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What Do We Believe For 2013 ?

December, 16 2012

It seems interesting to us to develop some alternative paths in a ever changing environment as no one wants to mention that the Fed Chairman has changed the rules of the game in the middle of the game but there you are; a backsliding Federal Reserve Bank whose statements are only crafted for the moment and future moments may be brief; we just don’t know. Apparently we have transitioned to a “whatever is convenient” policy at the Fed and we all should bear that in mind when assessing probable actions. When money talks, nobody pays any attention to the grammar.

At the heart of the markets, it is still us humans and our endearing greed, fear, and heuristic biases that drive the flows… trade accordingly.

121216 Currencies, Interest Rates and Market (Citi)

Charts: Citi and Bloomberg (as marked above for clarification – not all charts are sourced from Tom Fitzpatrick of Citi)

In addition to this view we are glad to propose you the following presentation of  Societe Generale’s top FX strategist, Kit Juckes. He captures what he sees as the most important underlying theme: unprecedented central bank balance sheet expansion is now giving rise to new asset bubbles, not unlike excessively easy monetary policy has done in the past.

QE supports the concentration of wealth into the hands of people who spend it on assets and forces investors to over-pay for both yield and safety.

And Now… Another Bubble