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Mark and all,
A bit more to add to the good mix so far --
Good macro forecasting and trend start/end observations can be
had using credit instrument spreads.
They are useful not only from a yield-curve standpoint to track the
underlying currency, and indirectly the country's equities, but
expressed inter-currency, much as the crosses are. Comparison of
the bond rate between canada and USA for the recent past is a
good example, and then look at the currency cross as an overlay
to see some interesting relationships that are tradeable.
This is indeed for macro use and long-term strategies only, and is
quite useless for short-term, unless you can play some of those
fancy swap trades.
Since you are building this for the future, don't forget the impact of
the Euro itself, which may indeed vault itself into a premier if not
the top world reserve currency, the way things seem to be going.
Some other thoughts...
is the world entering a period of such instability that these macro
trend behaviors will be less useful?
currency devaluations have large and far-reaching effects on macro
business and trade. I would think that, for the next 3-5 years, these
dislocations, and the resulting depressionary effects, will be the
overriding factors in the "big picture". All asset prices are
maintained with a relevancy to each other, in proportion to their
ability to generate return. Here in the USA, we are enjoying the
penthouse view, but every time a foreign currency devaluates, our
assets become more expensive, and generate less potential return.
A good macro model will have to take this comparative asset
pricing into consideration, IMHO.
Cliff
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