Leo Haviland provides clients with original, provocative, cutting-edge fundamental supply/demand and technical research on major financial marketplaces and trends. He also offers independent consulting and risk management advice.

Haviland’s expertise is macro. He focuses on the intertwining of equity, debt, currency, and commodity arenas, including the political players, regulatory approaches, social factors, and rhetoric that affect them. In a changing and dynamic global economy, Haviland’s mission remains constant – to give timely, value-added marketplace insights and foresights.

Leo Haviland has three decades of experience in the Wall Street trading environment. He has worked for Goldman Sachs, Sempra Energy Trading, and other institutions. In his research and sales career in stock, interest rate, foreign exchange, and commodity battlefields, he has dealt with numerous and diverse financial institutions and individuals. Haviland is a graduate of the University of Chicago (Phi Beta Kappa) and the Cornell Law School.


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The long running bull march in the Japanese Yen from early summer 2007 to the current time generally coincides with a continuing worldwide economic crisis. The Yen’s robust strength mirrors the failure by central bankers and politicians around the globe to cure the lamentable financial ills. National policies often differ. The international guardians frequently coordinate their rescue and stimulus programs. Yet measures such as deficit spending, money printing, efforts to keep government interest rates near the floor, and struggles to maneuver currency rates merely have patched and postponed severe problems, not genuinely repaired them. Worrisome debt and leverage issues revealed in 2007-08 lurk on in various forms.

The rally in the Japanese Yen on an effective exchange rate basis since around July 2011 warns that an acceleration of the worldwide crisis, as in mid-2008, may be underway or very near to commencing. Significantly, the climb in the Yen cross rate versus the US dollar since mid- March 2012 also fits the ongoing international economic weakness story. Recall that as the world economy deteriorated more and more quickly around mid-2008, not only did the US dollar rally on a broad real trade-weighted basis, but also the dollar weakened relative to the Yen. The strong dollar equals weak stocks (and weak commodities in general), weak dollar equals strong equities (and bullish commodities) chant remains popular.

The world and perspectives on it are not immutable, so 2012 does not precisely duplicate 2008. Yet given the experience of 2008, what does a rally by the dollar in general, if accompanied by a rally in the Yen (effective exchange rate), and especially if the Yen also marched higher against the dollar on a cross basis, portend? This would hint that the disturbing international crisis is in the process of becoming more fearful. And since March 2012, that seems to be what has been happening.

The current dangerous situation in the ongoing worldwide economic crisis, if it further worsens (and it probably will worsen to some extent, even if the deterioration is not nearly as severe as in 2008), will be sufficiently severe to induce policy makers around the globe to take further substantial steps in their struggles to provide long-lasting remedies. Perhaps such actions by central bankers and political leaders may occur relatively soon. These may issue from individual nations in somewhat piecemeal fashion. Yet there is a substantial chance that intervention will be relatively coordinated, especially if an encore of second half 2008 looks more and more to be underway.

But in the meantime, for the near term, the Japanese Yen probably will keep rallying on an effective exchange rate basis; it probably will breach the 1/16/12 daily low of 187.5. The Yen likely will retest the Y75 level against the dollar. However, the US dollar (TWD) will remain fairly strong. The bear trend in worldwide equities and commodities in general therefore probably is not over. Renewed sustained weakness in both the Yen and the dollar would indicate an easing of the current stage of the global crisis.

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2008 Revisited- Japanese Yen Strength, Global Economic Weakness (6-4-12)


Recent patterns in key government interest rate marketplaces warn that the worldwide economic crisis remains far from over.

Since around mid-March 2012, compare the trend of falling rates in government notes (10 year) of “flight to quality”/”safe haven” nations such as the USA, Germany, and Japan (and even the UK) with that of rising yields in several other European nations (not just Italy and Spain).

Note this rate pattern in government debt instruments alongside the recent high in the S+P 500 at 4/2/12 at 1422 as well as related weakness in commodities “in general”. See “The Worldwide Economic Growth Story: Chinese and Indian Stocks Alongside Commodities” (4/2/12).

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Of Human Bondage- Government Note Marketplaces (4-9-12)
Government Note Marketplaces (4-9-12) 

FISCAL FINE PRINT © Leo Haviland, February 7, 2012

To create a sustained and substantial recovery, gurus and their audiences agree that much matters on the fiscal front. In the darker days of the economic crisis, most financial sentinels and their allies proclaimed that large sustained fiscal deficits were good (or at least acceptable, up to some point). Whatever have been the short term benefits of enthusiastic deficit spending campaigns in America and elsewhere, epic fiscal measures only shifted some of the debt (and leverage) burden from the private sector to the public one.

However, nowadays big sovereign debt generally is viewed as a problem. Most of the public hopes that noteworthy fiscal progress to reduce terrifying deficits has been made, is being achieved, or eventually (and soon enough) will be accomplished.

Let’s spend time surveying some fine print regarding the fiscal landscape, paying particular attention to Europe and America. At best, only limited advances have been made in recent wars against huge deficits. Actually, judging from their very modest results, these struggles to slash them look more like skirmishes than pitched battles.

A Financial Times front page headlines the European Union’s “tough fiscal treaty” (1/31/12; this refers to the “Treaty on Stability, Coordination and Governance in the Economic and Monetary Union”). Many applaud this treaty for its alleged fiscal hard line. It indeed takes a step towards resolving Europe’s sovereign debt and banking crisis, but a small step is not a giant leap. Despite the stagecraft of European leaders, the region’s fiscal challenges are not near to being resolved.

Though many states and municipalities face scary times, let’s focus on the federal deficit. The US fiscal situation remains fearful.

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Fiscal Fine Print (2-7-12)


Though global marketplaces and their problems intertwine, let’s concentrate on recent European debt developments and related statements alongside a review of several European interest rate spread relationships. This inquiry underlines that the heated efforts by European (and American and other) economic (political) generals have yielded only partial progress in vanquishing the challenges of the worldwide international crisis. So the worldwide international economic crisis probably will march onward for quite some time. And there is more than a little chance that it will worsen.

A review of yield spreads between the 10 year government debt of Germany and the key Eurozone nations of Spain and Italy over the past year or so underlines the gradually growing sovereign debt and banking stresses on Europe (and therefore on other territories and marketplaces). In addition, these widening European spread trends, especially when reviewed in the context of stock marketplace, currency, and commodity ones, point out the limited (merely partial) successes of efforts to solve the European sovereign debt and banking crisis in particular (and the worldwide economic disaster in general). These spreads warn of dangers to European (and global) economic growth.

Compare the timing of the German 10 year’s high on 4/11/11 at 3.51pc with the April 2011 lows in the German 10 year’s spread against Spanish, Italian, and Hungarian government debt. Keep in mind the pattern of higher lows in the Spanish/German and Italian/German spreads since mid-April 2011. For this mid-April 2011 timing perspective and its aftermath, remember the S+P 500’s high around then (on 5/12/11 at 1371) and that in the broad Goldman Sachs Commodity Index (4/11/11 and 5/2/11 at 762).

Euro FX weakness also reflects the Eurozone (European) crisis. Note the rough parallel since spring 2011 between the declining Euro currency (peak versus the US dollar 5/4/11 at 1.4940) and the gradual widening of the Spanish/German and Italian/German 10 year government spreads.

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European Debt Dangers- Selling Solutions, Buying Time…Yielding Results (1-17-12)