This is the year of the trader.
It is time to make a call. The hunky dory days of the past 2 years with QE1 and QE2, not the Queen of England Jubilee in mind, are almost over.
I am still struggling with recurring visions of dramatic changes in the correlations I have grown used to in the past 2 years. Risk on – buy EUR, GOLD, S&P and USTs.
It is turning as we speak now. The LTRO II effect ? Then why not the first one ? COMPLACENCY ? MISPLACED COMFORT ZONE ? MANIPULATED PROPAGANDA ? CROWDED TRADE ? OR ALL OF THE ABOVE ?
Trading EUR/USD while watching Gold now. How weird does that feel ? And reading bad news as good news. Weak ISM Numbers = QE3 = Buy GOLD, STOCKS, EURUSD and everything.
Such behaviour would have been called travesty in the old days or even perverse. Yet you just have to participate or face extinction and be the lemming that is left behind.
3 years of QE and now LTRO and BOE. Are the good times back ? Or are we headed to a new world order in correlations ? Playing around with the correlation tables, I notice that JPY had a big fall in correlations with the SPX and 10Y UST in the recent year.
Lets not get complacent and live life as we have known it in the past year.
Just look at the chart above to see how the distortions were created. There is a story forming here.
Carpe Diem and more to come.