AuthorAlex Gorzelak, CIO Archives
June 2020
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In-line with our "Bona fide" principle, please do not panic and do not engage in excessive day-trading or un-informed bets on the shape of the yield curve ahead of clear forward-guidance & yield-curve-control characteristics in the U.S.A. Following the experience of fruitful long-term partnership between Governor Kuroda-San and PM Abe-San, we ask you to sit tight on the sidelines and join our structure. It won't take 4 lost decades to realise a profit, however we would like to welcome you as investors with proclivity to think ahead in Centuries, enabling to escape the on-going "cash flow recession" with hard-earned savings, as many of you did during the "balance-sheet recession" of 2007-09 (see: The Holy Grail of Macroeconomics, Richard Koo, the Nomura Institute).
As the equity deep-buying ride spikes up the VIX to around 40 levels, the only benefactors are large option writers who can barbell the market in a macro non-directional trading. Front-end, back-end or the 5.3/4 belly of the U.S. Treasuries curve are tradable only when inflation is well-understood. We do not have the clue what inflation expectations are and whether the Taylor rule is working at all right after NBER changes the definition of a recession. Nor we can count on proven rational-expectations principles during the protests storming around America starting with the Tulsa rally. Stay at home, be safe, capitalise on your savings and let us do our job in sunny Azerbaijan, a friendly country of calm people. The country that goes to war with nobody uninvited; Ilham Aliyev being a friend to both Vladimir Vladimirovich, Mr. Trump, as well as other major players in the Middle East, always receiving a complimentary gift from Queen Elizabeth the II on the Republic Day. Our traders in the BAKU City remain calm, cool and collected welcoming the widening spread between Brent (ICE-London) and WTI (NYMEX), as well as the "crack spread" (see: refining process), profiting from positioning as patrons of vertically-integrated E&P to downstream groups. Since we have skin in the game, we do as we tell you as we test the Caspian Sea waters and keep improving incrementally to enable compounding effects in our activities. While most-passive investors in Azerbaijani corporate dollar-denominated debt are looking to capitalise on capital gains before collecting quarterly coupons, we have already made a giant leap forward ("the Leap"). We are aligned with local banks while buying manat-denominated Treasuries, utilising the Number One position as respected European investors, able to lock the yields on par with elite regional hegemons. We do not please ourselves with such lofty statements, it's the perception of the Market that plays in our favour. Come and join. Do not forget to brace for impact or you may land either on the oil-rig, or one of the Baku finest golf courses, as the SOCAR Grand Prix is cancelled by the Formula One. It is going to be a wild ride on a convex curve all the way up the Baku Flame Towers, unless we show you where the natural gas was first discovered by the Nobel family. (for more quantitative research, glance through the market dailies we publish throughout the week - indicate you request by writing our CIO directly on Alex(at)FrontCo.pl) Feel free to ask questions directly. Not considered investment advice as your R.O.I.'s may fluctuate - historic returns are not reflective of future earning estimates. Proceed with caution and assess risks investing in Frontier Markets.
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