Tags: astonishing | volatility | investors

Most 'Astonishing' Volatility Yet to Stun Investors

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Thursday, 03 January 2019 09:22 AM Current | Bio | Archive

A letter from Tim Cook to Apple investors was enough to create serious damage in global markets keeping also into account that Japan was still closed for holidays.

The text of Mr. Cook’s the letter reads, among other things of course: “We believe the economic environment in China has been further impacted by rising trade tensions with the United States. As the climate of mounting uncertainty weighed on financial markets, the effects appeared to reach consumers as well, with traffic to our retail stores and our channel partners in China declining as the quarter progressed. And market data has shown that the contraction in Greater China’s smartphone market has been particularly sharp.”

For investors who have time available and who want to try to read “between” the lines, I think Mr. Cook’s letter to Apple investors is worth a read.

Once again, it’s uncertainty, be it about the U.S.– China trade tensions, or be it the Chinese economy that is slowing down, which includes also the Asia slowdown more than the official surveys tell us, be it the global economy that is also slowing down, be it the temporary U.S. shutdown, be it geopolitical tensions that are rising again in various parts of the world. To take just one example, China’s reunification of Taiwan where Taipei and Beijing apparently locked into a zero-sum game. Speeches by Xi Jinping and Tsai Ing-wen show they are poles apart on key issues. Taipei rejects ‘one country, two systems’ model, which Beijing sees as linchpin for reunification.

… and so on, and so on…

Anyway, overnight, the Japanese yen rose four (4!) standard deviations against, yes you read well, the Turkish lira that declined 10 percent, which was a destructive move.

Notwithstanding this is the world mainly reserved for “traders” but nevertheless it’s worth mentioning it that it took only “seven” (7!) minutes for the yen to surge through levels that had held through almost a decade. Investors could do well keeping that in mind.

I’m still convinced we haven’t seen the most astonishing event yet, but I hope that I’m wrong.

One thing is for sure, 2019 did start with one word that dominates everything: “uncertainty."

Under these circumstances, I still wouldn’t expect a “weaker” dollar, which is of course for U.S. companies is a constraint.

Of course, the Japanese yen remains to top safe haven, ask the people who hedged for example their Turkish lira undertakings.

One thing, I’d like to add: Please stay away from that extremely complicated world of “hedging” when you’re not a “real” professional trader and even if that would be the case, this a world of a lot of uncertainty.

Besides that, the world of Emerging Markets is still extremely vulnerable that therefore, I’m sorry but have to repeat myself, I still prefer to remain on the sidelines and remain in dollars.

Anyway, hedge fund launches exceeded liquidations in q2 of 2018 for the fourth consecutive quarter, although both launches and liquidations fell through mid-2018.

Besides all that, let’s wait and see what tomorrow Fed Chair Jerome Powell will tell us after the Bureau of Labor Statistics has informed us that the partial shutdown will not have changed the release date of December jobs report, also due tomorrow.

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.

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One thing is for sure, 2019 did start with one word that dominates everything: “Uncertainty."
astonishing, volatility, investors
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2019-22-03
Thursday, 03 January 2019 09:22 AM
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