Trading Blog

An Overview of the Chinese Yuan (Renminbi)

With the rise of China as a global economic power, many investors and economists consider the Chinese yuan as a potential successor to the US dollar as the world’s top reserve currency. The yuan officially became a “reserve currency” on October 1, 2016 upon its integration into the IMF’s Special Drawing Rights basket of currencies. […]

Is a Currency War the Next Big Global Macro Event?

It is very likely that currency policy will take on a much bigger role in the next recession. As the ‘trade war‘ associated with the export and import flows between countries plays out, most notably between the US and China, a ‘currency war’ is likely to be one of the next big macro themes as […]

Stock Market Making New Highs: Can It Continue?

The US stock market recently made new highs. Recession fears caused by inverted yield curves are overblown. While an inverted yield curve has been a strong statistical correlate to a recession over the past five business cycles in the US, it doesn’t get at the underlying reasons for them. In reserve currency countries, recessions typically […]

Can an Oil Shock Cause a Recession?

On September 14, 2019 drones attacked state-owned Saudi Aramco oil processing facilities at Khurais and Abqaiq. The initial size of the shock was huge. Global oil production is slightly over 100 million barrels per day. The attack on Saudi oil infrastructure was worth some 5.7 million barrels per day of production, meaning 5 to 6 […]

Negative Interest Rates: Can They Continue?

Negative interest rates are now a fixture in the financial world. Most developed market countries currently have negative interest rates of some form. Some remain “holdouts” – most notably the US to go along with the UK, Canada, and Australia / New Zealand, but Japan and most of developed Europe are below the zero level […]

Currency Valuation Models: How Are Exchange Rates Determined?

Different traders have different ways of determining a currency’s fair value price. Obviously, different expectations and different motivations are what make a market. While many traders have their own decision rules and proprietary systems, there are currency valuation models and ways of looking at the currency markets that are the most common. We’ll cover the […]

The Path Forward for Cryptocurrencies

First, I’ll start with my opinion on bitcoin, then cryptocurrencies in general. Later on in the article, we’ll look at the path forward for cryptocurrencies more broadly. This will include the financial and non-financial uses and applications of crypto assets, and how traders and investors will need to view them as the niche matures beyond […]

Can China Offset US Tariff Threats?

The US and China recently came to a partial deal agreement, termed “Phase I” by the Trump administration. US tariff threats against China remain, but were pushed back by two months. (Mini) Deal Overview As we believed from the start, some form of a “mini deal” or “truce” could be viable in terms of the […]

Did the Fed Restart QE?

Due to recent issues in the repo market, the Federal Reserve began growing its balance sheet again to avoid a scarcity in reserves (a type of cash asset held by banks). In 2017, the Fed began to shed around $50 billion per month to unwind some of its post-crisis stimulation designed to lower interest rates […]

The Discounted Future: Backing Out What Markets Think

Financial markets represent the discounted future. As mentioned in a previous article where we discussed our big three market equilibriums that traders and investors need to pay attention to, we described the “risk premium” between different asset classes. It tells you what the discounted future is like. 1. What’s the yield on cash? Where does […]

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