Some light Saturday analysis for you.
It's always important to check out what's going on without too much focus on a specific topic.
I tend to find that idea generation can come sometimes from not actually looking at anything specific and taking a bit of a window shopping view of data and articles.
Let's get into it.
Turkish 5Y CDS Is Spiking
The Turkish 5Y CDS (credit default swap) is edging higher.
This value reveals a 9.31% implied probability of default, on a 40% recovery rate supposed.
With Erdogan sacking the head of the Turkish Central bank yesterday, after the Lira had depreciated so much, potentially this creates greater discord and a higher chance of lower rates for longer.
And it's really not a pretty sight for the Lira...
Become a Premium subscriber to read our view on Turkey from back in September.
97 Currencies Have Depreciated vs USD in 2020
Dollar doom just isn't a valid thesis.
Every time it ticks down, you have people talking about how it will lose its reserve currency status.
You have people talking about how central banks are buying gold - that tends to be the most common belief popping up.
Even though last quarter they became net sellers for the first time in 10 years last quarter.
We rarely hear about the currencies that have depreciated versus the dollar.
It doesn't make for as good a headline, really.
And nor do we hear about the problems with the proposed assets or currencies that are apparently destined to replace the dollar's reserve status.
The price of the dollar matters far less than the economic statuses of other countries' currencies relative to the dollar, since Eurodollars are what matter the most (i.e, the credit infrastructure of the world's economy is based on USD).
Read more about Eurodollars below.
A Pretty Bullish Looking Chart
Below we have copper.
And it looks wonderful.
I'm looking at copper again as a response to an article that we released a few months ago...
Become a premium member to read it.
We really want to see what price does above $3.31 from a pure price action perspective...
The macro gives bigger drivers.
Goldman Were Right On Market Volatility Moving to December
Here's a chart that Goldman released in a note back in September.
“Option markets seem to have abandoned the view that volatility would rise strongly in the lead-up to the election, which had been priced in throughout much of 2020,” the strategists wrote in a note to clients. “Instead, currently markets are expecting volatility to jump at Election Day, and then remain high thereafter.”
The VIX term structure suggests this is right.
With Trump wanting to contest seemingly everything, and there being some reports that he will only concede defeat in December, it's likely that vol could remain higher for longer.
Having said that, the trade for me is to remain long equities since it's likely that Biden will be the new President, so the question of the election actually being contested is a mute point - it's just down to Trump's ego that we may face slightly longer uncertainty.