Busy Bounce day - quick thoughts

Busy day but mood has improved at camp TMM as there are signs that the storm is subsiding. But here are a real mish mash of thoughts.

- Chinese stock turns -6% to flat. Monstrous great "hammer" on the candlestick charts. Can't see that being overcome on the downside for a while. Similar patterns all over the place.

- FED First attempt to rein in the runaway herd. Fisher/Kocherlakota (axalotl? strange fish theme?)

- FED comment as heard by markets reminds us of this Far Side cartoon


(just substitute "Tapering" for "Ginger")

- Turnaround Tuesday? US has turned any minor rally that has started in European time. First time for an abatement? 

- BUT - 10y yields, once they hit their highs, may not come back that much.  Maybe 20bps or less...  The front end might but the 10 yr is seeing a fundamental repricing.

- Draghi is under pressure, Coeure comments reiterate easy policy needs - heightens differences and undermines Euro.

- Chinese saying they may release the liquidity noose, but no idea how fast or how many casualties.

- Bradley ... OOOOH !!  Forgive TMM a bit of their own witchcraft now and again, but to suddenly notice that Bradley and his amazing Siderograph call this years big trend turn as last weekend has us going OOOOH. Especially as this is the biggest for a few years. As ever, there is something for everyone here as timing is plus or minus a few days so it could encompass the turn last Wednesday night OR it could mean we bounce after this sell off. But way, take it as a free gift to back whichever view you fancy. We’ll take an up move. 

- FX sell offs stopped yesterday leaving other underlying assets to continue their falls. Sign of first hedges done and second stage underlying asset unwind taking over = panic over, near completion of first wave? 

- Many things don't fit the normal RORO trade, as this is possie liquidation rather than classic risk off. It's positional risk off not traditional macro risk off.

- Are we seeing 5 minute macro putting on the 3 year trades again (compare with JPY and Nikkei over shoot and pull back)?

-  US data coming out strong this afternoon. Unaffected so far re post FED asset price moves as all pre FED readings.

-  How much asset price damage is needed to trigger feedback -> Confidence -> Economy slipping down again? Need to see post Fed confidence samples. 

- TMM feel like the matador in today’s press - Gored again after having just returned to long equities.



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abee crombie
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June 25, 2013 at 9:35 PM ×

nice post tmm. agreed this is not traditional risk off trade but until US bonds show some strength I think you have to be cautious. The game plan is not very clear at the moment for anyone

I do think equities are the best place to be though but only on a relative basis and upside potential.

For me the q's are all about Long rates, EM FX and Credit spreads. I nibbled here but I just cant see the rationale to go all in on these markets and I think another leg down only brings in more selling for these assets once retail sees their losses.

Where we close the week and the reaction to NFP will be key for me.

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Anonymous
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June 26, 2013 at 12:32 AM ×

Pity poor Risk Parity models

would you buy a US 30y zero here? Not yet, then

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Anonymous
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June 26, 2013 at 9:18 AM ×

C Says
I still have little interest in being outright anything, and probably will stay that in that tactical approach now until market forces tend to have written in what the ongoing lessening forces of central bankers will eventually mean. Market distortion from the latter has been enormous in it's effect upon investor and trading behaviour and we really cannot begin to get a clear idea how that is going to unfold in a any form of precise manner. It's not difficult though to forsee how this path policy and data is going to lead to punishment for overcommittment on position so personally I prefer to use what I call seesaw tactics. Tends to mean you appear to underperform for awhile then you pass the outperformers coming back in the other direction ;) ,more of a smoother ride I'd say.

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amplitudeinthehouse
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June 26, 2013 at 10:10 AM ×

Have the Central Bankers finally done Stanley justice?

A while ago I read a newsletter that struck through me like a thundering lightening bolt , the penner deconstructed Stanley Kubrick s film " Eyes Wide Shut " , part by part he took us through Toms journey from the upper middle class life of a New Yorker into a one night escapade into the world of the Elite. He basically put forward that the realm of elitism sit in high places that are unknown to those that prefer to cruise through life without feeling the need to know what doesn't involve them , but little do they know when it comes to the financial realm it has everything to do with them and the general train of thought is that they have no recourse to create change , ie ....everytime a financial collapse takes place it just adds to the misery bill that one day our future generations will have to pay.
It isn't so much the financial fundamentals pillars to his essay that struck us , it was the movie itself that struck a chord..the variability in the class spectrum resonated with us having spent our formative years in the Sport of Kings living in the lowest realm of the spectrum.
As I watched Tom in travails through the class spectrum in New York and out into the Estates of Nobility we caught on to fact that this man was already where he wanted to be but was nonetheless going to push the thresholds of infidelity with his " Eyes Wide Shut " having being dragged into an intellectual debate on sexism with Nicole who clearly couldn't handle her pot, and delve into the realms of others that he has no idea of.....
I witnessed enough in the Sport of Kings to know when it comes to betting all men are equal , the stock market included.
The time has come as in Toms journey when he is at Zeiglers Fifth Avenue apartment leaning over his billiard table in a pool of sweat in acknowledgment of the fact his been out of his realm for the last 24 hours ,and market investors that have enjoyed the Qe train with their " Eyes Wide Shut " to this point are now that Tom standing in Zeiglers apartment , and they will definitely be sweating it out over their friends billiard tables when discussing future Qe implementations and growth...

ps....our favorite part of the movie wasn't the orgy...that only makes us jealous..It was Toms face of athirst when in the costume shop and paying overs to the Storekeeper ...it reminded me of the times when I'd pull on the new $800 diesel jeans on a Friday night and knowing full well I didn't have a clue where I was going , where I'd be eating or where I'd be sleeping , but somehow I was going to make home Monday around noon.

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Anonymous
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June 26, 2013 at 10:18 AM ×

C Says
Deep, I like it ,come sit on my couch for a moment.

The word to take from all that and think about is "journey".

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amplitudeinthehouse
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June 26, 2013 at 11:06 AM ×

The " journey " was over long ago..it's just hell now and I am going to embrace all of it...b\c someday in the future it's all going to rise up in a creative way.

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Anonymous
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June 26, 2013 at 11:45 AM ×

C Says
If you're not dead and it doesn't look like it then your "journey" certainly isn't over. I've risen more times than Jesus so I can tell you all about "journeys" and when they are over. ;)

Meanwhile Mr Market is playing "see after saw".

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amplitudeinthehouse
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June 26, 2013 at 12:04 PM ×

Well, when it comes to journeys I won't be setup into arrangements by those that have failed at it multiple times!

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Anonymous
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June 26, 2013 at 2:21 PM ×

Oh no, you mean GDP is a lot less than we first made up, er, said? You mean 10y nominals should maybe be lower than we frantically were repricing for the past month?

#muppets

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Leftback
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June 26, 2013 at 2:32 PM ×

Anon, very droll.

Short feral hog futures. Limit down today.

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Leftback
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June 26, 2013 at 2:35 PM ×

Hmm, 1Q GDP revised down. Wait until you see how slow 2Q and 3Q are, especially after that little rate spike that was just created.

I think we'll see a bit of a rotation into the "rate-sensitive" babies that were being thrown out with the bathwater these last two weeks.

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Leftback
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June 26, 2013 at 2:43 PM ×

Mr Market seems anxious to revisit the Fib levels we threw out here yesterday.

Only problem is when he hurries the retracement, we get the feeling we are watching some big punters who are seeking the exits and handing off Spoos to eager noobs who have just been chased out of bonds. Which usually ends up being a bad idea.

See you at 1620-1625.

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abee crombie
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June 26, 2013 at 5:42 PM ×

LB, no one want lower rates more than me, who unfortunatly didnt lock in my mortgage rate, but I would hardly call this a rip roaring rally in rates, which is what is driving most of the move.

You knew the CB's were gonna come in this week and talk down the comments, no surprise there.

I worry that the next 2 NFPs could surprise on the upside (given the lag)


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Anonymous
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June 26, 2013 at 11:59 PM ×

Next 2 NFPs surprise to the upside but then will be drastically cut in the following months. Ensuing panic triggers more stimulus hand holding from Fed as break evens finally slow if not reverse their ongoing descent --> equities melt up into the holidays as 10y<2% again by XMAS.

#bookit

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amplitudeinthehouse
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June 27, 2013 at 3:04 AM ×

Awesome!..I feel like one of those props at channel 9.

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Anonymous
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June 27, 2013 at 7:31 AM ×

Re Risk Parity:

You might like this chart.

Risk Parity

Eddie

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Leftback
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June 27, 2013 at 9:24 PM ×

Anon @11.39, agreed with all the above except the timing. US growth starts to look piss weak even earlier in my conceptual model.

Feral hog futures down again today. The REIT complex has bounced hard off the lows. Typically you get a selling crescendo twice a year in those and the lucky buyers get to enjoy the divis, while the panic sellers are less fortunate. Those who bought at the top, of course, got what they deserve, a hosing.

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Anonymous
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June 28, 2013 at 10:57 AM ×

Leftback,

Scroll down past the charts for a quick but frightening analysis of the recent revision of US GDP. There is plenty of enthusiasm out there for the US economy in the second half of 2013. This economist isn't so sure:

http://www.consumerindexes.com/

Rossmorguy

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abee crombie
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June 28, 2013 at 2:25 PM ×

Quarter end window dressing! Asian markets loved it but doenst seen like US session will follow. Will be critical for mREITS as they publish their BV off todays prices. FNCL 3.5, is the one to watch.

How big is next Friday's NFP gonna be? Enough to spoil the long weekend plans for traders?

Gold cant stop going down and oil never moves now. What gives?

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Leftback
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June 28, 2013 at 3:05 PM ×

Thanks, Rossmor, a good read.

NFP will indeed be a big one. A few feral hogs are going to be bacon next week if the US jobs recovery (cough cough) disappoints.

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Anonymous
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June 28, 2013 at 3:25 PM ×

C says
The good news is the rate panic threw up a couple of specific good debt buys as the baby went out with the water. Other than that I can't get too excited right now.
We seem to be in a place where good news will keep impacting bonds and the upside for equity still looks capped. Disappointments would short term favour bonds ,but I seriously doubt they will signal any kind of return to the moneyflows previously seen during this policy cycle .On that basis the genie is out of the bottle and no amount of Fed jawboning is going to get it back in. No one wants to be the duration bagholder for them. Indeed their best chance of serious containment I think would come from some re emergence of a crisis elsewhere of sufficient magnitude to deflect people's attention from bagholding.

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amplitudeinthehouse
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July 1, 2013 at 1:11 PM ×

Even better the price of Iranian oil just went through the roof.

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Leftback
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July 1, 2013 at 7:20 PM ×

1625 level was tagged, as we predicted. July 1st is usually a lot better than the rest of the month. The ISM was weak again. Expectations for Friday are already being recalibrated, but perhaps more in the bond market than elsewhere.

Europe looks a bit better, probably not a good time to short Euros here with the US fading a bit.

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