Friday bullet points

Macro Man has had another snafu, as his Excel cannot process the Bloomberg data updates that one of his amigos sent him.  That in turn has rendered his NFP forecast spreadsheet null and void.  It looks like Bond will have to confront Le Chiffre tomorrow without a briefing from M.

*  While the week has thus far played out kind of the way that Macro Man envisaged, there really isn't enough in it to call victory or defeat either way.  Yesterday's equity price action was curious, to say the least....European stocks got waxed on Draghi disappointment (what were they expecting? Manna from heaven?), and while the US tried to follow suit, Spooz hit a shelf of demand and bounced quite nicely.

*  Your author still reckons a test of 1900 is in the cards, though obviously the closer we get to the level the less insightful that view becomes and the greater the opportunity of playing for a bounce.  At 1938 (the price at the time of writing), it's sort of no-man's-land territory...not a lot to do there.

*  Although there's been some sturm und drang in the comments section about the flattening of the US curve,  it's far from clear that it's an issue that need concern the Fed.   The current curve is after all still quite steep by the standards of history, and US 10's look cheap when placed in a relative global context.  And of course, lower back end yields = more methadone for the housing market, which in Yellen's world = #winning.   (Macro Man's catching up!  Now he's only 4 years behind in social network savvy!)

*  In any event, Macro Man prefers playing eurodollars, where he's got a little EDZ5/Z6 option spread in the p.a. which has worked quite nicely.

*  As for the buck, while his head tells him there's a deeper correction to come, his gut thinks the street may try and buy the dip in USD/JPY tomorrow, assuming the number is decent.  That ultimately depends on how much of the recent length has been dissipated, which he'll oncede is difficult to track from a distance.  His Bloomberg never felt so far away.....

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amplitudeinthehouse
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October 3, 2014 at 8:54 AM ×

Sticking with my call , and grateful to have caught the latest SP500 slide due to having seen the hedge book gently sliding into territory that I haven't seen in quite awhile and always dread the comeback that it takes to normalize the trading book, it's horrific.
Thanks to commodities for catching that that slide and without a doubt putting a bottom in place
I'm short the indices.

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Nico G
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October 3, 2014 at 10:25 AM ×

early in the week Europe defended tremendously well - and that was such a frustration when you were short stoxx - hoping for Draghi, while US got clubbed

yesterday saw two opposite stories when US was already attempting a bounce from oversold while Europe only caught down with past US price action after Draghi meehed

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Anonymous
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October 3, 2014 at 2:51 PM ×

Apologies senor, me just refreshed all workbooks, F9ed saved and sent... no idea what happened there.

spreadsheet hacked by one of the super villains?

keep turning the terrible towel

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Leftback
admin
October 3, 2014 at 3:14 PM ×

Ugh, we were quite close to nailing the number, and of course it was a "hot" number, at least if you only look at the headline. The main impacts have been seen in FX, where both EUR and JPY took a bath. Spooz were going to rally whatever happened, as a mini-squeeze gets rolling.

Looking at the details. Hours worked was up slightly, but hourly wages were flat. So inflation hawks can get back in their box for another month. As usual most of this report can be seen as "0 ± measurement error" given the size of the US economy and population.

I am going to stick with the view that we are near a top for DX (markets peak on Good News), and near a low for commodities and shares of their beaten-up producers (mining, oils, EMs in general).

Rates seem to be continuing on their inexorable path towards a much flatter yield curve. You read that here first, of course.... punters should recall that the "steepness" of the YC that we have seen since QE1 is an artifact of Fed policies and a most important aspect of financial repression and bank balance sheet repair. It isn't in fact "normal". A flatter back end is actually "normal" for a healthy market, while an inverted YC signals recession under non-QE conditions, and strong steepening thereafter signals an imminent recovery under normal conditions.

It would be interesting to see what happens to the YC during escape from the Zero Bound, so let's look at Japan's recovery from its entry into ZIRP in the 90s and see what we can learn from its successful exit ...... oh, drat... :-)

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Anonymous
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October 3, 2014 at 3:43 PM ×

C Says
I think the EOD is to watch today. That zoom off the news is one thing ,but if for any reason equities finish flat on that news I'd be inclined to say buying power is waning Friday or no Friday.

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Mr. T
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October 3, 2014 at 3:57 PM ×

+40 on the spooz in < 24 hours is a pretty darn good neck-snapping rally. Oil still can't catch a bid - its easy to dismiss this as just DX but I think there is more too it. AUD off almost 2% today. The US headlines are like the SPX - they look much better than they should, given whats going on under the hood.

I think the most likely fed reaction is to see them backing off from their targets (again). It's going to be very tricky to get us off zero rates. Flatteners or outright longs of the long end seem like the way to go. I just don't see the scenario where US 10 yr yield can meaningfully go up.

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Anonymous
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October 3, 2014 at 4:07 PM ×

5yr UST to 30yr UST spread @ +139 ..... thats a low going back to 2008

Crack spreads just cratering . Lotsa bad press out there on gasoline demand ... now even ethanol is cratering on glut of supply.

Today's DXY spike has finally driven gold thru $1200 .... suspect it gets medieval into year end as DXY continues its quest for $90.

54% of the new jobs in today's print were in low wage sectors (and only 12% goods producing.

The US is the KING of low wage jobs...

http://imgur.com/083QDeH

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Anonymous
admin
October 3, 2014 at 4:15 PM ×

No Black Swan, just that FINRA is lining up 800 arbitrators to hear claims about Puerto Rico closed-end bond funds

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abee crombie
admin
October 3, 2014 at 4:20 PM ×

real buying in R2K and HYG.

where we close is what matters but i think that might have been the end of it. not saying spoo's are gonna rocket to new highs again but this was always a rotation correction, not a full fledged one. If the russell bounces hard, that will underpin the 'internals' like breath and new highs etc

Nico good point about the stoxx/s&p weakness earlier in the week. Guess Europeans just love stops!

EEM is one to watch as well. DXY, WOW!

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Leftback
admin
October 3, 2014 at 4:40 PM ×

Here is the Real US Jobs Report, in microcosm as seen from the ground in LB's mythical middle income town "Springbrook, USA":

"Debbie got pregnant again with the nice boy around the corner with the tattoos and motorbike, so she cut back her hours at the ShopRite down the street, but she is still working. Chad is still on disability from his PTSD and Molly was laid off last year from her book-keeping job after it was digitized and sent to India. To make up for the lost income, Grammy Lois and Grampy Chuck both got jobs at the ShopRite. He is bagging and she is on the checkout. So our family gained TWO jobs, just to keep our income steady."

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Anonymous
admin
October 3, 2014 at 5:51 PM ×

Over last 12 quarters , the number of Americans aged 45-54 working has DECREASED while the number 55 & older has INCREASED 12.2%

North Slope Alaska spot crude was almost $115 in June . About to break $90 now

Offshore drillers getting smacked upside the head again and Heating Oil futures have certainly crashed

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Anonymous
admin
October 3, 2014 at 6:59 PM ×

5yr UST red by 1/4 point and 30yr UST green by 6/32 ..... traders pricing in Fed driving inflation to zero

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October 4, 2014 at 3:01 PM ×

It is said that stupid question doesn't exist, but... Can somebody tell me something about technical situation in US stock market (S&P500 and NASDAQ). In Poland dominate opinion that stock in USA is in for correct. Is better concentrate on European stocks market where SuperMario Draghi could boost economy? Or better is waiting for good moment to buy for example ETF S&P500?

Thanks in advance!

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Anonymous
admin
October 4, 2014 at 6:35 PM ×

Mortgage rejection letter to Ben...

http://imgur.com/W6ConUc

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Anonymous
admin
October 4, 2014 at 6:48 PM ×

Robert, just keep reading the blog. Some excellent market calls by MM and commentators. Oh, and please keep it to yourself :)

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Anonymous
admin
October 4, 2014 at 10:01 PM ×

Airline stocks no bid Monday...

https://twitter.com/paul_chard63/status/518456527838269441

Note all the reporters responding to tweet.

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Anonymous
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October 5, 2014 at 12:21 AM ×

S&P: Greece will likely default (again) in the next 15 months due to financing shortfalls.

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Nico G
admin
October 5, 2014 at 8:11 PM ×

Gross interview

http://online.barrons.com/news/articles/SB51517841841143733463604580184300213564076

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Anonymous
admin
October 6, 2014 at 1:55 PM ×

Fast and Furious...
http://screencast.com/t/GGjX43PEWx

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Anonymous
admin
October 6, 2014 at 1:57 PM ×

Doing God's work:

"She said LIA employees told her about a “lavish” trip to Morocco and that “there was heavy drinking and girls involved,” paid for by a Goldman Sachs banker on his company credit card. “I was shocked by all of this and a number of red flags were being raised in my mind,” McDougall, said in the witness statement".
http://www.bloomberg.com/news/2014-10-06/goldman-relationship-with-libyan-fund-shocked-lawyer.html

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Anonymous
admin
October 6, 2014 at 2:09 PM ×

Thomson Reuters data: Third-quarter profit-growth expectations for S&P-500 companies has fallen to 6.4% from roughly 11% two months ago.

Fourth quarter profit-growth expectations for S&P-500 companies is down to 11.1% from 12% (from July 1st).

Even though profit-growth forecasts for the second half of 2014 have been cut, forecasts for 2015 have gone higher, from 11.5% to 12.4%.

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Anonymous
admin
October 6, 2014 at 2:42 PM ×

If "profit growth" is measured in eps you gotta really take them with a grain of salt. OCF/EV much better to measure performance when buybacks are so popular.

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amplitudeinthehouse
admin
October 6, 2014 at 4:40 PM ×

Staying out of the market today, thought about visiting my fav cafe in London next week.

Hello Frenchie!










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Leftback
admin
October 6, 2014 at 5:40 PM ×

Shocking revelations:

"LIA employees told her about a “lavish” trip to Morocco and that “there was heavy drinking and girls involved,” paid for by a Goldman Sachs banker on his company credit card.."

Imagine... heavy drinking.. and girls.. we are shocked, shocked to hear that this has been going on.

Bucky seems to have run out of gas this morning against the majors. Euro catching a bid on bad news today, that's sending a message for sure.

Good day to wake up with some Brazilians...

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abee crombie
admin
October 6, 2014 at 5:49 PM ×

Starting this Monday, October 6th, we will provide updated estimates of the LMCI every month. In general, we will endeavor to have the updated series posted sometime after 10:00 a.m. on the first business day following the Bureau of Labor Statistics' monthly Employment Situation report. (You can find the release schedule here.) Of course, because the LMCI is a staff research product and not an official statistical release, it is subject to delay, revision, or methodological changes without advance notice.2
Although we will not write a new FEDS Note each month, the latest estimate of the LMCI will be posted as a comma-separated values (CSV) file at the permanent URL http://www.federalreserve.gov/econresdata/notes/feds-notes/2014/files/lmci_feds.csv. This coming Monday, the series available at the link will be the model's estimate of the change in labor market conditions through September, given data available through October 3rd. (Until then, the link will point to the LMCI estimate from our May 22 Note.)

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amplitudeinthehouse
admin
October 6, 2014 at 5:52 PM ×

You know what , the last time I was in London some Frenchie tried to sell me the London Bridge...then the same Frenchmans friendly Yankie quarterback tried to sell the Big Ben clock tower at half the price of the London Bridge, but only if I would allow the interest rate to swing from one side of the channel to the other, sorry , I mean one month to month.
Anyway, I bluntly declined because I felt that such high standing figures of society that they were would not possibly be seriously conducting business with an unemployed mature student at such a high level of finance.
I suppose luckily that life resembles those curve balls b/c it's expected that that late swing in into the batsman can be predicted.

https://www.youtube.com/watch?v=tAJIsYqU9AI

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Anonymous
admin
October 6, 2014 at 10:05 PM ×

Bloomberg data: Companies in the S&P-500 are poised to spend $914 billion on buybacks and dividends in 2014, or about 95% of earnings

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Nico G
admin
October 6, 2014 at 10:42 PM ×

that says it all

none gives a shit about innovation capex blablah

it all about extracting the cash NOW et après moi le deluge

i'd be curious to see compare this data with say, Asian companies

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Anonymous
admin
October 7, 2014 at 12:12 AM ×

Steen Jakobsen

Macro. Our Q4 report out tomorrow. Main position : Significant lower yield in the US - 10yr @ 1.5% by Q2/15.

This is NOT Grands Montets...

http://imgur.com/46ob1tF

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amplitudeinthehouse
admin
October 7, 2014 at 12:59 AM ×

So that's what life is like after having the ALL TIME BEST trade on your books..just a never ending game of trying to emulate the same trade over and over again.

Hat Tip: Stop chasing for that trade again it's only going to bring you grief, just sit back in your chair and chew on a cigar knowing you had the best of all time.

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Nico G
admin
October 7, 2014 at 9:14 AM ×

there you go

buy back in Japan

http://www.bloomberg.com/news/2014-10-07/socgen-quants-outdo-japan-shame-gauge-with-buyback-index.html

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Leftback
admin
October 7, 2014 at 2:51 PM ×

Fairly awful IP data out of Germany, and the Euro only dips briefly below 1,2600 before rallying. Hmm...

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Anonymous
admin
October 7, 2014 at 3:37 PM ×

you don't need bloomy feeds, =200+rand()*100 is as accurate a payroll predictor as you'll ever get!

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CV
admin
October 7, 2014 at 4:06 PM ×

Memo to self, just buy US duration ;) ...

@LB: Yep, but a lot of pain is already priced into that pair. This was always going to be week of the "great mean reversion" in Germany. We are not done yet mind, the export data on Thursday will be shocking too! Of course, the problem is that this means that Germany is pretty much now in one of those dreaded "technical recessions" and this means that Eurozone GDP will look dead as a do-do yet again etc etc. All very logical once you factor in that trend growth in the Eurozone is pretty much a couple of bad guesses between 0 and 0.5% ... it does not take much to get you below the zero line.

The game plan for me is pretty unchanged, though. If this does not spill over into the bond market somewhere in the periphery, it will be bad but not catastrophic. I also think that private QE at the ECB will surprise the market with its potency, just as the LTROs did. In six months' time we will be talking about all kinds of weird things in the Eurozone ABS and high yield markets.

Oh, and does this bring us sovereign QE. I am unconvinced ... why buy sovereigns when governments are not allowed to spend anything. At these yields it does not make sense ... it might actually be much more effective to relieve the Spanish banking system of its NPLs through private QE of RMBS ;).

Claus

Claus

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Leftback
admin
October 7, 2014 at 5:50 PM ×

CV, on EURUSD, agreed, the pain is already priced in and so we are seeing Buy The News price action. Not 100% sure but the top may be in for DX for 2014.

Spooz might be in one of those declining wedge thingies for a few days here, while we get a look at earnings season and ahead of options expiration?

CV, how 'bout those soaring US rates, eh???

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Anonymous
admin
October 7, 2014 at 6:15 PM ×

LB, if one thinks DX is topping now perhaps it would be a good time to jump in oil related stuff for the short term? A lot of that field (offshore most prominently) has been beaten to the gutter.

Of course offshore has its own problems, including rig oversupply which is going to go well into 2015, considering rig building are long term decisions going back many years and will also affect many years into the future. But it might be a nice risk/reward play for the short term.

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Anonymous
admin
October 7, 2014 at 7:25 PM ×

Steen Jakobsen prediction: US 10 year @1.5% in Q2/15..why?

Deflation in EU..hence Euro printing and the U$ catches bid?..or the US data sucks and the Fed prints?

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Leftback
admin
October 7, 2014 at 8:29 PM ×

Already got a load of oils/energy companies, but all in non-US markets. TOT, ÖMV, Lukoil, Gazprom, etc... did reload a bit in Lukoil this week.

Took my eyes off the market to do some writing this afternoon and stone the crows, IT'S ALL GONE PEAR-SHAPED, Guv'nor. The EURUSD rally is a bit of magic for us, though. There are a few gaps in that chart that might get filled next week.

US Treasury dynamics - it's all about shortage of quality collateral and new balance sheet rules. Not just banks but other SIFIs like the big insurance companies. Innit.

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