The Revenge Of ‘Econ 101’
News flow slowed to something approximating a trickle ahead of Jackson Hole, a consequence of the summer doldrums and the proximity of a risk event.
The lull, in conjunction with an apocalyptic spiral in European gas and power prices, gave analysts and former traders an opportunity (read: excuse) to dust off economics textbooks in the service of explaining and forecasting FX moves. I mean "dust off" figuratively, but I'm reminded that I actually kept my physical textbooks for years, despite bei
The cost of war.
Hopefully, next time the intended target is the actual casualty and this war ends sooner rather than later.
Speaking of Econ 101, ‘getting through’ the gas crisis essentially means developing the LNG export capacity of producers (US) and import capacity of Europe. As more US gas makes its way to Europe and the gas market becomes more global rather than local Europe’s gain will be our loss in terms of spot price/henry hub.
Jaded. So Jaded.
Love it.
But I probably should go shave my goatee.
I worked for a large asset manager back in the mid-90s who had a very hot currency fund, until all of a sudden it was not (hot). Sir John Templeton once said that the four most dangerous words in investing are “this time it’s different”. I beg to differ, the most dangerous ones are “we hedge currency risk.”
It has been easy enough to see since the beginning of the Ukraine conflict that this coming winter is going to be the pivot point.
I suppose some people know how to trade this whole situation but from an investment perspective I’m not touching anything until March.
In a strange sense it is almost as if the euro is becoming an EM currency
Soon the US might even become an EM country so not all that strange.
Krugman and Obstfeld’s international finance and trade textbook had it all. It worked quite perfectly back then. The formulas are starting to work again, thank goodness.
“I didn’t unburden myself of those textbooks until 2006.” Good move. When you crack open an old textbook and find that the pages are yellowed and brittle it can trigger a significant emotional event.
H-Man, Econ 101 also doesn’t get you ready when SNB removes the 120 franc peg to the Euro. One of the safest trades around until it wasn’t in 2015. 30% move in a few minutes destroys a portfolio.Moral of the story, stay away from FX even if you think you know the rules.
Let’s also not forget that Putin essentially appointed Trump’s first Secretary of State, Rex Tillerson…how’s that for influence…? …like so much Trump related it’s unfathomable to me how this and so much more Trump related has been swept under the proverbial rug…
Increased volume = increased dilution. Unprecedented volume = unprecedented dilution. Bread and butter for confidence artist. Thanks for reminding me of Tillerson appointment.