Oh Dear

Oh dear.

While Macro Man has been cycling halfway across Massachusetts, his mates have been sending him some rather ugly charts.

The DAX has looked terrible ever since Germany won the World Cup.   Apparently peripheral weakness is a more formidable opponent than the Brazil team:



Meanwhile, the more speculative grades of credit seem to have decided to price at least a smidgen of the liquidity and leverage risk premia that Macro Man wrote about a week or two ago:


Whether this is the beginning of the Big Kahuna correction still remains to be seen, of course.   Suffice to say, however, that the days of 5+ Sharpe lazy longs in speculative credit look to be over for the time being.
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Anonymous
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August 7, 2014 at 7:13 AM ×

for the time being vol bid in risky assets and safe assets rallied.

The Big Kahuna correction implies a sell-off of both and a correlation breakdown between risky and safe assets caused by the fact that accounts will dump whatever they've got to meet margin calls &co.

for the time being we haven't seen any of that (yet) but the level of complacency existing these days is quite something.

ciao f

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CV
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August 7, 2014 at 7:37 AM ×

I couldn't agree more Anon@7:13, I couldn't agree more ...

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Anonymous
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August 7, 2014 at 2:03 PM ×

Draghi says data suggest slowing of growth momentum = Forget all steepeners.

On the other hand, you may still have sharp sell-offs caused by excessive positioning at times but not much else... :(

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Anonymous
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August 7, 2014 at 3:05 PM ×

Sub-1% 10-yr money in Europe coming...

http://imgur.com/Ar88sor

Awesome. What Draghi wants is no longer in his control.

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Leftback
admin
August 7, 2014 at 4:37 PM ×

Agreed on steepeners, Anon @ 2.03. In fact, if anyone wants to put on a steepener, you can save time by just putting the money in an envelope and sending it to Gary Shilling, Jeff Gundlach and yours truly. We appreciate the gesture.

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Anonymous
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August 7, 2014 at 4:38 PM ×

Also if anyone has a spare run, please send it to Virat Kohli c/o Indian dressing room, Old Trafford, Manchester, U.K. He has been looking for one.

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Anonymous
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August 7, 2014 at 5:28 PM ×

Macro Man - After your "Casino Royale" story & Draghi's press conf today, I have the perfect picture for you:

http://imgur.com/gCgqpLP

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Anonymous
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August 7, 2014 at 7:01 PM ×

How about the days of 5+ Sharpe lazy longs in bunds? still alive and kicking.

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abee crombie
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August 7, 2014 at 8:14 PM ×

so the eurostoxx is down 10% now from the highs, time to start donning the teflon?

damn russia is giving me pause

but do buy the dips I think, as draghi will do what all the other CB's end up doing and that will be good for equities.

Bund, I am impressed! 30yr german paper traded as low as 1.65% in 2012, currently it just took out 2% and falling. Looks like we are gonna get a re-test

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Leftback
admin
August 7, 2014 at 9:21 PM ×

Treasuries, bunds and low rate vehicles (preferreds, REITs) have been the Lazy Long of the Year.

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Leftback
admin
August 7, 2014 at 9:27 PM ×

A very small toe into Spoos tonight, encased in a Kevlar sock, naturally. Lower vol tends to indicate a bounce isn't far away. Fully expect Eurostoxx to do the same thing and for it to last for a week or two. As long as DAX 8900 holds there will be some dip buyers out there. It's not as though there can be completely sh*tty EU economic data releases every day (famous last words).

MM finally got his wish in the shape of a falling EURUSD. Mind you we were all wishing for that about 18 months ago, when it seemed to be suspended above 1,40 on a set of invisible wires (aka Abe/Yellenomics). I guess EUR longs have finally started feeling QEasy.

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Nico G
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August 8, 2014 at 5:44 AM ×

as per MM dictionary:

ebola punt: buying a dip in August 2014

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mt99
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August 8, 2014 at 9:53 AM ×

NZ is notably absent from the Russian import ban list. While it does make sense (see here) that a whole lot of European dairy will need to find a new home, I cannot see Fonterra and the kiwi suffering more from this than gaining from one hungry new customer. Thoughts?

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amplitudeinthehouse
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August 8, 2014 at 12:28 PM ×

Nice post , MM, trading amongst these market players is tough going, but Yes, we still like the previous trade for a number of reasons that only a trader with foresight into a future beyond tomorrow can recognize that one day we can keep the desk going.
Ps..bleeding on the desk still counts for something these days.

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Anonymous
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August 8, 2014 at 12:36 PM ×

C Says
Classic morning reason to not sell the news without considering if you are already at short term oversold.

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