You know that not much is going on when most of the Bloomberg “news” is about daily market moves. With trading thin in the Christmas period, some of these moves have been relatively large, but not exceptional. EUR and GBP have both fallen against USD, and there are reports that the movements were caused by a single large seller. I do not know what is moving the gold and silver markets but they have also seen quite large falls, with gold now trading around the bottom of its September spike.

I have compared the price of gold with real interest rates over the past three years and there has been a strong relationship; at present, gold has fallen significantly below the level implied by the 10-year real rate on TIPS, and I wonder whether it would make sense to go long. I am wary of catching a falling knife, but on the other hand, large moves on low volume during the Christmas period may provide a buying opportunity.

I feel bad about having taking profits on my short in EUR/USD, because the market has continued to fall. But this is foolishness. Central to my trading philosophy is the idea that the market is generally not predictable; in order to make money, one has to capitalise on the rare moments when the situation is clear and simple enough to predict. EUR/USD was predictable when I went into the trade, but with the ECB’s recent action I am not confident in my grasp of the situation. That means that EUR/USD is not predictable at present and I was right to take profits. From a psychological point of view, I need to focus on the pleasurable experience of having realised profits, rather than the extremely unpleasant experience of missing out on a further move; this should help me get into the habit of taking profits rather than letting winners run too long, as is my natural tendency.

Argentina has announced that Cristina Fernandez has been diagnosed with thyroid cancer. She is due to have surgery on 4th January and to spend three weeks recovering. The cancer has not spread, according to a spokesman, and the US National Institutes of Health puts the 10-year survival rate for similar cancers at 95%, according to Bloomberg. Fernandez shed a disloyal deputy for a loyal one at the latest election, and that means that the situation should remain stable until she returns to her job. Markets have so far reacted calmly to the news; government bond yields and CDS spreads are down since the announcement.


German preliminary CPI 0.7% MOM d.e. Dec.
Eurozone M3 2% YOY d.e. Nov.
Eurozone private loans 1.7% YOY d.e. Nov. Both loan and money growth are weakening.
Initial claims 381k d.e. So far this looks like a spike in a downward trend.
Chicago PMI 62.5 b.e. The regional surveys that have been released so far suggest an increase in the ISM PMI to 54.2.
Pending home sales b.e. Level is now comparable to the period of the new homebuyer tax credit.

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UK Nationwide house price index