#93 Ukrai-ziness

Low Fiscal EU expansion, Central Bank balance sheet expansion deja-vu

Issued by Labis Michalopoulos, CFA


Major events of last week:

  • EU: It becomes clear that the European fiscal expansion will be insignificant. Germany and the Netherlands could even report another surplus during 2020. The fact that Germany managed to avoid the technical recession, as they did not report a second consecutive negative GDP q/q number, does not help the arguments of politicians that favoring fiscal expansion, as Nober Walter Borjans and Saskia Esken from the SPD.
  • US-EU: No decision has been made on imposing tariffs on EU automobile industry, as the 6 month self-imposed deadline for a decision expired on Wednesday.
  • US-China: By now, the phase 1 deal between them should have been signed. Addressing the New York Economic Club, Trump noted that they were ready to agree with China 7 months ago (February) but the Chinese were backing up from their promises (he changed his public tone on May). “They are dying for a deal…their supply chain is falling apart…we are close” were the worth noting points of his speech on the subject.
  • USA-EU-Turkey-Russia: Erdogan visited the White House and Trump welcomed him, noting that their trade relations should become 5 times larger (from $20bn to reach $100bn) and that the ceasefire in Syria (that followed Turkey’s invasion) is going well. It’s difficult to get something out of a press conference that Trump said “Kurds and Turkish are watching ISIS” and Erdogan said “Y.P.G will never be accepted”. Worth noting that the S400 Russian system has already been delivered to Turkey. Son-in-law diplomacy may offer a more reliable view point.
  • Spain: No majority has been secured in the Spanish elections, last weekend. Socialists came first, losing 3 seats compared to the April’s elections, the liberals Ciudadanos were the bigger losers and the far-right anti-european Vox party was the bigger winner. Eventually the Socialists made a coalition deal with the Podemos, that would need the support of smaller parties.
  • UK: Polls are projecting a Conservative Party majority.
  • USA: Impeachment hearings are certifying that Trump was negotiating military aid towards Ukraine in exchange for Ukraine’s investigations against his political opponent.
  • OPEC: We are 45 days away (January 1) from the implementation of IMO rules that demand the use of refined oil from the ships that dock to EU ports. We are 1 month away (December 11) from the OPEC+ summit that would decide on extension or further production cap. We are during the 20days building of the IPO book of Aramco (December 5). Oil Prices refuse to skyrocket.
  • Protests : Protests in Hong Kong and Iraq continue. Morales (Bolivia) enjoys asylum in Mexico. Protest in Chile may lead to a new constitution in April 2020.
  • Cryptos: Total market cap at $234bn ( -2.0% w/w, -30% from the 2019 high, -70% from the all time high of January 2018).
  • Facebook is launching the Facebook-Pay. Amazon will go after Pentagon for granting a $10bn contract for cloud services to Microsoft.

Major events of next week:

  • The APEC summit has been canceled. The Friday’s PMI releases become the most significant scheduled issues of the upcoming week.


Getting the Point” readers:

People do not get the point and are overeating to noise.Getting the point” is an attempt to focus on what really matters. Past performance or past accurate forecasts is not a guide to future performance and the accuracy of future forecasts and should not be the sole factor of consideration. Any research in this document has been independently produced by Labis Michalopoulos, CFA for his own purpose, and is intentionally written in first person. The views expressed do not constitute investment or any other advice and are subject to change. The author has an interest in the currency pairs, indexes and any other security disclosed in this report, as he is an active trader.

Reliance upon information in this material is at the sole discretion of the reader.

Opinions expressed in the report do not represent the opinion of Zulutrade, XM or any other company that is being advertised and do not constitute an offer or invitation to anyone to invest or trade.

Advisory service:

GIPS standards are all about full, fair, consistent and comparable presentation of actual returns of the past. No models, no back-testing, no promises. I am doing that. I am publishing in real time, via a 3rd party, my actual returns since inception where one can see the most strict, comparable, revealing metric of the industry: the monthly Sharpe ratio.

My current monthly Sharpe ratio stands at 0.27 as can be found at www.forexfactory.com/dxmix

My current annual Sharpe ratio is 0.27 multiplied by 12 = 0.27 x 3.46=0.93 Annual Sharpe Ratio

The numbers used to stand at 0.5 monthly Sharpe ratio and 1.73 annual Sharpe ratio up until the August of 2019 for 45 consecutive months. On 24 August 2018, I mistakenly ordered to open a position 10 times bigger that I am used to. My equity level is currently back on track, but my statistics are no longer as impressive as they used to be. My 54 months, since inception, monthly Sharpe Ratio (that includes the leveraged AUDUSD trade) stands at 0.27, equal to 0.93 Annual Sharpe Ratio.

I cannot claim that I will be performing with the return of my best months, but I can tell that I will hover around my average returns. Claiming with a 95% confidence, that my next month* return will be within my average monthly return ± 2 standard deviations is a well educated statement I can make anytime.

My average monthly* return ± 2 standard deviations is from -16.54% up to 20.49%

My average monthly* return ± 2 stadard deviations becomes -5.74% up to 9.47% , excluding the 4 months effect of the one time mistake trade.

* the monthly returns are the actual returns within a month. They are not presented on annualized basis.

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