Year’s end and volumes are low.

The Deutscher Aktien Index (aka the DAX, German Stock Index) fell below the 13000 price level for the first time in the three months since it had first breached the level three months ago. Remember, like almost all of the worlds’ major stock market indices these days, the DAX is at an all-time high. We have discussed the reasons for this but it is always important to review the fundamentals. Ask any exceptional professional. (Remember the 10,000 hours of rehearsal hypothesis.) The stock markets are as high as they are for two essential reasons. First, corporate earnings are very high. With the fruits of globalization in full bloom, (Yes there too are victims of globalization. They elected Trump and decided to take Britain out of the Eurozone.) Namely extremely cheap marine freight costs and ruthlessly competitive labor costs: More stuff is being supplied and consumed at lower costs than at any time in the history of recorded economic activity. Second, as interest rates worldwide are at extremely low levels, remember that the long term average for interest rates, even taking into consideration that for the last 10 years they have been at or next to zero, is still 5.5 percent. We are quite some way from that level today, though climbing back VERY slowly and cautiously. And so, with interest rates returning practically no real profit, and almost as little nominal profit, where are you going to invest any spare change you have acquired? Most probably the stock markets. Hence the rises. These circumstances will change as all circumstances in economics always do. But for now that the deal.

Three months ago the US dollar was the weakest it had been against the European currency that it had been for about three years, it strengthened about three months back but gave that gain back to the people of Europe and their currency and is as weak as it was there years ago. Very hard to explain why this is so. But read the press, no doubt they will dream up loads of reasons for the gesticulations of this most complex of trade, economic and financial relationships. Always remember, as traders, we do not have be academics. While it is always satisfying to trade assets about which enough is known or understood to be more certain of our trading strategy and positions, like crude above, it is not necessary. Have a look at the chart for the pair. Do you need to know all or any of the nuances of the drivers of the relationship between the two largest trading block in the history of recorded economics to be able to profit from them? We believe you know the answer to that as well as we here do. Enough said.