Ahead of the Curve provides you with analysis and insight into today's global financial markets. The latest news and views from global stock, bond, commodity and FOREX markets are discussed. Rajveer Rawlin received his MBA in finance from the Cardiff Metropolitan University, Wales, UK. He is an avid market watcher having followed capital markets in the US and India since 1993. His research interests includes areas of Capital Markets, Banking, Investment Analysis and Portfolio Management and has over 20 years of experience in the above areas covering the US and Indian Markets. He has several publications in the above areas. The views expressed here are his own and should not be construed as advice to buy or sell securities.

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Is a Recession Imminent?

Definition of a Recession: The textbook definition of a recession is two quarters of negative GDP growth. Some examples of recessions in...

Tuesday, 23 December 2014

BRIC Currency Crisis Bad for Indian Banking Stocks?

Weakness in the Indian #Rupee will most often translate into weakness for the Indian banking space as potential hawkishness forced on the #RBI in defense of the Rupee could hurt bank margins. The Rupee has weakened considerably since Russia raised interest rates to defend the slumping Ruble and more recently with China devaluing the Yuan.

Recent  topping action in the bank index could suggest a possible sell off in this space in anticipation of further Rupee weakness and potential hawkishness from the RBI. Just going back to August 2013 banks corrected over 30% when the Rupee fell to over 68 Rupees to the dollar and the RBI embarked on some serious tightening raising the overnight lending rate from 7% to 9%.


Tuesday, 16 December 2014

The dominoes keep falling one after another

Lets take a look at a few charts courtesy yahoo finance and market watch.com. First we started with the well over 95% crash in the Baltic dry index (#bdi).
Hottest Deals On Refurbished Apple Products | JemJem DMS Baltic Index I (DBIAX)
Then we had a over 40% plunge in #gold and #silver prices as symbolized by the respective ETF's:

share prices

This was matched by over a 40% plunge in base metals:

Followed by the dramatic over 50% plunge in #oil:
Symantec Corp.

This has translated into a rout in the junk bond market:
SPDR Barclays High Yield Bond ETF (JNK)
Which will most certainly nail banks which have exposure to this toxic stuff:
KBW Bank Index (^BKX)

No surprise then at the flight to quality bid emerging in US treasuries and the #dollar:
Treasury Yield 30 Years (^TYX)
PowerShares DB US Dollar Bullish ETF (UUP)

And carry trade liquidation should start any moment with a bid for the Japanese #Yen:

All in all we have sown the seeds for the great depression of the 21 st century and the U.S Fed and its fellow central banks can do absolutely nothing about it.

Monday, 15 December 2014

Deflation to trigger junk bond rout?

The deflationary collapse of oil is clearly threatening to take down other risky asset classes with it, most notably of late the junk bond market
SPDR Barclays High Yield Bond ETF (JNK)

the makings of a brand new financial crisis!

Thursday, 4 December 2014

Collapsing Oil price flat out deflationary

The recent 40% decline in oil the past 6 months is flat out deflationary. Look at the popularly traded oil ETF. This taken together with the collapse in other industrial commodities has generated a major deflationary signal. The collapse in the Euro also lends further support to the deflationary theme emerging.
United States Oil ETF (USO)
iShares Silver Trust (SLV)
SPDR Gold Shares (GLD)
The last time oil approached it's cost of production was just before the financial crisis of 2008. Just a matter of time before the collapse in gold, silver, copper, oil and other industrially sensitive commodities spreads to other risky asset classes like stocks.

Wednesday, 26 November 2014

Disconnect between the Rupee and the Indian Stock Market Indices

Yes falling commodity prices help narrow our current account deficit and are positive for the Indian market which is correcting lower from recent highs:

These developments are however even more positive for the Rupee taken together with positive foreign institutional flows, so why is the Rupee breaking down in the face of a surging stock market?
Global Dollar strength on fears of upcoming deflation?
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Here is some data to consider:
2008 GDP - 9.5%, Dollar/Rupee - 42, Stock market Peak January - 6350, P/E -24, 3 month return from Jan 08  < -30%
2015 GDP - 7.5%, Dollar/Rupee - 68, Stock market Peak in March - 9119, P/E -24, It remains to be seen how much of a decline will occur, as of now -20.0%.

Thursday, 20 November 2014

Vix is warning trouble ahead?

While the S&P is at new highs
S&P 500 (^GSPC)

The Vix is not making new lows, on the other hand it is threatening to break out significantly higher
 This suggests the upcoming market sell off will be far worse than the October pull back.

Wednesday, 12 November 2014

long bonds signalling onset of deflation?

30 yr long bond yields about to break below 3% in the U.S despite all the QE withdrawal talk confirming the onset of deflation. Chart courtesy yahoo finance.
Treasury Yield 30 Years (^TYX)

Monday, 10 November 2014

Deflationary Crash in 2015?

Thursday, 6 November 2014

QE forever wont stop deflation

QE in Japan, QE in Europe, QE in the US, there is no stopping deflation though.
Look no further than the recent strength in the dollar, break out in the US Volatility Vix index and an absolute collapse in several industrial commodities like crude oil, copper and silver.

Monday, 3 November 2014

Markets to get a reality check?

Wednesday, 29 October 2014

Will be interesting to see how stock markets perform in the absence of QE

Tuesday, 7 October 2014

Are we staring down at the great depression of the 21 st century?

Some key Indicators are painting a tell tale sign of another great depression:
Lets take a look at a few charts courtesy yahoo finance and marketwatch.com:
1) Despite all the talk of interest rates going up from a phase out of the FED's #QE policies bond prices have moved up with yields about to head down in a big way:
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Treasury Yield 30 Years (^TYX)
2) The baltic dry index (#bdi) despite its recent rally is over 95% below its all time peak it hit in 2008. Global shipping woes despite a so called economic recovery!
us stock market DMS Baltic Index I (DBIAX)

3) #Gold continues to spiral down and is well over 40% down from its all time high's:

4) The #dollar is becoming king again as the #Euro collapses which could result in the liquidation of carry trades:

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5) #Oil has absolutely collapsed down over 50% from highs it hit just a year ago:


These developments taken together with ongoing bear markets in several key asset classes , new lows for the velocity of money and surging margin debt make the great depression (#greatdep) of the 21 st century inevitable.

Sunday, 13 July 2014

More Signs of Upcoming Deflation

The baltic dry index continues to break down

Despite all talk of QE Tapering US bonds are rallying and yields on long bonds are plummeting

Chart forTreasury Yield 30 Years (^TYX)
The dollar index  is holding the 80 level and refusing to go down 

Friday, 23 May 2014

Signs of Upcoming deflation

Some telling signs of deflation despite the 5 year plus QE induced rally:

First, Gold has collapsed almost 40% from its all time highs of $1975 plus an ounce and doesn't appear to be recovering anytime soon: (Chart courtesy, Yahoo finance)
Chart forSPDR Gold Shares (GLD)

Second, the baltic dry index is down over 95% from its highs of near 12,000 in 2008, if there has been real growth and economic recovery why are shipping rates collapsing?(Courtesy stockcharts.com)

Thirdly, Abenomics has not succeeded in keeping deflation out of Japan: The Nikkei is still down over 70% from its all time highs (Chart courtesy, Yahoo finance)
Chart forNikkei 225 (^N225)

Last but not the least the deflationary spiral in China is getting out of control: The Chinese market is down over 65% from its highs (Chart courtesy, Yahoo finance)
Chart forSSE Composite Index (000001.SS)
Bottom line: Deflation is alive and kicking and is going global in short order, beware those low volume stock market rallies

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My Asset Allocation Strategy (Indian Market)

Cash - 40%
Bonds - 20%
Fixed deposit - 20%
Gold - 5%
Stocks - 10% ( Majority of this in dividend funds)
Other Asset Classes - 5%

My belief is that stocks are relatively overvalued compared to bonds and attractive buying opportunities can come along after 1-2 years. In a deflationary scenario no asset class does well other than U.S bonds, the U.S dollar and the Japanese yen, so better to be safe than sorry with high quality government bonds and fixed deposits. Cash is the king always. Of course this varies with the person's age.