Bullet points while preparing for SNOWMAGEDDON

* When Macro Man checked the weather forecast last Friday, early this week was supposed to be cold and sunny.  Over the weekend, it changed to a bit of snow.   Yesterday, as he was riding his bike on the turbo trainer, Macro Boy the Elder burst in to tell him that the forecast had changed to 20 to 30 inches (50 to 75 cm) of snow from Monday morning to Tuesday midnight.  You know it's bad when they cannot specify the amount of snow you'll receive within 10 inches.

* A year ago, March '14 heating oil was priced at just over $3.00.   Today, March '15 is at $1.62.   With plenty of the stuff set to be burned in the Northeast this week, the strong dollar will demonstrate a palpable benefit to the economy.

* Syriza duly "won" the Greek elections while falling short of an outright majority.  Meanwhile, anti-austerity party Podemos is the hottest new thing in Spanish politics.   It's all very well for Draghi and the Germans to harp on about structural reform and fiscal rectitude, but what happens when those goals happen to conflict with the will of the people?  The risk/reward from owning peripheral debt at these levels looks very poor indeed.

* Some degree of consolidation in the euro is probably to be expected after the recent downdraft.  Anyone who wanted to be short but wasn't probably had to reach and hit a bid that he'd rather not have.   That having been said, it doesn't seem as if many are positioned for a "proper" move to parity, so any bounces should probably be seen as a gift and an opportunity to add to shorts at better levels.

* For another take on central banks and risk, peruse friend-of-the-blog Neil Azous's piece at Finalternatives.

* Good luck and stay warm!

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38 comments

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January 26, 2015 at 1:25 PM ×

MM stop doing boring training on turbo...sell your high yielding euro govies To ecb front runners And Buy a fat bike!!!!

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washedup
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January 26, 2015 at 2:01 PM ×

MM's workout equipment clearly matches his choice of asset classes to trade - cyclical with an ability for reversals, with a high demand for endurance by participants.
And yes, predicting amounts of snowstorms involves numerous complex interactions on near the surface phenomena (some self fulfilling) which can be quite over-whelming for mets and their computers.
This, too, shall melt.

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Macro Man
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January 26, 2015 at 2:04 PM ×

Chaps, I refer you to the video at the bottom of my homecoming post...

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washedup
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January 26, 2015 at 2:15 PM ×

I rest my case.
Something else caught my eye - last and final comment by theta at the very bottom - sometimes the simplest answer is the best (notwithstanding Gone Girl, which after all, was fiction).

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January 26, 2015 at 2:34 PM ×

Ahahha crazy amount of suffering To Not move at all...And without reaching anymore Kom!!!
Long awaited profit warning from marubeni. ..glencore And co are Next ones? I'm lookin for a serious default where central Banks are unuseful

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January 26, 2015 at 2:55 PM ×

Or maybe ukraine/ raiffeisen Side? Or noOne as usual?

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Anonymous
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January 26, 2015 at 3:30 PM ×

My take on the weather: forecasting economy is just like forecasting weather. A few days ago everybody thought US economy was suuny and the only bright spot in the world. Well, maybe just over the next weekend, we will see if a NFP snowstorm is in stock for Fed and dollar bulls.

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Anonymous
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January 26, 2015 at 4:20 PM ×

Hopefully you're suffering on the turbo-trainer for this ?

http://www.thesufferfest.com/tour-sufferlandria-2015/

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Macro Man
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January 26, 2015 at 4:52 PM ×

@ Anon, funny enough I was going to do the Tour, but was supposed to travel this week. By the time that got cancelled because of the storm, the first day of the Tour was over. So back to the usual build program...

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Anonymous
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January 26, 2015 at 5:00 PM ×

ah shame...i did the first two, and whilst feeling less motivated on this one am 2 days in and plan to finish it. you know you could just do the first 3 days all in 1 and catch up to the pelaton in style..

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Macro Man
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January 26, 2015 at 5:50 PM ×

Ahhh that would truly be brutal. Am in the middle of one of the Trainerroad build programs anyway, which I had great success with last winter, so will just keep doing that. Good luck with the Tour...if you can do every ride at 100% rating on TR I tip my hat to you!

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Anonymous
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January 26, 2015 at 6:02 PM ×

@mattyboy,thanks very much for your comments and the links on the previous thread. That Hoisington link is both very instructive, and more than a little scary from a geopolitical perspective.

- Whammer

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abee crombie
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January 26, 2015 at 10:51 PM ×

EU equities have some real strength here. Greek risks dont look priced in but perhaps that is a good sign.

I'm watching copper here. Chart looks horrible but I have a feeling too many 5min macro punters & CTAs are short and the fundi's arent as bad. But no positions yet. When is oil gonna break $40, I think everyone is just waiting for it already

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abee crombie
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January 26, 2015 at 11:28 PM ×

re: Gone Girl, its the only movie i've seen where at the end I was more scared than my wife ;-)

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Anonymous
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January 27, 2015 at 3:01 AM ×

Daniel Davies: Greek games and scenarios

"Don’t think of the Greek debt burden, either in cash € terms or as a ratio to GDP, as an economic quantity. It basically isn’t an economically meaningful number any more. The purpose of its existence is as a political quantity; it’s part of the means by which control is exercised over the Greek budget by the Eurosystem. The regular rituals of renegotiation of the bailout package, financing of debt maturity peaks and so on, are the way in which the solvent Euroland nations exercise the kind of political control that they feel they need to have if they are going to be fiscally responsible for the bills. There’s more than a couple of Germans I’ve spoken to over the last few years who have pointed out that although Germany got massive debt relief in the twentieth century, it got it in the context of an equally massive national admission that the entire political system was rotten and needed to be totally restructured with foreign help; this was also the basis on which the integration of Eastern Germany was managed in the 1990s. Seeing the peripheral Eurozone debt in isolation from the politics of European integration is a sure way to lead yourself up blind alleys."

"It is, therefore, totally inimical to the Eurosystem to hold out any hope of the kind of debt writedown that Syriza wants, as opposed to some smaller, cosmetic face value reduction or maturity extension. The entire reason why Syriza wants to get a major up-front reduction in the debt number is to create political space to execute the rest of their program. The debt issue and the political issue are the same issue. Syriza understands this, and so does the Eurosystem. The people who don’t understand it are the ones writing editorials in the business press which support the debt reduction but don’t think that Syriza should be given carte blanche to do everything it wants."

http://crookedtimber.org/2015/01/25/greek-games-and-scenarios/

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Anonymous
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January 27, 2015 at 8:08 AM ×

"The debt issue and the political issue are the same issue" We have a winner!

I was in East Germany in 1990, and the "official line" was that it would cost about $10 billion to upgrade the E. German infrastructure as part of unification. A small child could have told you it would cost way more than $10 Billion. But at the time I thought the "official line" was just put out by stupid people. In hindsight, not stupid; they understood the politics quite well.

-Whammer

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Polemic
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January 27, 2015 at 8:26 AM ×

Greece has more to bargain with EU over than just debt http://polemics-pains.blogspot.co.uk/2015/01/greeces-political-bargaining-chips.html

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Nico G
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January 27, 2015 at 11:42 AM ×

more blablablanaki

http://www.washingtonpost.com/blogs/wonkblog/wp/2015/01/26/the-lesson-from-greece-a-1930s-style-depression-creates-1930s-style-politics/

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Leftback
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January 27, 2015 at 12:36 PM ×

Oh God, save us from WaPo! The narcissistic US-centric narratives, full of references to communism (ooooohh) socialism (oooh nasty) and corruption (ooooh glad we don't have that in US).

The fact is this. Greece is at its nadir now because of the unchecked activity of its oligarchy, aided and abetted by the EU, who dodged taxes and stripped the country of its assets over decades of rapacious crony capitalism, then exported them who knows where ahead of their own exit.

The guys who won the election have to rebuild the country's economy from scratch, probably by looking to China and Russia for investment capital unless Germany comes to its senses. Greece doesn't matter, except to Greeks, apart from the issue that it is a test case for Spain, Portugal etc.. prepare for more bailing, maturity extension, and other fudges.

There is a lesson here for all of us...

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Anonymous
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January 27, 2015 at 1:00 PM ×

US earnings starting to look rough. And LB's NFP to come....

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Anonymous
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January 27, 2015 at 1:14 PM ×

"Signs are mounting that Japan's fiscal sustainability is beginning to crumble"
Nomura chief credit strategist Toshihiro Uomoto

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Polemic
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January 27, 2015 at 1:22 PM ×

totally agree with LB - that Wash Post article reeks of euro-hyperbole drawing on stereotype horrors. Is the author a lay preacher by profession? Or just a zero hedge contributor?

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Bruce in Tennessee
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January 27, 2015 at 1:37 PM ×

Lefty,

If this were the old days, I suppose I'd owe you a hamburger. I hope you've got the timing right.

Bruce

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Anonymous
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January 27, 2015 at 2:12 PM ×

Swiss Central Bank Made Killing in U.S. Stocks

http://imgur.com/j4zdwJO

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Leftback
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January 27, 2015 at 4:55 PM ×

Today is one of those days that we warned you about. Shit US data and a lot of people long USD = modest carnage as € shorts rush to cover. There will be more of this, plenty more, we promise.

You have Dame Janet tomorrow. FOMC will be dovish but intentionally vague and confusing, leaving the concept of June hike open for now, which gives you all a couple more days to unwind all of those strong USD-associated trades (short oil, short EMs, long USTs) etc. Eventually there will be general Dollar Revulsion, and even Treasuries will be sold as Global Yield Hogs flee in search of greener pastures.

It's going to be ugly for leveraged USD longs.

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Macro Man
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January 27, 2015 at 5:13 PM ×

LB, I love ya baby but it would take another 10-15 days like today before the DXY got back to where it was when you first started calling the top! ;) In seriousness, days like this are a godsend for anyone who isn't short enough and has had the patience to avoid selling panic lows.

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Mr. T
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January 27, 2015 at 6:02 PM ×

The capex reductions from the oil patch are showing up in forecasts, certainly should not be that surprising. Breakevens seem to be flattening out, oil is staying low, dollar is still strong. I still can't believe people are selling GDX in the low 20's. I've got a full boat but am looking at ways to increase exposure without violating risk.

And whats up with US biotech, still. On a sector-relative basis valuations are getting increasingly stretched.

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washedup
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January 27, 2015 at 6:09 PM ×

Sorry Left - I know it feels lonely out there, but I kinda have to agree with MM - plus, I really, truly, honestly don't think the Fed wonks truly GET the implications of a strong dollar (just like they didn't get the weak dollar implications in late 07/early 08), so I think their 'transitory' assumption on deflation while they think a lot of nice things are happening to the economy in the background will operate.

I remember thinking in early 08 what an odd thing it was for a portfolio comprised of crude and treasuries to have outperformed everything under the Sun.

Guess what, it is strange bedfellows time again, this time its gold and treasuries.

Doesn't mean its 2008, I am sure 2015 will find a way to be uniquely different, but I do think these are rare events as far as joint distributions go and tell us something - wish I was smart enough to figure out exactly what.

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washedup
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January 27, 2015 at 6:10 PM ×

T - love GDX just like you - see it as 25-30% undervalued to gold assuming crude stays less than 60.

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Leftback
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January 27, 2015 at 8:41 PM ×

Thanks for the love guys. LOL. LB loves GDX as well, will accumulate on weakness.

MM, at some point parabolic FX moves do end, and then, well, you know..?

Listening to Chelsea v Liverpool on radio. Agony.

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CJ
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January 27, 2015 at 8:57 PM ×

what do you guys think on AUDNZD? It is approaching multi-decade support and I think all the rate negativity is starting to get baked into AUD, but hasn't yet for NZD.

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January 27, 2015 at 9:18 PM ×

USD destiny is in the hands of our sexy Yellen...Lew is happy with dollar's strength... not so sure about Fed's members...spoos noticing some multinationals having hard times to cope with $
1,13 in a move from 1.40 to 1.1 it's only a dead cat bounce... the trend isn't violated but i agree... positioning is huge


pretty happy with my long eustoxx/short sp500... it's time to buy some protection on it..

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Bruce in Tennessee
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January 27, 2015 at 9:37 PM ×

3 month UST closed at 0.00 today...do you pros think NIRP coming to the New World?

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Manish Singh
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January 27, 2015 at 10:02 PM ×

LB enjoying the € upside move, we discussed it last week didn't we. 1.10 to go long was my target, it has worked well. I think it will struggle to go beyond 1.15 in a hurry but then it will move from Feb/March onwards as USD longs are "left at the altar" by Dame Yellen. Yes EM short, OIl shorts and metals short need to get their hats out to stay in the game.

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Anonymous
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January 27, 2015 at 11:26 PM ×

Not so sure oil is going to bounce here. If anything, next leg is down. Every attempt at a rally has been hit in recent days. Earnings look bad and with Capex being cut, we might get a spiral lower. Big API's again. ..

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Polemic
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January 27, 2015 at 11:40 PM ×

Or - Not so sure oil is going to fall here. If anything, next leg is up. Every attempt to move lower has been bought in recent days. Earnings look bad and with Capex being cut, we might get a spiral higher. Big China buying again.

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Nico G
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January 28, 2015 at 5:14 AM ×

hahahaha i was sure you'd laugh at the wapo piece

yes - the big Greek money is gone. A family i know moved to a comfy tax heaven rock on the Med in 2007 quietly before shit hit the fan, from my understanding they owed billions of tax to their cherieshed government

i like Tsipras he looks decent pourvu que ca dure

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Nico G
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January 28, 2015 at 5:25 AM ×

since he started the new job first dude he saw was Russian ambassador first thing he did was to visit the memorial to 200 Greek communists gunned down by German nazis...

so looking East indeed

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