News Points

  • China cut reserve ratios by 50bps.
  • Japanese exports fell 9.3% YOY. Exports to China fell 20% YOY, exports to the EU fell 7.7% YOY, and exports to the US rose 0.6% YOY. The figures are contorted by the early Chinese New Year, but the comparison between the EU and US figures confirms that Japan is feeling the effect of the European slowdown.
  • A World Bank official has said that the European crisis is causing financial systems to develop at a faster pace in EM, as European banks are increasingly absent.

Recent Decisions

I have been thinking some more about the trades I have recently not done: long oil and long SPX. I mentioned SPX last week; in oil, I have talked about my realisation that the sanctions were getting serious, and perhaps I should have gone long when I realised this. Anyway, I would have made money doing so. If my method is to exploit a rare moment of predictability in the markets, then both of these trades would have qualified. I have been treating a stop well outside the recent range of the market is a prerequisite for a trade, on the basis that I like to trade with a stop in a place that the market should not get to (rationale: if something has changed since the market hit a new extreme, then it should not go beyond its extreme). I have been driven by the stop. But sometimes there is a good argument that the market should not fall very far from where it is at present, and that was the case with oil and SPX recently. A trade based on that kind of argument is more likely to be a loser, because timing is more important; but still, if the macro change that has happened is big enough, then the risk-reward ratio should be in one’s favour. I have dwelt before on the fact that, with my present method, I would not repeat my long-equity trade of September 2010, when I bought SPX when it had not pulled back signficantly (on the basis of QE2). This year I think I have missed two good opportunities because of my caution over this kind of trade and I am considering a change to my process.

The Grave of Democracy

Wolfgang Munchau ( has an article in the FT headed: “Greece must default if it wants democracy.” I have talked about this theme before. The EU has always been undemocratic, but when it was regulating nothing more important than the straightness of bananas it was not a big political issue. In Greece, we may be witnessing something new: the death of a modern, liberal democracy. That would not be a good idea. Let us hope it is only going into a coma.


  • UK Rightmove HPI 4.1%
  • Japan trade balance showed a record deficit, b.e., Jan, partly on account of special factors such as the Chinese New Year and high energy imports (nuclear reactors are still offline). Adjusted for the Chinese New Year, the data were comparable to November and December.

This Week

  • UK public sector net borrowing (Tue).
  • China and Europe flash PMI’s (Wed).
  • UK MPC meeting minutes (Wed).
  • US existing home sales (Wed).
  • German Ifo business climate (Thu).
  • UK revised GDP (Fri).
  • US new home sales (Fri).
  • G20 meeting (Sat and Sun).