Thursday, December 06, 2012

THE CLIFF - A Pantomime

A friend of Team Macro Man has offered us his script for a seasonal dramatic romp. Though you may think it is remarkably familiar, we now present for the first time, but by no means the last -

THE CLIFF - a Pantomime; an AMUSEMENT for financial dramatists.

Featuring our hero BIG EARS, his elf-like accomplice TINY TIM, BONER,
a pantomime villain, and PC BERNANKE, a POLICEMAN, wielding a truncheon
and a QEaser.

TINY TIM :   "Look out, Big Ears, there's a Cliff behind you"
BIG EARS :    "Oh no, there isn't"
AUDIENCE:  "Oh yes, there is"
BIG EARS:     "Oh no, there isn't"
AUDIENCE:  "Oh yes, there is"
BIG EARS looks over shoulder, recoils in mock horror.
Exit TINY TIM, stage right.

BONER appears, stage left.
BIG EARS:    "Hello, Boner, do you want to go over the Cliff?"
BONER looks over shoulder, recoils in mock horror.
BONER:         "Why you... socialist wealth distributing rascal..."
(BIG EARS:    "You, you, you, small business owner.."
BONER:          "I built that business with my own two hands"
BIG EARS:     "Oh no, you didn't"
AUDIENCE:   "Oh yes, he did"
BIG EARS: reflectively "Really? People do that? I never knew"
AUDIENCE:    "Oh yes, they do"
BONER:            "Son of Satan. Socialist!"
Big Ears and Boner engage in play wrestling by the Cliff
PC BERNANKE: "Break it up, you guys, before I QEase you"
Exit the Policeman, waving truncheon, stage right.

BONER:             "Maybe we can compromise, Big Ears?
BIG EARS: suspiciously "How so, Boner?"
BONER:             "How about we axe some deductions for middle class"
BIG EARS:         "How about we axe your mortgage deduction too?"
BONER:              "Why you, double crossing... Hawaiiian socialist.."
Big Ears and Boner engage in play wrestling by the Cliff

BIG EARS:          "Careful, you d*ck, there's a Cliff there, you know"
BONER:               "Oh no, there isn't"
AUDIENCE:        "Oh yes, there is"
BONER:               "Oh no, there isn't"
AUDIENCE:       "Oh yes, there is"

BONER:               "OK, I'll sell out the $500k crowd, save my mortgage"
BIG EARS:          "Deal. Do you want to try Michelle's arugula?"
BONER:               "Is that European socialist lettuce? No thanks."
BIG EARS:           "Suit yourself. It's quite peppery. So, deal then?"
BONER:                "Deal. Now I have to call off the dogs."
BONER exits stage left

Enter TINY TIM stage right
BIG EARS:            "Yo, Timmy, what up, bro? Wanna play HORSE?"
TINY TIM:           "Really? You want to play a 5 foot 2 guy at hoops?"
BIG EARS:            "I like winning"
TINY TIM:            "Apparently... and you did beat THE GLOVE."
BIG EARS:            "Like beating Barkley at golf. No contest."
TINY TIM:             "It's too early for the deal. Carry on wrangling"
BIG EARS:             "How so?"
TINY TIM:             "Long bond auctions next week."
BIG EARS looks at audience quizzically
TINY TIM:             "Imagine if we could sell a load of 10s at 1,50%"
BIG EARS:             "Good point. I could drag it out until my vacation.."
TINY TIM:             "Now you're talking, leader of the free world"
BIG EARS:             "NO later. Michelle would kick my ass."
Exit TINY TIM, grinning, stage right.

Enter BONER, stage left.
BONER:                  "OK. We hog tied De Mint, you got your deal"
BIG EARS:  grinning "Hey, BONER. Your deal stinks."
BONER:                   "Why you dirty double crossing socialist...."
Big Ears and Boner engage in play wrestling by the Cliff)
BIG EARS:               "Careful, you d*ck, there's a Cliff there, you know"
BONER:                    "Oh no, there isn't"
AUDIENCE:            "Oh yes, there is"
BONER:                    "Oh no, there isn't"
AUDIENCE:             "Oh yes, there is"

Enter the  POLICEMAN, stage left, waving truncheon.
PC BERNANKE:      "Break it up, you guys, before I QEase you"


Repeat until December 17th, when Big Ears goes on vacation.


Anonymous said...

Well done, LB!

amplitudeinthehouse said...

Concur, which I might add, we got it right this time..

Anonymous said...

Gents - So this blog has games, quiz shows, song writing, screen plays and even a recent post on sales people being losers. The comment fields, instead of talking about markets and ideas, also has become somewhat political…. Any chance we go back to writing about markets and ideas soon?

amplitudeinthehouse said...

Anon 1.35

POL won't forget you at the end of year hat collection ol'son!

Polemic said...

Any suggestions anon? We don't think anything has changed apart from what people think other people think and, yes, the rest is indeed politics.

If you've got anything good we'd be happy to post it, but as it is we are sticking to core stuff and reading for next year.

If you feel the comments are not up your strasse you are more than welcome to contribute regularly to open debate where you like.

But sorry, at the end of it we 'll write what we like and if that doesn't come across as a free ideas factory for sales people to cut n paste then so be it.

As our guarantee in the banner states.. satisfaction or your money back..

You may have noticed we aren't even doing a charity call this year... not only do we not expect the 20 , we aren't even asking for the 2.

Chicken Little said...

Where's my recession?

Leftback said...

Here's yer recession, folks:

US Recession Inescapable

Oh sorry, that was last September's recession... still, we should take this recession call VERY SERIOUSLY. After all it comes from a highly respected economic forecasting gentleman, who is a graduate of the esteemed and world famous Fairly Dinkytown University in Madison, NJ, and also has a MBA from the Long Island Expressway.

amplitudeinthehouse said...

My one recession is stubbornly not developing , I just wish the other couple of Variables would clear off!

Anonymous said...

C Says'
you are either in need of 20/20 hindsight vision,or an extra dose of patience to carry that conviction that is itching insde you through to fruition.

The markets not particularly transparent and theirin is the problem.On some measures as to allocation to risk etc we should be nowhere near a top for equity. Looking at govt debt yields shouts run for cover.
Sectors that should confirm same like property/autos,credit stress say go back to sleep we are not ready for recession.

Technically,transports have gone sideways all year,but the question is how should we look at transports in a society that has become much more dependent upon technology to generate it's GDP?
Utilities have already sent you a sell signal,but wait,what does that mean when the pop occurs as Sandy rains all over your parade?

Growth targets are cut across the globe,but sales continue to look ok,and PMI in some sensitive areas appears to have stabilised.So what are we to believe?
The answer is not blowing in the wind really.It is in being willing to be exposed to the risk,because without such we can not expect to garner the reward.Hence,if the reward matters less to you than the risk step aside is not an unreasonable posture.
Boomer on.

Anonymous said...

C Says'
Putting this at changing room level though I could have pitched it, where's your balls ladies.

I love language/Lnguistics.

marcussejanus said...

boring, as is the wont of the brits

Anonymous said...

marcussej is back !

marcussejanus said...

i deeply regret my scandalaous behaviour in as much as it affronts all you epicene brits.

Phallus maximus said...

Snobi brits! Feckless satirists...

Anonymous said...

Which reminds me of

Bigus Dickus

Corey said...

Thanks for all the puzzles, quizzes, plays, raps, pantomimes, videos, and of course the macro.

As for the rest, I think it was Ice-T who put it best, "don't hate the player, hate the game."

amplitudeinthehouse said...

C, I like this

Leftback said...

Another riveting day. I think one can appreciate the sheer folly of trying to come up with daily posts at times such as these. Of course the ink=stained wretches of the mainstream media have no choice, hence the enormous volume of bollocks being churned out on TV and in the blogosphere.

As with trading, there will be opportunities soon enough for intelligent commentary. For now, it's wiser to be silent as the media babbles on....

amplitudeinthehouse said...

Leftback, this is without a sweeping generalization, but I concur, when are some of these fuckwits going to wake up a realize that their remuneration numerology doesn't match their IQ!

Anonymous said...

C Says'
What is there to really say about markets.They remain the most politicised in living memory. The degree of intervention is unprecedented.The outcome is a chase for real return on a scale unparallelled (if you are American just drop an L).
In deference to an Anon recently who intimated "a bloodbath" in 2013.
I have no idea when,but I'm right with him in expecting that this process is at some point going to end with some group getting seriously damaged. I would have much preferred to see more supportive fiscal action, and less monetary action in helping economies climb out of the hole created by GFC.C'est la vie.

Leftback said...

Michael Gayed must be a keen reader of MM. We first raised the relative yield comparison between shares of AAPL v. 10y UST here WEEKS AGO and it was also highlighted by Cody Willard about the same time. Ah well, imitation, as they say, is the sincerest form of flattery:

Apple and the Bear Paradox

Actually, LB thinks Gayed is pretty good, just slightly irritating b/c he turns on a dime so much.

Leftback said...

Global equity markets continue to drift higher as the kabuki theatre continues in DC. The outperformance of EMs over DMs that we had discussed here as a theme for 2013 seems to be taking shape already.

Anonymous said...


I think you were talking about me. "Bloodbath" is a bit strong but for sure there are better times to come if one wants to invest for the longer term. Chasing short-term profits is another thing, of course.

Funny enough it's an equilibrium game imo. Seems like the FED wants to transform cash into a hot potato that nobody wants to hold (and let inflation do the job, no matter how limited it is). (Government) Bonds are a money-loosing proposition, too, in real terms at least so everyone and their grandma plunge into the stock market (except for some insurance companies eyeing at infrastructure finance, mortgages and similar stuff). Stocks (in the US at least) are already priced for measly real long-term returns (the exact figures vary depending on the sage but everyone seems to agree that 10y annualized returns are somewhere between 0% and 2% in real terms). Note that money is just flowing from one asset class to another as the overall amount of stocks and bonds is more or less limited (bonds get rolled over and companies usually do not issue tons of brand new stock), thus depressing risk premia on its way.

As long as everybody is happy so am I. Unfortunately you cannot solve fiscal problems by means of monetary action (unless the monetary action becomes permanent and inflation runs its course), so we are probably in a rather unstable equilibrium.

Anonymous said...

Talking about solving fiscal problems with monetary solutions ...

- DD

Anonymous said...

C Says'
Indeed,he rarely disappoints in giving the markets what they want whihc is mainly as much about certainty as anything.
On tat score Carney is to be welcomed as we shove Mervyn bakc onto the dinner circuit where he really belongs.He can work on his paunch full time,and who knows keeping his mouth full of food will certainly assist in keeping closed.

Leftback said...

Welcome back to the capital markets as we luxuriate in the afterglow of the QE4 announcement. Was it good for you, too, punters? Once again, in retrospect, the Treasury market had done a better job of anticipating this announcement than equities. Yesterday's action was a simple Sell The News trade, especially in the long bond.

You just cannot fault the Bernank in his unwavering commitment to the central premise that Japan did in fact do the right thing, but just not nearly enough of it. For those who doubt the wisdom of this approach for the time being, please consult 2y2y inflation breakevens and get back to me. People completely misunderstand the essential simplicity of the Bernanke approach, which is stated succinctly by our friends here:

1) Seems like the FED wants to transform cash into a hot potato that nobody wants to hold (Anon)

2) Talking about solving fiscal problems with monetary solutions ... (DD)

Yes, indeed, my friends, the FED continues to ease to encourage investors to leave Treasuries and walk out along the risk curve in 2009 style until things pick up a bit.

As we have noted before, the full "fiscal cliff" impact would be at the most about 5-6% of US GDP. With yesterday's announcement, the total size of the Fed's 2013 projected asset purchases is now $85B/month or $1T, which is roughly equivalent to ... 5-6% of GDP. So DD is exactly correct, the FED is in fact replacing the fiscal hole by emptying a monetary bucket into it.

Despite the popularity of the "pushing on a string" argument, LB believes that the Fed interventions on this scale can still be quite effective, but that there is often a time lag in seeing its effects.

If you want to see this clearly, look at the delay between QE1 and QE2 announcements and the subsequent curve steepeners that ensued. QE3 does appear to have been somewhat ineffective, but this can easily be ascribed to the political uncertainty in the US and EU that characterized much of the latter half of 2012, so it is still early doors for that one.

Looking back at 2012, one of the central predictions made here was DMs would out-perform over EMs, based primarily on the idea that USD and JPY would remain strong for most of the year.

One of our themes for early 2013 is a slow steepener of the US YC, along with a lower USD and JPY. We think it will be EMs over DMs as we see the steady removal of a variety of political hurdles around the world, e.g. Grexit, Spanic, Bunga Bunga, Fiscal Cliff, Chard Landing etc, alongside a slow recovery in global trade and economic activity. The fly in the ointment, as pointed out by commenters here, would be a sharp spike in EM inflation. Whether and when that materializes will be a key determinant of the second half of 2013.

Last year's critical data point to look at every day for direction was probably Spanish 10y yields. In 2013 we think it will be EURJPY, which has been the single best FX barometer of late, and the US YC, especially 5s30s, as the front end remains pinned for now.

Leftback said...

...and this is our highly anticipated Knob of The Week nomination. Do you think they come in at WSJ holding the bear suit and make someone wear it every week?:

US Chance of Recession 100%

Another True Believer in the ECRI Cult worshipping at the altar of St. Lakshman here. This chappy wants us all to go short equities and long 30s here. If my memory serves, this John-John was also calling for Grexit, Spexit, Eurpocalypse, and US hyperinflation, at various times in the past.

We can safely install this one as a Contra Indicator, and better watch out when he turns bullish.

Anonymous said...

EM actually flat vs. US YTD (looking verrrrry quickly at EEM vs SPY, because I am lazy like that)

I see the merit of the idea going forward but it has already been a very strong run in the past 3/4 months (600bps or so in Q4).

Other than that, as noted by LB, I am still looking at that beautiful LOLHOR run in EURJPY as carefully as a German automaker.

I have got a feeling ... 2013 is going to be FUN.

- DD

Anonymous said...

In unrelated entertainment news (and I am surprised our US correspondent has not reported on this yet) the Robin Hood Whatever concert was source of great amusement, what with the EXTREMELY waspy/HF crowd (25k a seat) clenching fists and humming Kanye West tunes, not to mention the always depressing parade of 70y old rock n roll stars.

The point of this digression being, as Bluth Sr kept saying, there is always money in the banana stand.

Anonymous said...

C Says'
Actually LB what you didn't go on to say is even simpler...don't forget who is inbetween the FED and the markets into which this cash is going to get pushed.I liken this to the California goldfields.Do you want to buy ahole in the ground ,or do you wat to buy the store that sells the tools. In this case,we're talking about banks/financials who get paid anyway.
If I had done nothingelse for the last year or more other than to ride this one trick pony into the ground I would have still been smiling.I don't expect that to stop now either.Peple tal about book value etc etc.I couldn't care less.More important is they get to suck the cream out of the Feds juice before others get to it.
1st qtr earnings might be revealing to see how much cream they managed to suck up.

Anonymous said...

Maybe my thinking is muddled but I'm trying to figure out why the 5 yr is not trading at the overnight. So there could be 40+bps gain there vs not so much on the downside unless you think the recovery will happen a lot sooner and stronger than the Fed currently forecasts. The prospect of the cliff plus Mr Bernanke's checkbook adds some hefty protection.

But I like getting short the long bond. The Bernanke is a crafty one methinks. I could see some perverse logic in the argument that hitting the cliff will result in a sell off at the back end of the curve. You could also argue a similar result if we avoid the cliff.

5s 30s steepener anyone?

Anonymous said...

Re bank stocks: a certain Warren B. from O. is diving headlong into that stuff, mainly Wells and BofA, and still about it. Think about it: Wells alone grabs close to 40% of the US mortgage market (and would grab more if they were allowed to but obviouly monopolies are currently not en vouge unless it concers ownership of printing presses). Throw in the bottom in house prices, risining household formations plus the general idea to recap banks via the mother of all carry trades (aka ZIRP) and you might come to the conclusion that this is a neat place to be.

You have to do the math for yourself but it looks like BofA built enough provisions to handle almost every crap coming its way, be it Countrywide legacies or whatever. Not a bad thing imo.

Eddie (also referred to as Anon)

Leftback said...

Horrible scene today in Newtown, CT. Many of us will remember Dunblane vividly.

Please, please, make it more difficult to obtain a gun and ammunition. It's just common sense. Please.

Leftback said...

EURUSD at resistance levels, so a pullback is probably ahead in the near future. Stronger USD is likely next week on multiple POMOs, unless the deadlock is broken in DC.

Anonymous said...

C Says'
I have long thought that we cannot get a sustainable rally in equity until you first get a failure in ernergy and to a certain extent the wider comms sector.In effect what I am saying is that such a failure allows for real income rises and a wider range of choices over discretionary spending.That combination eventually allows more price pass through outside of non discretionary sectors, and of course takes the pressure of that segment of input costs thus allowing more amenability on labour costs eventually.
I bring this up,because the marked signs this year has been the relative good news on this issue certainly in the US where gas is playing a bigger positive effect role for them.
Overall the US looks like it is on the cusp of soemthing good in the years ahead.I think energy has played an increasingly big part over the years in making real income gains difficult to achieve hence the excessive use of credit to offset same. You get better control over your energy requirements and you've fixed some of your biggest problems.
Unfortunately in the UK we are still years behind ,but we are finally getting that message.

Of course that picture is exactly the inflationa picture the Fed has been working towards albeit they'll have to be busy as it unfolds.

amplitudeinthehouse said...

The picture is becoming clearer, my analysis over the last year has stayed solid , I've watched it carefully all the way,if I do say so myself, otherwise I feel that any trader trying to come into the US market at this juncture would be at a disadvantage due to the yennish environment that's been implemented worldwide. The yennish environment juxtaposed alongside any commodity price relief has been short lived in the past , your analysis screams USA relative to some countries that have dutch disease - housing bubbles. This trader is looking forward to the future as the time when rates reverse this blog can evolve....Macro Man...Team Macro Man...Interest Rate Swap Trader

Anonymous said...

Blackhawk Ben's speech was interesting. You would think that the Fed's job is to take the punch bowl away in the middle of the party. Instead Blackhawk points to the table and tells everyone to drink his fill.

I think rates will indeed stay low for a long time to come. Right now the Fed has about 2% equity (thanks to Hussman for pointing this out among some other points that follow). Which means they are about 50 to 1 levered. For comparison, the now (in)famous Bear credit funds that blew up in the summer of 2007 were about 20 to 1 levered.

I dunno what the duration of Blackhawk's bond portfolio is but since the Fed kept selling the short end and buying the long end 7 years might be ok. If you want to be more agressive/optimistic insert 5 years, it doesn't change a lot. A duration of 7 years means that the Fed is bankrupt if long term rates increase by about 30bps (40bps if you assume 5 years duration). Which is not a lot...

According to Reinhart and Rogoff the central banks of Chile and Jamaica iirc have been operating with negative equity for a long time and nobody cared. I dunno, though, how feasible this modus is for the Fed. At least they don't mark their book to market which obviously helps.

To cut a long story short, imo rates will stay low until the bond portfolio has rolled down sufficiently (the new buying spree doesn't change things, at this point it shouldn't matter whether you are levered 50 to 1 or 100 to 1, you are toast either way).

Of course, inflation expectations have to remain anchored... if inflation expectations go up, for example because people realise that the easiest way to get rid of this debt burden is higher inflation, say 3 to 4%, combined with interest rates below 3% for 20 years or so, Blackhawk is caught between a rock and a hard place. Raising rates is no option either way. So let's keep our fingers crossed.


Leftback said...


Many have likened the FED to a hedge fund. It's true that the FED can move large amounts of capital into a variety of markets and hence influence asset prices and FX in the US and around the globe. But the analogy only goes so far.

Not only does the FED not have to mark to market, but they also face zero possibility of liquidation under pressure from investors. This means that the prospect of the FED being Corzined by its positions in USTs is also zero. If MF Global had the luxury of being able to hold its positions in Italian debt, they would have profited handsomely in the post-Draghi moment. The FED can, if it so wishes, hold its longer dated bond holdings to maturity, and then roll down its portfolio extremely slowly,simply by suspending purchases and allowing rates to rise gradually.

Under this scenario, a 50 or even 150 bps rise in yields has little impact and could occur over afew months (see 2009, for example). In fact the FED would prefer this to happen soon so that some of their projected purchases for the year can be made at a lower price, and also to encourage investment in riskier assets. They will definitely want to see inflation higher but will have a hard job achieving this as hourly wages are flat.

The greatest fallacy of the hyperinflationistas is that QE drives the dollar lower which drives commodity prices higher which drives inflation. In fact there is a short circuit in place due to the yawning US output gap created by persistently high unemployment. Input commodity costs tend to be a driver of episodic transient inflation as the US consumer wages are flat. We have now seen repeatedly that $gaso much above $4 slows consumption markedly.

Leftback said...

Another yawn today. When the market lacks catalysts (and hence volume) there is a tendency for declining wedge patterns to develop on lower volatility. These are often described by Fib numbers, e.g. a series of 61.8% retracements, as quiet markets are dominated by technical trading.

So, if we argue that the run up from 1350 to 1440 was a ~61.8% retracement of the prior drop from 1475 to 1350, we might expect the next move to be a 61.8% down of the rally, which would drop us into the area around 1385-1390. This also happens to be around the 200 dma. Would not be surprised to see that this week if the politicians dither.

As is usual, we would need a catalyst to break out of the wedge and return volume (and direction) to the market. Otherwise we will sit in this range defined by 1390-1440 for some time.

Anonymous said...

Eddie 11.57 and LB 2.01 ... broken record at this point but I would surmise that there is a very long queue of people who would be quite sorely hurt in their collective derrieres by a rates flare-up before the Fed even blinks.

Those 4$ trillion of corporate demand surely didn't all go to people familiar with what it means for fixed coupon investments when interest rates move 100bps against you.

And as LB points out, unlike the Fed, these people tend to ask for their money back when things do not go their way.

It may all go smoothly (i.e. going Japanese indeed), but should there be a 400k jobs print at some point in the next year, I am sure the Fed is not first in line to enter a 1994-type world of hurt.

- DD

Anonymous said...

C Says'
I'm not convinced about the wedge.Markets not been dipping far before it's bought.I'd be more inclined to lean to it melting up into the year end.

Anonymous said...

C Says'
Actually I'll go back to my mainstay argument for longs...banks/financials.I don't trade the US banks/fins except through a fund,for my own reasons. Today the BKX is again taking out the sellers and I still see this has the leading 'indicator' for risk appetite. When the bid goes out of banks I'll be willing to listen.

Anonymous said...

C Says'
Welcome to the party Meredith?

Better late than never.

Anonymous said...

C Says'
Thank the Lord for technical markets.See what they are doing.The would be sellers are getting sucked into the kind of gently rounding technical play that to their MACD's indicates loss of mom and shortside play.Trouble is MACD's are no good in a trending market other than for getting stopped out in the grind.

Leftback said...


Wedges ALWAYS end in a melt-up (or meltdown) for sure. LB is BOLIVIAN, so would be happy to see the market drift up indefinitely. Still think we might get a little 2% setback this week on profit taking, if let's say Big Ears and Boner don't quite kiss under the mistletoe. Any pullback will be bought of course as you point out.

The interesting thing will be what happens between the FC deal announcement and the Q4 earnings. There will be a few winners (financials, a few tech) and quite a lot of losers (industrials and energy still facing weak demand, retail - this holiday season is really weak to this point, although it's not quite over). Guidance, however, should be stronger as US China and Europe all begin to look a little better.

DD, one group that really benefits from rising rates at the long end is the banks, which as C points out nobody in their right minds should be short here. I refer the honorable commenter to Spring 2009.

Anonymous said...

C Says'
Awful though it is to say the tragic events in the US imo make a timely deal more likely. They will both be acutley aware of how it will appear ,within this context,if they conduct a dogfight over the FC. Context counts and they must realise that.

Anonymous said...

I wasnt quite meaning the banks in my duration and corporate credit comment.

I think I am already on record re my touchy feely sentiment towards regionals. A steepener and book value at once. And to this untrained equity eye, valuations appears to lag a bit as well.

- DD

Leftback said...

Havens are all being unceremoniously dumped out there today, with bunds, UST, JGBs and gilts all selling off and Italian and Spanish spreads tightening like the thighs of a muscular mediterranean lady. It's a tough day for the bugs as well as Mr Bond. Greeks selling gold?

S&P Upgrades Greece

Pardon, monsieur. It appears that the Grexit may be off the menu. Sorry, sir. Care to sample the Spanic, instead? Oh, pardon me, that's out too. Well, how about some of this "Sch├Ątzewurst", it's on special.....

Anonymous said...

C Says'
This is what i find ridiculous;
"Deposits at U.S. banks exceed loans by an unprecedented $2 trillion as the threat of a slowing economy tempers borrower demand and lenders preserve tightened standards."
Talk about a lesson in behavioural psychology.Their should be some kid out there who wants to do his doctorate on this.
Simple answer.Charge them to hold money on deposit.Then watch it leave.

Leftback said...

Ho Ho Ho. It's a you know who rally. We have all been quite unequivocal here about hat to do during the Fiscal Cwiff Panto. Buy Equities. Sell Fwamingoes*.

Negative interest on overnight deposits has already been used in Europe to prevent Scandinavian banks from being overwhelmed with deposits from Southern Europe. But it may not be necessary here if the curve steepens to the point where banks can once again feel they can make more money by lending.

Speaking of steepeners, we did mention that was on the cards. The long bond at 3,03% today. The last few times the 30y has poked its head above the 3,00% line there have been buyers ready to take it down. A clean and convincing break above this level would be a vewy beawish dewelopment for this fwamingo*.

* Reference to Pink Flamingo hunting by TMM. Todays flamingos include gold, gilts, Treasuries, bunds, Schatz, JGBs.....

Leftback said...

UK 10y at 1.95% today, approaching the 2.00% level that was a critical support level for yields until the panic began in May and yields dove as low as 1,41% this summer. It's likely that this level will hold, at least the first time it is challenged. German 10y on the other hand have a lot farther to back up. Should be hours of fun for bund longs.

Leftback said...

Hope no-one was short. [Insert the usual remarks about Cold Steel, "they don't like it up 'em", etc..]

Saul Bollox said...

Fiscal Cliff, my Arse.

Leftback said...

Sharp FX reversal from DX 79 and EURUSD 1,33. The Holiday party might be coming to an end, at least just for the time being.

Anonymous said...

C Says'
It appears I woefully underestimated Boneheads capacity to indulge in a pubescent pissing contest.

Anonymous said...

Coincidentally, our barometer of choice (yes eurjpy) has been getting in seriously overheated territory.

So time to fold'em for the year here and now, methinks. We are sitting out for a bit, and we'll figure out on the other side how badly some of the unsuspecting birds have gotten stuffed.


Anonymous said...

C Says'
There's a lot of stuff which on most measures appears extended (heated). That's what happens when markets grind on past the points that people exepect them to correct.Eventually they do correct,but usually they frag some short sellers repeatedly before they do .

amplitudeinthehouse said...

C, I'm too tired , Merry Christmas :)

langone said...

Yen looks pretty bees knees.