Mario and No-QE-yet

But soft!   What price through yonder support breaks?
It is the oil, and HICP is sub-one
Arise, oh price, and kill off deflation soon,
Which leaves us sick and pale with grief,
That thou hast left our price far below two:
Be not so low, since we are grievous
That headline price will be low through '16
And none but fools try to change it; have it off!
Previous
Next Post »

29 comments

Click here for comments
Anonymous
admin
December 4, 2014 at 2:08 PM ×

If you look at the current Indexes of China, Japan and Europe, it their LOW growth that accounts for their rise. Go figure.

Reply
avatar
Polemic
admin
December 4, 2014 at 2:10 PM ×

Love it ! well done!

But today is turning into a grimfest.
Putin sabre rattling and getting more isolationist. ECB All mouth and no trousers.

Bye bye German stocks,

Reply
avatar
Macro Man
admin
December 4, 2014 at 2:13 PM ×

Whatever the arguments are for further easing in the EZ- of whatever type- lower oil has got to be among the flimsiest.

How the hell does Draghi and/or the ECB think that anything they do is going to impact the trend in oil? For Mario to say 'hey, these forecasts don't even account for the last couple of weeks' decline' is beyond ludicrous.

Reply
avatar
Anonymous
admin
December 4, 2014 at 2:28 PM ×

YEN just tagged $120.

Reply
avatar
washedup
admin
December 4, 2014 at 2:33 PM ×

why would QE work in eurozone anyway? because a (wtd average) 10 Y 1.3%is too high and it really should be 1% to finally make a difference?
The rally in european stocks and corporate credit? Plus, they are dominated by large corporations so a M&A boom has more issues than it would in the US. New investments? Isn't capex history for european firms kinda lousy relative to earnings? All you would get is P/E expansion.
Europe has an aggregate demand problem, which it will continue to have as long as the world has an aggregate demand problem, which it will continue to have (barring contact with alien civilizations that have a taste for our hydrocarbons) as long as policy makers (not central banks, that game is nearing the end) move to a positive fiscal stance thus bringing forward even more demand from the next 20 years and cram it into the next 5, meanwhile hoping for the technology cycle to do something miraculous to revive growth expectations.

Reply
avatar
Anonymous
admin
December 4, 2014 at 2:52 PM ×

I think the market is overlooking the point Draghi made repeatedly about the wide range of assets which the ECB could buy.
I would not be surprised if an equity ETF component was included in the coming QE announcement in February, taking its cue from the BOJ practice.
One can rant at the foolishness, but the purpose is to make money.

Reply
avatar
Anonymous
admin
December 4, 2014 at 2:52 PM ×

Sure feels like a major low liquidity flush is coming as the absurdity of the Keynesian central bankers grows ever clearer

Reply
avatar
Leftback
admin
December 4, 2014 at 3:01 PM ×

If the Yen tagged $120 it would be a shocker. The $ did tag 120¥ though.

Reply
avatar
Polemic
admin
December 4, 2014 at 3:01 PM ×

Can we have a rule that any reference to a "new high/low since last time/ever" we please state why it is relevant and what we expect people to do with that fact?

Reply
avatar
Macro Man
admin
December 4, 2014 at 3:05 PM ×

In fairness, 'the highest level of USD/JPY since before the crisis' is probably relevant...event more so if you look at it in real/PPP terms.

Reply
avatar
washedup
admin
December 4, 2014 at 3:08 PM ×

anon 2:52 - wouldn't call it impossible, but given the struggles faced in sov QE I would say the odds of equity purchases by ECB by q1 as quite remote, unless, of course it is through other channels such as the bundesbank having to bail out someone like DB that poses a systemic risk. Needless to say we are not close to that point yet.
Japan is just much further along the grand experiment than EU is, has a much more closed system and even there lets not forget it was a 5-4. Also, unless I am missing something there is no equivalent of the GPIF in the eurozone.

Reply
avatar
Anonymous
admin
December 4, 2014 at 3:20 PM ×

@ washedup
There is indeed no equivalent to the GPIF and most public pension funds in the Euro area have their hands tied in term of asset quality and allocation.
However, the BOJ buys ETF directly in the market. The rebalancing of GPIF allocation will come later.
Buying corporate bonds and equities to the tune of 1 T euros might nicely circumvent the Karlsruhe litigation risk which the german have been brandishing privately to scare the ECB council.
I would give it a 30% probability which is certainly on the high side but one has to take a stand....

Reply
avatar
Anonymous
admin
December 4, 2014 at 3:39 PM ×

One last point though.....
Maybe the market needs to make a (slightly?) scary point to nudge them (the ECB) in the right direction

Reply
avatar
Leftback
admin
December 4, 2014 at 3:49 PM ×

Yes, the history of the EU is that we have to wait until there is a near-crisis situation until the Buba decides to get on the dog and bone to Draghi, who then brings out the bazooka or simply refers to how big it might be (if it did indeed exist and was able to be used). TV finally caught on to the Draghi jawboning and it is now described as "Quantitative Speaking".

Rally in Shanghai is quiet interesting and might be a sign that China isn't slowing as much as we thought, perhaps to 3% instead of the 1-2% that has been feared (cough: sorry, how silly of me, officially China GDP = 8.0% - (n x 0.1), where n is the number of months since April.)

If this proves to be the case, then the carnage in Brazil, Australia and others should be over soon. Anyone else fancy a punt on the Aussie?

Reply
avatar
Leftback
admin
December 4, 2014 at 3:53 PM ×

You can use the same formula for US unemployment where the number is 10.0 - (n x 0.05)%, where n is the number of months since the glorious reign of King Barry I began, and the alogorithmic random number generator took over the functions of the BLS.

Reply
avatar
Polemic
admin
December 4, 2014 at 4:01 PM ×

The answer is a job swap - Or a president swap - Putin as ECB president and Draghi as Russian President,

Reply
avatar
Anonymous
admin
December 4, 2014 at 4:22 PM ×

2.96% on 30yr ..... 2-10yr curve +171 close to 52 week flat +169
Bill Gross: "It is difficult to envision a return to normalcy within my lifetime"

Reply
avatar
washedup
admin
December 4, 2014 at 4:24 PM ×

LB - I don't think its that simple - if I've ever seen a poster child for the lack of any relationship (or indeed, a mostly negative relationship) between the stock market and the real economy, its in China - I think we can all safely say that the fate of BRL and AUD would be more correlated with something like CRB and not A/H/Connect shares. Some of this is actually some risk aversion bids away from wealth management products and shady real estate dealings into the stock market given the new linkage to HK.
For full disclosure, I am fairly constructive on chinese equities next 6-9 months - doesn't make me constructive on those other things..

Reply
avatar
Anonymous
admin
December 4, 2014 at 6:24 PM ×

Old Canadian energy trusts just demolished $BTE $PGH $ERF $PWE $CPG $AAV

Reply
avatar
Anonymous
admin
December 4, 2014 at 6:57 PM ×

you want to be long Europe and China in 2015 boys.

Reply
avatar
Anonymous
admin
December 4, 2014 at 7:14 PM ×

I obviously have been proven wrong by the latest leak....no equities;
still, if european market catch up a portion of US overperformance since the 2009 low, considering also that so many AMs are underweight europe relative to their benchmark, we can expect some capitulation fireworks next year.
Then, all bets are off.

Reply
avatar
Mr. T
admin
December 4, 2014 at 8:56 PM ×

Another day of pretty bad selling in one sector, miraculously offset by a perfect rotation into another, with the inevitable grind higher. I expect sectors to ebb and flow, just not at the exact same time and with just the right amounts. Its very odd, as if it was all just an asset allocation trade - noone is just selling energy names and waiting for a better opportunity. Its sell energy and immediately roll it into healthcare or tech. Is JNJ at 18x earnings still a defensive company? KMB @ 20?

Reply
avatar
washedup
admin
December 4, 2014 at 9:17 PM ×

agree T - kind of increases the probability that we are in a 12-15 month topping phase - as u proly recall we saw very similar stuff happen in q307-q308 (decoupling - sell financials buy energy) and as u proly don't recall (dunno why i say this u just sound like a young guy!) from q100-q300 (sell tech buy defensives/energy).
Don't have a great theory of why this happens, but this phenomenon has correlated with the rise of hedge funds (L/S equity) as a bigger part of the equity markets - some kind of human weakness to not accept mistakes but instead force new ideas? Thats why macro traders usually outperform them around inflection years as u know.

Reply
avatar
abee crombie
admin
December 4, 2014 at 9:21 PM ×

SHCOMP is doing well but H-Shares not moving. Guess it tells you where the spec and real money are going in differnet directions.

I'll buy the Eurostoxx dip, thank you. Mario is just betting his time. Not easy to win over z germans. But expanding the balance sheet is the only thing he can do, and he will do it. Stock prices will follow (or lead)

Cheers for the CAD energy names. I didnt notice, even though I have a little CPG left. They are all gonna have to cut the divy but will still yeild high 6s afterwards, IMO. Good time to nibble even though I think oil is going lower. Negative Petronas LNG annoucment was probably the catalyst

Reply
avatar
Polemic
admin
December 4, 2014 at 10:31 PM ×

I have to say that the fog of financial war is decending over me. I am finding it harder and harder to see the wood for the trees. I can t for the life of me see how Europe is better off this evening than it was this morning. I see ECB bumbling along and I see Russia getting more entrenched. May be because I m an old git but I was brought up under the cloud of nuclear threat and can see nationalism taking hold and Putin using it to rally the masses around the old flag.

When it comes to a battle of nerves Russua vs Euro consensus I know where I ll put my money. Nationalism makes Russia stronger whilst Europe weaker. It s a key point.

I must be on s limb with this fear because US bias seems to be towards a feeling that money and capital rules all. Russia is not an EM country dependent on patronage and neither is it a DM that is so tied up in needing imports that it cant cut ties. I really think it can. Just look at a map. lets look at tge attitude when Ukraine first flared up.. an it doesnt matter attitude.. its nothing. Since then it has steadily got worse with a sort of denial. Folks can laugh at the rouble and their economy but this is not good news. This goes beyongd rosneft funding or bond yields. This is big macro.

Yours a worried pol.

Reply
avatar
December 4, 2014 at 10:33 PM ×

Draghi next time will buy oil... This man is riskying a lot... Try to do qe without german approval...
Oil is a stimulus but he's obliged to buy govies... What a pity...

Reply
avatar
December 4, 2014 at 10:49 PM ×

Wise words pol,....
But HFs need to beat sp500 used as benchmark to pick performance commissions and you can't be much worried... Buy on leverage and forget it... This about latest article on bbg about hf performance and costs... Alternative industry hasn't well communicated how they works and how they make (or intend to) make money

Reply
avatar
Leftback
admin
December 5, 2014 at 3:07 AM ×

Pre-crash 07-08 was indeed an endless rotation game as the xlf gradually sank at the expense of xle and other sectors. It's the leverage that kills. At some point someone is down so far they they are forced to liquidate and then the contagion begins. 00-01 bear had some of the same dynamics but different sectors.

This next bear market will be no different and yet in its own way will be unique. Brokers and mutual fund called this week to sell me equities....

Then there was this:

Economist Cover Indicator?

Time to buy RSX?

Reply
avatar
Nico
admin
December 5, 2014 at 5:02 AM ×

yep Pol while Japan and Europe compete at the biggest bazooka (south Park Chinpoko Mon episode)) all the ingredients are set for Russia going rogue the oil shock being the icing on the honey cake

LB i hope my old warning helped you not lose money in Russia(n equities, currency) and really there is no point insisting investing there come on Draghi made it all rosy closer to you, sti cazzi

Reply
avatar