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rssMacro trade of the century: Long gold in CNY; short global equities.
Remarkable how well this trade performed in all Chinese and global economic downturns of the last 40 years.
Gold in Chinese yuan terms just broke out from a 3-yr resistance line.
It’s one leg of the macro trade of the century. We are extremely bullish on gold, but we are most bullish on gold vs. yuan.
Thought For A Day
3 Highlights in the Week Ahead
Three events next week will shape the investment climate. The Federal Reserve meets and will update its forecasts and guidance. The British House of Commons may vote for a third time on the Withdrawal Bill before Prime Minister May heads of the EU Summit to ask for an extension of the UK leaving the EU. The eurozone sees the flash March PMI, with great hope that the green shoots of spring will be evident.
FOMC
There is little chance of a change in policy at the FOMC meeting. The meeting is important because the Fed’s verbal communication has changed dramatically since the December projections. The Fed’s thinking about its balance sheet has also evolved. Often officials make small incremental changes to their forecast, but it could be a step function this time.
That said, the Fed’s view of the economy has probably not changed materially. The economy hit a soft patch at the end of last year and early this year as various crosscurrents hit, but the underlying fundamentals remain frim. Financial conditions tightened dramatically, but have eased nearly as quickly. The S&P 500 is up over 12% since the start of the year. The Federal Reserves’ real broad trade-weighted dollar index fell in both January and February, to snap an 11-month rally. US interest rates remain below Q4 18 levels. The 10-year note yield was near 3.25% in early November and finished last week below 2.60% for the first time since early January. The two-year yield closed the week a little above 2.40%. It peaked shy of 3.0% four months ago.
In December, the median forecast for growth this year was shaved to 2.3% from 2.5%. The median dot for 2020 and 2021 was unrevised at 2.0% and 1.8% respectively. Like many private sector economists, officials will likely recognize that the economic weakness in Q1 may be more pronounced than anticipated and could trim their forecasts again.
Reid Hoffman: 16 Lessons Learned
16 Lessons Learned (Among Many!)
-People are complicated and flawed. Root for their better angels.
-The best way to get a busy person’s attention: Help them.
-Keep it simple and move fast when conceiving strategies and making decisions.
-Every weakness has a corresponding strength.
-The values that actually shape a culture have both upside and downside.
-Understand someone’s “alpha” tendencies and how that drives them.
-Self-deception watch: even those who say they don’t need or want flattery, sometimes still need it.
-Be clear on your specific level of engagement on a project.
-Sketch three possible outcomes for a project: the likely upside, likely ‘regular’, and likely downside scenarios.
-A key to making good partnerships great: Identify and emphasize any misaligned incentives.
-Reason is the steering wheel. Emotion is the gas pedal.
-Trade up on trust even if it means you trade down on competency.
-Tell the truth. Don’t reflexively kiss ass to powerful people.
-Respect the shadow power.
-Make people genuine partners and they’ll work harder.
-Final: The people around you change you in myriad unconscious ways
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Bond market is still saying the Fed has made a mistake and that the data is ugly…
Week ahead :What’s on the US economic calendar
A look at what’s coming up
Monday:
- NAHB housing market index
Tuesday:
- Factory orders
Wednesday:
- FOMC decision
Thursday:
- Philly Fed
- Initial jobless claims
Friday:
- Markit manufacturing PMI
- Wholesale inventories
- Existing home sales
It’s a quiet week with the Fed on blackout ahead of the decision. However the UK should be busy enough for everyone as Theresa May holds another meaningful vote on Wednesday.