If you have been following port data you no doubt saw the large spike in March of both inbound and outbound volume, and then a bit of continuation in April and May.  A lot of people, both mainstream media as well as bloggers, came out saying that this was a huge green shoot and a sign that things were improving for the global economy.  The Macro Trader came out with this post (click here) where we explained that there is a lot of seasonal influence in shipping and without looking at it you are missing a huge part of the picture.

Looking at the data below is the chart for the month of March from 1995-2009 (click to enlarge).  As you can see March is a historically strong month, in fact it is historically the strongest month of the year.  So while we had a strong rebound in month to month data that was to be expected in March.  What many commentators forgot to mention was the year over year numbers which were anything but impressive, being down -17.21% that same month, not exactly the definition of a green shoot.

March Data

So where are we now?  Well after March we had slight increases in both April and May.  Historically April is the second best month of the year, so again not very unexpected.  In June we had a decline of -6.02%, and a year over year decline of -19.31% in total loaded volume. Looking at the chart below (click to enlarge) you can see that seasonality is easily seen in the data and that we are a ways off from a new move higher.

Combined Port of Long Beach and Los Angeles Data

We looked in the dictionary of overused terms and negative numbers were not under the term “Green Shoots”, however when we looked under weeds the exact definition was “negative numbers.”  OK, maybe that was a sad attempt at being funny but still the numbers are not pointing to a current increase in global shipping. To help smooth out the data and show the long term trend of shipping data here is a chart of total loaded along with a 12-month moving average (click to enlarge).  As you can see we are still in a downtrend and it will take more then a few months of increased activity to show real improvement.

Total Loaded with 12-Month SMA

Happy Trading,

Dave@TheMacroTrader.com

http://TheMacroTrader.com

If you’re getting value out of our posts, you can do us a favor by linking to us and mentioning The Macro Trader to friends and co-workers. Here’s the link information for this article:
Title: Port Data, Green Shoot or Weed?
URL: http://www.themacrotrader.com/2009/07/19/port-data-green-shoot-or-a-weed/

Bookmarks

One of our favorite, as well as one of the best indicators that investors can follow is that of interest rates.  Since we are global macro traders we follow interest rates across the globe for every country that we can find reliable data.  We track short and long rates for 58 different countries for use in many of our models as well as for other indicators like global and regional yield curves.

As you can see in the chart below (click to enlarge) short term rates for the G-10 are low.  In fact right now there are five countries that are following a zirp (zero interest rate policy) and consequently their 90 day rates are down under .5%.

G-10 Short Term Interest Rates

After dropping significantly throughout the second half of 2008 as Government Bonds went into the stratosphere, rates have since recovered quite a bit during 2009.  As we mentioned in a previous post on Treasury Bonds we think that just like rates overshot to the downside they have also overshot to the upside.  With recent comments by the Fed that essentially said that they will not be raising rates for the next year…or two, we are a bit taken back by the sell off in Treasuries the past few days.  (click to enlarge)

G-10 Long Term Interest Rates

The chart below  (click to enlarge) shows the average 90-Day and 10-Year government yield for the G-10.  In our view this chart shows how the ECB was very slow to lower rates while still preoccupied with the fear of inflation in the fall of 2008.  Looking back, and even at the time, this view was ludicrous as everything on the planet was dropping like a rock.  In fact the world at one point had lost 42% of its wealth.  Obvioulsy rates were eventually lowered but we were, and still are a bit amazed by the lack of understanding shown at the depths of the crisis by Jean Claude Trichet and his crew.

G-10 Short and Long Rates

Here is the chart (click to enlarge) of the G-10 GDP weighted yield curve.  As you can see it is extremely steep with the spread at 2.63% after having been negative back in late 2007.  Remember back in 2007 when people were saying that this time it was different and that the economy was great?  Well they were wrong and the yield curve gave a big neon flashing warning signal.  We were fortunate in that by heeding its cry we were able to not only preserve capital but actually generate positive returns in 2007 and 2008.

G-10 GDP Weighted Yield Curve

Finally here is the Global GDP Weighted Yield Curve (click to enlarge).  Using the country weightings in the MSCI index it is made up of 40 different countries. It has hit new highs this week at 2.20%.

Global GDP Weighted Yield Curve

Happy Trading,

The Macro Trader

Dave@TheMacroTrader.com

TheMacroTrader.com

If you’re getting value out of our posts, you can do us a favor by linking to us and mentioning The Macro Trader to friends and co-workers. Here’s the link information for this article:
Title: Global Interest Rate Trends
URL: http://www.themacrotrader.com/2009/07/16/global-interest-rates

Bookmarks

In our last post we discussed our views on deflation and how it will  be around  longer then most investors think.  Most people are stuck on the idea that hyper inflation is just around the corner and that you must be buying gold, most other commodities, and Asian stocks and at the same time short the US Dollar, Japanese Yen, US Treasuries, and US stocks.  Eventually this may be the right stance, but for now we think, along with the market, that it is the wrong view for the short and medium term.

The main issue stems from the idea that because the government has printed a gazillion dollars that we MUST have hyper inflation tomorrow.  The reality is that until that money is actually in circulation it will not cause inflation.  If you look at the financial situation of most banks it is obvious that not only are they not lending, but they are still so weak that they can’t lend.  Until they have rebuilt their balance sheets they will remain weak and unable to do any large scale lending on anything but bad terms.

Add to this the fact that consumers are saving more and more and you have massive debt deflation.  Consumers that are employed are paying down debt while the unemployed are unable to go into much more debt as credit card companies have curtailed their lending and the housing ATM is shut down.

As the global financial markets continue to deflate we have a few trends that are benefiting from this.  One that we have already covered is that of going long US Treasury bonds.  Another trend that we have shared with our subscribers is that of going long the Japanese Yen.  Long viewed as the funding currency for the carry trade , over the past 18 months the Yen has changed course and is now a safe haven currency.  Every time that investors have fled risky assets such as stocks and corporate debt then have flocked to the Yen.  As investors increasingly realize that the current threat is continued deflation and not inflation we think that they will gravitate out of stocks and into Treasury bonds and the Yen.

In the chart below (click to enlarge) you can see that since 1998 the Yen had been consolidating until breaking out back in March of 2008 as the financial crisis accelerated with the demise of Bear Stearns.  This breakout later pulled back before breaking out again and making a large move lower.

Japanese Yen 15-Year Weekly

As you can see in this chart (click to enlarge) the last two pullbacks have found support at the 50% retracement levels.  While we don’t think that Fibonacci levels have some mystical power, we do use them to find opportunities to buy pullbacks in a trend.

Japanese Yen 3-Year Weekly With Retracements

Finally as you can see in this daily chart of the last year (click to enlarge) you can see that we finally have broken out of an almost year long consolidation.  While not a perfect triangle it obviously contracted more and more until finally breaking out over the last few days.

Japanese Yen 1-Year Daily Chart

Looking at the 15-year long term chart of the Yen we are expecting a move up to 114 and would not be surprised to see it make new highs at 120 in the coming months (If you are looking at the USD/JPY cross the levels would be 88 and 80).  Although anyone who is a macro trader is no doubt aware of this move we have found that most equity investors skip over currencies and fixed income themes, thinking that they have nothing to do with them.  The reality is that the currency and fixed income markets can give great signals for when risk is high or low and should be followed by all investors.

Happy Trading,

The Macro Trader

Dave@TheMacroTrader.com

If you’re getting value out of our posts, you can do us a favor by linking to us and mentioning The Macro Trader to friends and co-workers. Here’s the link information for this article:
Title: Debt Deflation and the Japanese Yen
URL: http://www.themacrotrader.com/2009/07/09/debt-deflation-and-the-japanese-yen/

Bookmarks