gold could strengthen by 3% due to the increased investment demand for the asset, primarily from the Central Banks of different countries. In the medium term, demand for precious metals will decline due to the improvement of the overall political and economic situation in the world and the growth of interest in alternative investments.
Gold for the first time in a few months managed to overcome the lower limit of the trading range of 1300 dollars. The development of further impulse of decline will depend on the nearest economic releases of the US and further geopolitical conflicts in the Middle East.

Brent rose to 3 and a half years maximum

Oil has risen again as a result of continued tensions in the Middle East region, which may have an impact on the supply of raw materials.
The Brent, with delivery next month, returned to the highest levels in the past three and a half years, adding 1.11 dollars, or 1.4% to its value, to a level of 78.23 dollars per barrel. This was the highest level of closure since November 2014.
The rise in US crude oil was not as remarkable as the raw material rose 26 cents, or 0.4 percent to a level of $70.96 a barrel.
Concerns about what's happening in the Middle East have made investors position themselves more in Brent oil.
Collisions between Palestinians and Israeli militaries in Gaza, leaving several dead protesters behind after a US Embassy in Jerusalem opened, have been largely underpinned by rising oil prices.
Last week, Brent rose 3% and US crude oil 1.4% as a result of Trump's decision to abandon the agreement with Iran on the country's nuclear program.

Interest rates on 10-year US government bonds again over 3%

Interest rates on 10-year US government bonds rose again above the exceptionally high level of 3%. This has led to a new appreciation of the dollar against other major currencies, and especially against European currencies.
Interest rate hikes are in the midst of new concerns about the breakdown of US-China talks. There are concerns that trade clash and war between the two sides is inevitable.
This is expected to trigger a rise in inflation and hence lead to a stronger rise in interest rates than current expectations.
Otherwise, the rise in the dollar has already had a very negative impact on the levels of metal trade. Gold went back to trading at $1,310 and platinum and silver fell to $903 and $16.30 per ounce.
Interest rates on 10-year US government bonds rose 2.3 basis points to 3.018 per cent on an annual basis, while those on 30-year bonds added 1.9 basis points to 3.148 per cent on an annual basis.
The popular interest spread between 2 and 10-year bonds remained at a level of 46.6 basis points, or close to its lowest levels in nearly a decade.
It is precisely the potential reversal of the interest rate curve, James Bullard warned yesterday. According to him, the interest rate curve may gain a negative slope at the end of this or early next year.

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The star of "The Big Short" recommends shortening Deutsche Bank

The name Steve Eisman, a cash manager from Neuberger Berman Group, may not tell you anything, but you probably think of his character from the popular movie "The Big Short". This is the analyst, who predicted the financial collapse before the 2008 crisis.
And Eisman has a new offer to investors who wonder what company to shorten ... And it is - Deutsche Bank AG. The largest German bank, which is facing serious difficulties and is in a period of crisis, on its way to restructuring.
Deutsche Bank really has problems with its profitability, said Isman, in a special interview for Bloomberg Television, in Hong Kong. According to him, Deutsche Bank is a troubled bank. Eisman believes that its shares should be drastically reduced, the expert also said, adding that the low-capitalized bank would probably have to raise its capital next year.
Eisman also recommended short stakes against Canadian financial companies, confirming that he is still short with the Wells Fargo & Co. bank.
Earlier Eisman's bets against the mortgage market before the 2008 crisis were described in Michael Lewis's 2010 "The Big Short" book, based on the stories of cash managers who benefited from the financial crisis.
Eisman joined New York-based Neuberger Berman after he closed his Emrys Partners hedge fund in 2014.

Oil rises after Trump withdraws from the deal with Iran

Oil rose during the Asian trading session after President Donald Trump announced that the US would withdraw from the nuclear agreement with Iran and re-sanction the country. This has led to an increase in oil prices.
US crude oil rose $1.58 to $70.64 a barrel after it fell by 1.67 dollars to 69.06 dollars a barrel on Tuesday. Brent rose 1.85 dollars to 76.70 dollars a barrel, after losing the previous day of 1.32 dollars.
Meanwhile, the Japanese Nikkei 225 fell 0.4 percent to 22 412.96 points, while the South Korean leading index lost 0.1 percent of its value. Hang Seng, Hong Kong, added 0.5% to 30 552.57 points.
According to market observers, geopolitical risks are rising, especially related to Iran and the price of oil.

The dollar took a breather

The central event in world markets is still the news of the US withdrawal from the nuclear deal with Iran. This news has pushed up the prices of crude oil, which are already getting support on the wave of the still-ongoing OPEC pact and the decline in oil and petroleum products in the States.
The foreign exchange market was characterized by low activity yesterday. The dollar first accumulated gains in the European session, but then lost almost all of its growth against the background of weaker than expected data on industrial inflation in the US.
According to the data provided, the producer price index (PPI) in annual terms grew less than expected. It was assumed that the indicator will add 2.8%, but it grew by only 2.6% against the growth for the previous period under review by 3.0%. On a monthly basis, the index added 0.1% against the forecast of an increase of 0.2% and growth in March by 0.3%. The base value of the producer price index (PPI) also declined year-on-year, adding only 2.3% against expectations of 2.4% and the previous value of 2.7%.
The US dollar on the wave of these figures stopped pressure on major currencies and rolled back from the local peaks.

US stocks fell due to Trump's decision to withdraw from the Iranian contract

US stocks fell on Tuesday after President Trump announced his intention to abandon a nuclear deal with Iran. The S&P 500 fell 0.03% to 2,671.92. At the same time, seven of the 11 main sectors completed trading in the red zone. The Dow Jones index added 0.01% to 24360.21. The Nasdaq index rose by 0.02% to 7130.70. Strengthening of the dollar continued: the ICE dollar index, which rates the US dollar to a basket of six major currencies, rose by 0.3% to 90,055 and now it continues to grow. Futures on the stock indices indicate mixed opening today.
President Trump's statement that the US is withdrawing from a multilateral nuclear deal with Iran, concluded in 2015, has become the main driver of the market, as the reporting season for the first quarter ends. So far, 78% of S&P 500 component companies reported earnings that were higher than expected. But optimistic reports have not provided the expected increase in the stock market, as investors are concerned about the impact of tightening the monetary policy of the Fed and the possibility of a trade war between the US and China.

Trump failed the cryptomarkets

Major cryptocurrencies on Wednesday are falling in price, as world markets are in turmoil after US President Donald Trump broke off a nuclear deal with Iran. At the same time, after a significant collapse on Tuesday evening, on Wednesday, the rate of decline of the cryptocurrencies has slowed somewhat and, probably, in the short term it will be already on such significant levels.
The bitcoin rate declined 0.13% overnight, to $9,112 with a capitalization of $155.7 billion. The rate of Litecoin was weakened by 3.25% to 154.6 dollars with capitalization $8.7 billion. Ethereum at the same time dropped by 1.16% to $725.8, its capitalization is $72.4 billion. The rate of Ripple fell by 2.5% overnight, to $0.78 with a capitalization of $30.6 billion. The total market capitalization of the cryptocurrencies reached 422.3 billion dollars.

Powell: The process of normalizing the policy of the Fed is without prejudice to the financial markets

The Fed has made it clear to the markets that it intends to raise the interest rate gradually, and investors are probably not surprised by the actions of the Central Bank, said the head of the Federal Reserve, Jerome Powell.
The process of normalizing the Fed's policy is taking place without damage to the financial markets, and the expectations of traders regarding the future policy of the Central Bank seem to be in good agreement with the expectations of the Fed's management, he said at a conference organized by the International Monetary Fund (IMF) and the Swiss Central Bank.
According to Powel, if the situation in the economy meets expectations, the markets are probably not going to be surprised by Fed's actions.
The Fed raised the rate six times since December 2015, each time by 25 basis points. The last time the rate was raised in March 2018 - up to 1.5-1.75% per annum, and the leaders of the Federal Reserve made it clear that they expect two more hikes this year.
The gradual increase in the rate helped to maintain the Fed's stimulating policy, which supported the growth of employment and economic recovery in the US, and also contributed to a gradual increase in inflation.

Nomura: Shorten the dollar in the summer

Temperatures are rising, and hence the tensions in foreign exchange markets. Japan's largest financial institution, Nomura Holdings Inc., has one offer for currency traders. And it is - to shorten the dollar in the summer.
The financial institution is of the opinion that a short dollar may be a good idea for the next three to four months. The recommendations are to shorten the dollar against the yen and the euro.
Since January, green money has been the strongest base currency, backed by Fed's rising interest rates.
Yesterday, the Fed kept the level of interest unchanged, warning that inflation was almost at the target level. Nonetheless, Nomura is of the opinion that the interest rate increase, which was not implemented yesterday, may begin to slow down.
And in an environment of expectation of ending the incentives from other leading banks around the world, the dollar may begin to decline compared to other major currencies, Nomura said.
Together with rising US inflation, Nomura believes that further interest rates, albeit at a slow pace, will have a very negative impact on the bond market.

Fed kept interest rates unchanged

The Fed kept the interest rate unchanged yesterday, but signaled that the inflation target was reached. Thus, the reserve, though disappointing investors expected an increase in interest rates at this meeting, opened its way to a June increase in interest rates.
The dollar initially declined, but subsequently recovered its losses. The euro returned at trading levels below 1.2000, with the pound continuing with its exceptionally strong impairment. Early this morning, a pound is exchanged for 1.3595 dollars.
The renewal of the Fed's inflation target is a major step after nearly six years in which consumer price growth in the world's largest economy is below the target of 2%.
The Fed also commented on the weak recent data on the labor market, saying labor market activity was slowing down, but it has performed well over the past few months.
In any case, at the next meeting on June 12-13, the Fed is expected to raise interest rates by 25 basis points after not doing so yesterday. Or, the market has bet almost 100%, that we will see a rise next month, unless something really dramatic happens.

Platinum and silver became even cheaper than gold

Platinum and silver continue to fall cheaper than gold. Indeed, yesterday, platinum was threateningly approached the psychological limit of $900 per ounce. Silver tried to test its bottom at $16.15.
And while at this stage both metals are able to hold on to the important support, a breakthrough could initiate extremely massive sales and closing down long positions after triggered stops.
It is quite possible to see spikes in platinum and especially in silver, which is extremely volatile and is traded at relatively weak volumes.
Such a spike can safely take the silver with a dollar, and why not with a dollar and a half down. Recall that there are plenty of holidays in many places around the world, which would further weaken the liquidity.
So, all investors should be extremely careful. Meanwhile, we see how the platinum-gold ratio is already close to its record bottom after it is at a level of 0.6870.
At the same time, the gold-silver ratio is at a level of 80.5, which is also extremely high, according to historical standards.
By comparison, in the long run, this ratio was about 40, as every time when it reached this level, it rebounced above the psychological limit of 80.