Getting the memo


Macro Man 28 June 2015 at 20:58

To: another old guy

what odds eur trades 1.12 by 5pm ny tomorrow?


Another Old Guy                   28 June 2015 at 21:21

To: Macro Man
Pretty high. I covered some of my short



Such is life in the trenches of the FX market, where EUR/USD closes well up on a day when equities and bond yields plummet thanks to the possible fracturing of the...err...EUR.  Still, the screw job wasn't totally unexpected, as you can see from the dateline of the email conversation from Sunday night.  Forewarned, as they say, is forearmed.

While the equity bounce off of the opening prints in Europe was also fairly predictable, you had to be quick as indices leaked badly into the close.   While yesterday's dip-buyers may conclude that what's doing once is worth doing twice, one would have to think that there will be a natural tendency to reduce risk across asset classes ahead of Greece, payrolls, 4th of July weekend, etc.

What this means for the euro isn't altogether clear.  It certainly trades like people are dripping short, but it's certainly worth asking how short the street is given the lengthy, meandering correction higher since the March lows.   One would think that anyone who's held on thus far wouldn't be inclined to close this week; if anything, the rally caused by weaker, shorter term hands represents an opportunity to add.

In the meantime, anyone with a heartbeat can hold out hope that today's leap second, which won't be noticed by 99.999% of the humans on the planet,  will somehow wreak the sort of havoc on the robots and the algos that they've been exacting on our markets for the past few years.  It probably won't happen, but hey- Arnold Schwarzenegger is starring in a Terminator movie these days so anything's possible, eh?
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abee crombie
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June 30, 2015 at 10:31 AM ×

Agree mm, it's not the open that matters, it's the close, which for the week is on Thursday.

I am still bullish Europe equities but as I've said, I bought half the position earlier and waiting still to buy other half. FM, NICO I am glad you are all doing well. More than one way to skin a cat in this game. But 2 years from now, unless we have a deep recession, eu equities will be much higher. That's what I'm watching....

Mlps and reit s really weak still. Wash out comming but not here yet.

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abee crombie
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June 30, 2015 at 11:35 AM ×

The movement in the EUR/Yen cross was also notable. But again lets see how the week washes out b4 "jumping to conclusions" ala office space

I was doing a little chart gazing, and there does appear to be a lot of ugly single names out there but one area that has stood out as a positive is US housing.

Oil stocks near lows again, Transports breaking support and a lots of old high flyers in the dumps or unable to break highs (DDD & TSLA). This is an aging bull market so i would expect to see that type of rotation. but the bigger question we all end up asking (especially after a down move) is if this is the end of the bull market, has the music stopped?

MA is at all time highs, VC is in lalala land and US equities are not cheap and earnings have been rolling over (though mostly due to oil). However contrasting all of that, now finally the economy is doing better ( though still subdued) and inflation is low. Russell and Nasdq recently made new highs.

I would welcome a big correction but dont think we are in for anything close to secular bear market

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econ man
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June 30, 2015 at 2:45 PM ×

Nice quick read this Tuesday A.M.!

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Anonymous
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June 30, 2015 at 5:23 PM ×

FT: from a seasonal and positioning standpoint I think the PM complex is, at least, due for a nice 2 to 3 months bounce

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Leftback
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June 30, 2015 at 6:14 PM ×

It's going to be Thin and Thinner in terms of NY volume starting tomorrow afternoon, I expect. Greece or no Greece, the Independence Day holiday awaits. That may translate into Dumb and Dumber trades, a good reason to stay out.

Gut feeling still says, can kicking and EU Funny Money will save the day once again and we'll see another sell off in safe havens in July. All so we can get back to playing NFP bingo and sit around the FOMC ouija board....

"Is Alan there? Can he speak to us from beyond the grave?" "He's still alive, you idiot". "Never mind. What about Tricky? Does he recommend +25bps here?" "He's not dead either, just stupid".

Abee, agree on REITs, the next relief surge in rates will bring the ultimate washout there. It's close.

Nico, my "Tsipras win-win" was indeed in part an homage to your excellent prior post. We concur, for once.

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Mr. T
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June 30, 2015 at 8:14 PM ×

Gut feeling still says, can kicking and EU Funny Money will save the day once again

I'm with you on this, in a non-hammock way. DAX in particular looks like a real overshoot considering policy backdrop. I'm also buying HY exposure - all this talk about liquidity strikes me as much ado about nothing. It all started from Dimon, where it sounded like yet another scare attack on DoddFrank, and now the 2nd tier guys with all their hand-wringing are coming on the scene. There may be a case to be made that ETF's have assumed some risk that was previously handled by BD's, but in the end I have more trust in the market as a whole and arb specifically than I do by trusting all the liquidity to a prop desk.


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washedup
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June 30, 2015 at 9:18 PM ×

some version of the 'liquidity' handwringing has always existed, it just takes different forms - in the 80's it was portfolio insurance, 90's it was decimalization and Y2K, then quant funds, and now HFT and bond liquidity - ironic that no one thinks over valuation may be a risk anymore because the Fed's got everyone's back, just need to worry about the greater fool not showing up any given day - doubly ironic these comments come more often from self proclaimed buffets whose holding period is supposedly forever.
Looks like PBoC's hail mary did the job - anyone fancy a punt on chi-next now that its only a 90 P/E??

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hipper
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June 30, 2015 at 11:54 PM ×

New astonishing insight from the Greece of US: https://www.youtube.com/watch?v=DDIQNO8PS8M

It's very possible that after the dynamic can kicking resolution safe havens indeed start selling off. Before the headlines got flooded with greek-o-drama remember that bunds were leading the way spiraling downwards and even though UST's were following the EUR was still on a pretty strong upward trajectory. Is it plausible to assume this is what's going to start happening again? DAX etc won't probably like it if it does, but it might be plausible to expect that there's been too much selling based on too many eye pairs looking at the same obvious scarecrow, expecting the worst of the worst scenarios, which now with every passing day look to materialize with a diminishing likelihood.

It's just a question of when all the bad news have been puked out from this Grepisode atleast and the downhill begins. Probably very close for potential bounce playing.

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Anonymous
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July 1, 2015 at 12:07 AM ×

http://www.raymondjames.com/bond_market_update.asp

"To keep things in perspective, Detroit captured the attention and worries of domestic debtors as the largest U.S. municipal bankruptcy estimated at around $18 billion. Greece is estimated to owe foreign debtors nearly $47 billion, $12.7 billion estimated to be for U.S. banks. Puerto Rico (a U.S. territory), has approximately $72 billion of debt with roughly $9 billion from the utilities alone. This morning’s bond markets were hit with Greece keeping their banks closed and the Puerto Rican governor Garcia Padilla quoting, “our debt is not payable ... there is no other option. This is not politics, this is math.” He is charged with somehow making a shrinking and impoverished population grow an economy that has already put more debt per capita versus any U.S. state."

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Macro Man
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July 1, 2015 at 12:14 AM ×

The difference, of course, is that PR or Detroit going to the wall doesn't suggest that, say, Michigan or Florida will leave the dollar zone and float their crappy currencies.

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Anonymous
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July 1, 2015 at 12:28 AM ×

And what is the true and honest probability (if Greece exits) that other "states" of the United States of Europe will leave the euro zone and float their crappy currencies?

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Polemic
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July 1, 2015 at 12:32 AM ×

Isf Schauble has his way Greece would be strung up on a lamppost with a burning tyre around its neck as an example to the rest. I see any departure of GR from the Euro as a fear factor enhancer for the others to stay. Greece goes? MORE chance of others staying

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Skippy
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July 1, 2015 at 1:47 AM ×

Christine Lagarde's ode to Alexis Tspiras, with apologies to Britney Spears

Alexis, can't you see
I'm calling
A guy like you should wear a warning
It's dangerous
Greece is falling

There's no escape
I can't wait
I need the cash
Alexis, give me it
You're dangerous
I'm needing it

Debt's too high
Can't come down
Losin' euros
Spinnin' 'round and 'round
Do you hear me now?

Oh,
The size of your debt
It's on the rise
You're toxic Greece slippin' under
With the end of island paradise

You're addicted to debt
Don't you know that it's toxic?
And you're at the end
Don't you know that you're toxic?

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Anonymous
admin
July 1, 2015 at 3:22 AM ×

Is there any chance that, post Tspiras' resignation after next Sunday's YES vote, he and Varoufakis will become special advisors to the Governor of Puerto Greeko?

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Anonymous
admin
July 1, 2015 at 9:46 AM ×

FT: another rabbit in the hat?

I strongly suspect that our Greek friends (who incidentally are probably much less stupid than propagana would have us believe) have been rather successful at playing the market; they have given a lesson of Sirtaki to the rest of the world and are enjoying it. Most people don't realize the pure hate towards institutions which animates Syriza; they are ready to lie and manipulate to get maximum effect.

They have ingeniously given enough rope to the prop community to hang itself on false hopes of a deal until last friday; I'm sure they had the referendum end game in mind for a while but wanted to create maximum havoc in markets to leverage their negociating position.
I guess the "muted" market reaction on monday has been somewhat disconcerting.

Most spec account correctly analyse the problem as transitory and are looking for entry points for "risk on" strategies.
On the other hand, the selling came from real money who remembers the torrid previous episodes of the greek saga.

I think the new greek proposal is another attempt at inducing a bit of leverage back into markets and they have one more surprise in stock.

Meanwhile, all is not well in EMGs. Brasil, Korea, China, Taiwan.....PMIs are falling off a cliff; this is taking a toll on some developped markets (australia, germany's machinery orders...)

I remember a month of July 17 years ago.

I think that after a 6 year bull, there is a bit of complacency and leverage (HY, biotechs...) out there and all it would take is a nasty surprise for a rerun of that fatefull summer.

By the way, I also think all this is transitory but I wonder if the transition won't last a bit longer.

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FunnyMoney
admin
July 1, 2015 at 10:07 AM ×

Greece might accept a deal... equities up... once again, congrats to all who BTFD :)

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Anonymous
admin
July 1, 2015 at 12:48 PM ×

FT: if Tsipras says "sorry about the rumor, no deal after all, germany is inflexible" that would be one more of those rabbits I was mentioning earlier;
Let's watch TV

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washedup
admin
July 1, 2015 at 4:06 PM ×

anon 12:48 - i fully agree with ur thts on what tsipras is trying to accomplish here - looks like it was working well for a couple days too - poor bast@!d doesn't understand that people so dote on global equities they would barter their nuts and kidneys to be able to BTFD.
Except China - like they say here in TX, 'Aa don't like what those chaaaneeese are up to'

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Leftback
admin
July 1, 2015 at 6:19 PM ×

Here comes another strong run by Bucky on the heels of the US data and Greek rumors, as the September rate hike goes back on the table again. We've been waiting for this. Likewise, short TLT has been a decent trade for us from Monday. Gold/silver miners, drillers are all getting killed again, probably more of that to come before another tradeable bottom is reached in those assets.

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July 1, 2015 at 7:22 PM ×

Good post thank you.

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washedup
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July 1, 2015 at 7:27 PM ×

left - don't disagree that bucky is bucked up and ready to run for a little bit - can you really see it taking out the new highs from march though?In the scheme of things its gone from being the smartest and loudest guy in the room in q4 and q1 i.e. completely dominating the agenda, to the junior analyst who gets periodically sent to check why the pizza is taking so long.

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Anonymous
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July 1, 2015 at 9:45 PM ×

Anyone recall? Greek off-balance sheet financing done by Goldman Sachs....

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=asBNXSLtlN9E

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Dan
admin
July 1, 2015 at 10:09 PM ×

The buck and its primary derivative, the UST, aren't done yet. Both sides of the Greece-EMU dispute know where each other stand. What has been interesting is watching the Swiss carry water for everyone. Those Swiss mountain folks are not like their forefathers.

USD/CHF +.++!

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Leftback
admin
July 2, 2015 at 2:35 AM ×

Have you guys looked at MBIA and AMBAC lately? PR muni exposure... caught me by surprise as I was looking at muni CEFs, but I guess the smarter managers exited PR debt some time ago.

Eyes Down for NFP bingo, chaps. We'll kick off with a 230k this time. Goldilocks number...

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pezalli
admin
July 2, 2015 at 8:51 AM ×

Ever thought about having a different collar for your shirt?
Just like your body shape defines your clothes choice, your face shape should define your collar to give you a perfect look.
URL: http://www.pezalli.com/craftmanship.php

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hipper
admin
July 2, 2015 at 11:38 AM ×

ECB expanding public sector "asset" purchase program into supranational and agency bonds. EFSF mentioned. Also two Italian utility companies on the list, lol.

No physical size expansion yet but wonder if that's following up shortly given the circumstances that Central Bankers might be regarding as threatening to the nascent yet early growth stage. Also if the Germans think extra QE would help to mitigate grexit contagion and gain an upper hand for negotiations, that might very well fit well into the plot.

http://www.ecb.europa.eu/mopo/implement/omt/html/pspp.en.html

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Nico G
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July 2, 2015 at 1:03 PM ×

a friend said something quite special the other day 'it takes seven jews to make one Greek'

never heard it before - but they boyz in wall street surely should take notice

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Anonymous
admin
July 2, 2015 at 1:05 PM ×

The ECB must be delighted with the Greek crisis. An excuse to trash the Euro, blackmail Greece and do more QE. I always thought Greece had the communist government, but clearly Europe are the communists here.

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Anonymous
admin
July 2, 2015 at 7:04 PM ×

http://www.bloomberg.com/news/videos/2015-07-02/varoufakis-says-he-will-quit-if-greeks-vote-yes-

Today's 19-minute rapid-fire thought-provoking interview with Varoufakis ...

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