I added to my short EUR position this morning. This is an extremely crowded trade, but likely less crowded in the recent shakeout. The drift is down – but might be accompanied by sharp spikes (given positioning). I’m fine with that.
* I don’t care what Merkel thinks, austerity doesn’t work.
* Eurozone politics are worse than ours.
* 10-year Bunds < 1%. UST will probably stay at > 2%. Regardless, we’ll have positive rate differential / carry for a considerable time.
* US is not the epicenter of deflation/slowdown. Flight to safety will be towards dollar.
* US is in a tightening cycle (though probably slower than people think). ECB is contemplating buying corporate bonds (what?).
* These long-term themes generally take considerable time to play out. I will stay on the bandwagon until the assumptions no longer hold.
Will show better analysis later.