Australian Bear Raid

Excerpt from Alchemy of Finance





I have sketched out a typical boom/bust sequence. It can be followed by two curves that follow more or less the same direction. One represents Stock prices, and the other, earnings per share. It would be natural to envision the earnings curve as a measure of the underlying trend, and the divergence between the two curves as an indication of the underlying bias. The relationship is much more complex. The earnings curve incorporates not only the underlying trend but also the influence of stock prices on that trend: the prevailing bias is expressed only partially by the divergence between the two curves.-partially ist is already reflected in those curves. Concepts that are only partially observable are extremely difficult to work with: that is why we have chosen variables that can be observed and quantified-although, as we shall see later, the quantification of earnings per share can be very misleading. For present purposes, we shall assume that the ‘fundamentals’ in which investors are interested are properly measured by earnings per share.


A typical path for the two curves may be as follows. At first, recognition of an underlying trend is lagging but the trend is strong enough to manifest itself in earnings per share. When the underlying trend is finally recognized, it is reinforced by rising expectations. Doubts arise, but the trend survives. Alternatively, the trend waivers BUT reasserts itself. Such testing may be repeated several times, but here I show it only once. Eventually, conviction develops and it is no longer shaken by a setback in the earnings trend. Expectations become excessive, and fail to be sustained by reality. This bias is recognized as such and expectations are lowered. Stock prices lose their last pro and plunge. The underlying trend is reversed, reinforcing the decline. Eventually, the pessimism becomes overdone and the market stabilizes

We are facing the opening stages of Expectations have become excessive on AUD now the next step is lowered expectations.

Updated PnL:

Selling more at these levels

now short 35C on futures and 2,500,00 on spot looking for folllow through rest of this week.

Good thing I purchased the Weekly aapl calls for a hedge they will be handy today as AUD/USD had a nice spinner on H4 looks to retrace a bit here to 1.0270 at least where I consider another short. But given this move so far profit taking into Friday could be the name of the game Next week could be the spot for the last leg before

1.0050

Hi,
may you share with us who's your broker for options and futures trading?

what is your average slippage in futures on 20 contracts stop beeing hit, if you don't mind.

and how many pips your worst ?

Hey guys,

I have several brokers for different reasons but the main options/futures account i go through is Thinkorswim and Interactive brokers. The former is a bit pricy but I am a longer term trader than most so I don't complain too much about commissions.

As for slippage on 20contracts usually their is a few tick slippage but usually i do it in blocks of 5c per entry, however, I did bunch up my orders right below the OCT rate cut and was filled quite badly about 18 ticks however I know that this was going to be expected. I generally like to do the illiquid times like Sydney/Asia for example because the orders are light and If I come in with 20contracts or more I can see on the DOM/Time sales what has been adjusted from other traders to get a feel.

I found this article interesting on how the 4 large banks are slow to implement the RBA rate cut right away. But they are quicker to implement rate increases.
http://www.smh.com.au/business/the-b...003-26ztm.html

RBA, APRA, Treasury pushed for tax on bank deposit insurance to raise $38bn - but gov hasn't picked it up

TWEET from AFR

Australia sells A$ 1 billion of Jan 25 notes and Dec 14 notes, yielding 3.1482% and 3.1880% respectively.

HSBC cuts China’s 2012 GDP forecast



from 8.0 TO 7.8

additional -200,000 spot SS@ 1.0208 if retail is increasingly bad

ANZ Commodities Daily

http://www.scribd.com/doc/108914890/...ily-718-041012

Lower rates risk fuelling bubbles: ANZ

Filled on 1.0208 the retail after actually going through the report was very subdued

Housing wont even look at because just like the US pending home sales this is a similar type report the question is will the projects get financing and built that is the KEY

Updated PnL for tonight at this lower range on AUD/USD. Sold 10c on the appl weekly calls only to lock in profits still have 20 open for friday expiration levels.

Added to spot on 200,000 not futures as I am looking for a retrace next week for adding on that side. Otherwise positioning is great so far and I am fully expecting and wanting really a minor retrace so I can put in more shorts at 1.04-1.0375 on spot

Thanks for all your work. I didn't know it existed till tonight. I agree with most of what you have said and only want to point out that I believe there may be some currency wars again as the world economy is being effected by what is happening in Europe. Every day I hear about the Japanese threatening intervention when basically the central banks of Europe and America are intervening at present.

Secondly, I come from a commodities country (Canada) and the government here has been losing tax revenue resulting in deficits. Yet the Canadian dollar is above par.

I look forward to your contributions.

Thank you for visiting yes that is a strange dilemma Canada is under as for AU i have not mentioned what I believe will be the reckoning that will cause a major decline. I mentioned briefly about Iron ore and coal as a main component which is the gas for the engine but the Frame where the engine sits in is BANKING. I will post soon about ANZ, Common, Westpac, and other banks that are creating a major issue when it comes to their loan and credit structures to the Mining sector. Not to mention their relationships with homeowners but that is not going to be the first shoe to drop

After this rate cut and the current price of Iron ore the next news you will see is Corp debt downgrade and individual municipalities downgrades> then we move onto government

Shane Oliver:AMP Capital

 

1. The need to boost the non-mining sectors of the economy as the mining boom fades at a time when the $A remains strong and fiscal cutbacks are intensifying means the RBA will have to cut interest rates further.
2. Post GFC caution has likely resulted in a reduction in the neutral level for bank lending rates, such that they are only just now starting to become stimulatory.
3. Our assessment remains that standard variable mortgage rates will need to fall to around 6%, which implies that the official cash rate will need to fall to 2.5%.
4. We expect this to occur over the next six months, with the RBA cutting again next month by another 0.25%.
5. Bank deposit rates will fall further, but the Australian share market is likely to be a key beneficiary as lower interest rates eventually boost housing activity & retailing.

Now, I agree on rates. But not on the dollar. By the time rates get two more cuts, markets are going to realise that the risk/reward scenario for holding Australian government bonds, or other bonds for that matter, has swung decidedly against them. This is because the rush into these bonds is driven, in part, by the knowledge that Australia is not a perfect economy. What I mean is, at the moment, because the Australian economy is fundamentally weak, folks buying our bonds know that interest rates are going to fall. Thus, there is a capital gain to be made on bonds as the already paltry yields fall.

Australian bond futures prices are lower as investors wait on crucial jobs data from the US.
At 0830 AEST on Friday, the December 10-year bond futures contract was trading at 97.055 (implying a yield of 2.945 per cent), down from 97.115 (2.885 per cent).
The December three-year bond futures contract was at 97.610 (2.390 per cent), down from 97.670 (2.330 per cent).