High Heeled Traders

Weekends are usually R and R for me, but it’s been raining outside and I just have to review the events this week! I’ve been talking about volatility and telling my trading community some of the things to expect. Here’s a very interesting discussion by Bank of
America head of global rates and currency research backing up my ideas on the what lies ahead … more volatility, China currency devaluation, deflation and possibly Fed non-action. Pay attention to him talking about “Risk parity” – I had to play it a couple of times to understand it hahaha. So go ahead, grab some chocolate, I had the bittersweet drink — and read on.

Chinese government selling US Treasuries to raise funds to support their own currency (yuan / renminbi) is happening, so when stocks are falling, US Treasuries are supposed to go up, BUT the biggest holder of the US Treasuries are selling, driving the prices down too. And so, “risk parity investors” take RISK OFF on everything.

This strategy of selling US Treasuries, while the Chinese holds US$1.48 Trillion in value … but using 40 Billion a month to “invest” in the stockmarket is not going to last long, and presumably, they won’t want to use it all on this stock intervention anyway, given that it was cited that it does not have a big effect on the Chinese economy overall.

http://www.bloomberg.com/news/articles/2015-08-28/bofaml-s-woo-explains-how-china-was-behind-one-of-this-week-s-most-extraordinary-market-developments

http://www.zerohedge.com/news/2015-08-27/what-chinas-treasury-liquidation-means-1-trillion-qe-reverse

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