China and the Fed

On Monday, the RMB fixed dramatically lower.  In developed markets, stocks sold off hard, short ends were bid, and the dollar rallied sharply.

On Tuesday, the RMB fixed dramatically lower.  In developed markets, stocks sold off hard until Spooz  ground higher to close up on the day, short ends closed up, and the dollar sold off sharply.

What gives?

There are a number of possible explanations; indeed, with a little imagination, Harry Hindsight could spend hours if not days conjuring rationales for the volte-face in Spooz and the dollar.  Three obvious possibilities, however, are the following:

* It's August.   In a world of five-minute macro, low-liquidity conditions in summer markets mean that algos and spot jockeys are quick to turn, so it doesn't take much to generate a stop-loss run or even get some to reverse.

* The Chinese are long RMB against everything; put another way, there are foreign currency liabilities not only against the USD, but other currencies as well.  What a weaker RMB implies, therefore, is a need to buy back the liability currencies as quickly as possible.  There may be something to this, though of course funding out of, say, euros to be long CNH is a practice that is hardly confined to the borders of the Middle Kingdom.  Regardless, what is without question is that the structured product TARN/TARFers have dollar liabilities that need to be either hedged or eliminated.

* A rally in USD/CNY represents a tightening of US financial conditions, thus implying that the Fed will remain on hold in September.   This logic appears relatively pervasive throughout the market, with the RMB representing the latest in a never-ending saga of excuses that the Fed rolls out to avoid tightening rates.   In fairness, it's really the market that rolls out the excuses; for the most part, the FOMC just sits there and does nothing.

Of these, the latter two are the most persuasive.    To be sure in the case of point number 3, some 20% of all US imports now come from China, a quite startling statistic.  It's difficult to say, however, what the pass-through of the currency move will be; after all, it's not like the steady rise of the RMB  from 2005 onwards generated much if any inflation.   Apple's margins have a lot more to do with the price of an iPhone than how much it costs Foxconn to make it for them.

Looking at how the market is priced, it certainly appears relatively extended and ripe for a correction.  EDU7, for example, nearly tickled the top of its recent range yesterday; it wouldn't (or shouldn't) take much to send it another 10-15 ticks lower.   Indeed, it's down 4 since Macro Man started writing this post on Tuesday night.



Frankly, it seems a little absurd to panic, and Macro Man doesn;t think that they will do so.  Although it's not exactly new news, it's worth reviewing once again exactly how easy US monetary policy is.   Macro Man compared the level of Fed funds with the 4 quarter moving average of y/y growth rates in nominal GDP (which captures both growth and inflation.)  Unsurprisingly, Fed funds have historically been priced at a discount to nominal GDP growth.



When he plots the difference between the two series, a number of regimes emerge.


It's interesting to note that other than a brief period in 2003-04 (didn't that end well!), the current spread is the highest since the uber-inflationary 1970's.   Given the level of accommodation, why isn't real growth higher?  The answer has been discussed ad nauseum, but suffice to say that neither the price nor quantity of money is restraining activity; rather, fiscal and regulatory factors have rendered the transmission mechanism of monetary policy to be relatively ineffective.  Put another way, you can drive in a nail with a shoe, but it's slower and more wearisome than using the proper tool.  And of course, you might want to actually use the shoe for its intended purpose if you ever encounter rough terrain.

For fun, Macro Man decided to take a look at some time-period averages.   Although the regimes to break neatly into decades, it's close enough that there is some utility in looking at decade averages for the nominal GDP/FF spread and real GDP growth:

The results are pretty interesting.   Macro Man was particularly intrigues to see that average real growth was essentially identical in the 70's, 80's, and 90's, though a "misery index" type number would capture the underlying sentiment better than the table above.

That being said, it's worth noting that the current decade has the worst ratio of policy accommodation to growth of any since the Fed began publishing Fed funds rates in 1954.  Again, it's not a big surprise, given that it comes on the heels of a bum-clenching economic and financial crisis.  The contrast with the 80's could not be more stark: three decades ago, policy was tight, regulation was dismantled, leverage expanded, and the economy grew after a couple of early recessions.  Now, policy is easy, regulation is overwhelming, non-financial private sector leverage is doing nothing much, and growth is tepid at best.

On the one hand, doom-mongers might say that this illustrates how fragile the economy is and that ba tiny only a modest rate hike could push it over the edge.   On the other hand, one might argue that if the transmission mechanism of monetary policy to the real economy has been strangled, the negative impact of a modest tightening will barely be felt, particularly as the Fed quits defrauding denying savers.

Perhaps it makes sense to keep banging in the nail with your shoe; from Macro Man's perspective, however, it's far better to put the shoe on your foot and walk to the hardware store so you can buy a hammer.
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Nico G
admin
August 13, 2015 at 8:01 AM ×

the mocked bears are back

http://www.bloomberg.com/news/articles/2015-08-13/who-s-crazy-now-yuan-bears-vindicated-by-tumble-see-more-pain

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Polemic
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August 13, 2015 at 8:08 AM ×

Option 4. Stocks reaction to China was completely overblown and realisation that financial world will not stop turning so prices are back to where they should never have left and dollar is weakening for reasons other than China. I'd favour the reason being ' because some people sold some'. Not everything is due to the most shouted about news. If it was then you could blame usd fall on kim kardashian.

Actually there s a thought. Might start a twitter handle pumping kardashian linked finance news in bbg style. Eg. 'North Sea fish stocks rise as kardashian shows off fat arse again'

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Nico G
admin
August 13, 2015 at 10:08 AM ×

with or without China fucking up it's hard to see pink on US equities

http://www.bloomberg.com/news/articles/2015-08-13/the-fed-is-on-thinner-ice-than-it-realizes-and-it-may-be-setting-us-up-for-recession

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Anonymous
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August 13, 2015 at 10:11 AM ×

Polemic - You could argue the dax & stoxx gap up rallies on Greek deal was overblown too. Yeah, they reached a deal, but things are not good. The ranges on the Greek off, Greek on and, prior to that, the QE rally, left massive pockets of illiquidity to be traded through.

I recall asking (obv as an Anon); what good the cheaper euro was and why the Dax was rallying so much at the time if the countries it exported to weren't buying. China, Russia, France. Turned out, China wasn't buying as much as expected. So, when they're not buying, and then remove dollar peg, you're going to get a repricing of German export expectations.

Is it really an overreaction when you see commodity moves?

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Anonymous
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August 13, 2015 at 10:18 AM ×



Here it is:

PANIC - http://macro-man.blogspot.ie/2015/03/panic.html

Anonymous Anonymous said...

About 23% (in 2014) of exports to US,UK & China. The rest was mainly Europe (French no.1 off all countries) & Russia....... France (8.8%), United States (8.1%), China (6.4%), United Kingdom (6.2%), and Netherlands (5.8%)

Products: Cars (11%), Vehicle Parts (4.1%), Packaged Medicaments (3.6%), Planes, Helicopters, and/or Spacecraft (2.4%), and Refined Petroleum (1.3%)

All those par-timers in the US planning to purchase a new 5 Series? Or the lads let go from the oil industry maybe.

The commodity collapse not saying something about China?

What will the German people do with their new found wealth? An extra week in Lanzarote? Retire earlier? Save some more in the event it all goes Pete Tong?

March 11, 2015 at 7:47 PM

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CV
admin
August 13, 2015 at 3:11 PM ×

Just a factoid ... the Eurozone has been running a bilateral trade deficit with China for ages. Exports to the U.S. and the U.K.(!) are the key drivers of the surging German and Eurozone trade surplus (well and import compression in the periphery). Exports to the "BRICS" have been suffering for a while now, but obviously won't get better after this.

However, the key FX rate for EZ exporters is EURUSD and EURGBP as far as it goes to make the argument about currency and export competitiveness that is.

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Anonymous
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August 13, 2015 at 3:52 PM ×

To CV,

On the trade related issue, there is obviously a regional unbalance between German and the rest of EU, regarding the trade with the rest of the world. Other EU countries, beyond bags and shoes, could not sell much to US, UK, and BRICS.

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abee crombie
admin
August 13, 2015 at 5:59 PM ×

Great post mm. Indeed the transmission mechanism is dead. Both corporates and households don't need credit, they need demand. As crazy as McCully is, I tend to agree with him here ( he was on cnbc yesterday )

MM or some commenters can you help me understand #2. If the BoC is long CAD or Aud, or EUR, why do they have to buy it back ? You are assuming they didn't buy cash but instead did a swap ?

From my sense of reading no one really knows what the long term implications of the rmb move is.

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Nico G
admin
August 13, 2015 at 6:44 PM ×

Anon 10:11 spot on

this last year I've been repeating on and on that Europe had lost their best client(s) and could never be saved by a really shitty domestic consumption. China has hard landed imho at least this is what the commodities show. And there is noone else to jump in since all the 'new money' EMs have been hit likewise (Brazil and Russia big time). So the rally on the cheap euro this year was a mistake since there is noone to export to anyway and all this nonsense needs to be repriced. I am not sure where fair value is but i don't see any reason estoxx should trade north of 3300

I spend April to October in Greece each year and can guarantee you nothing is fixed here if anything the weeks post referendum when they close banks took the Greek peeps even further from the banking system and their government. Their last and only hope, Tsipras, made an awful goat of himself and Greeks are back to living their very own peculiar way bypassing the state they can never trust . It is all cash, and very little improvement in tax collection

happy trading everyone and if you have enjoyed this rally this ain't the time to be greedy on the long side, smart stops are de rigueur going forward

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washedup
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August 13, 2015 at 7:02 PM ×

abee - its not PBoC but Chinese corporates, exporters and individuals that have, over the years, made a one way bet through their repatriations into PBoC or other direct transactions, that their currency would keep rising vs the rest of the world - more recently, because of ECB QE, this has been expressed as effectively a short on the euro,a trait shared with other carry traders around the world - note that China actually still has plenty of USD, but far fewer euros coming in on the current account - I think MM is implying that the effect of this carry trade unwind worked out in a way that actually net weakened the USD specially vs Euro, even though that is a bit counterintuitive since the RMB peg is vs the dollar - note that EUR/AUD and EUR/CAD actually strengthened yesterday which supports the thesis.
And yes, no one knows which way this all goes but unless spoos s@#t the bed again i think yen weakening is a decent bet, especially vs euro.

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Mr. T
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August 13, 2015 at 9:18 PM ×

I must be the only guy out there who thinks the hand wringing over USDCNY is totally overdone. I don't like pegs. I would prefer if there were none. Currencies that are not pegged move way more than USDCNY has, thats just what the do. EURCHF moved what - 40% in an hour, and while it bit some people it was not the end of the world. I also think the USDCNY carry trade hypothesis is way overdone. Maybe I'm missing something but I just don't see it out there in bulk. Lastly, this is a totally reasonable policy response (arguably one of the more reasonable policy responses we have seen from China in a while). Frankly I'm surprised this wasn't done earlier. So I, for one, am perfectly willing to look past this and the dire implications that seem to be all over the street.

In a similar vein, I'm buying the commodity complex names again. I don't think I'm picking the bottom but this sure as hell ain't the top. The credit stress in the names is real, but there is also another reality that the current capex and cash-burns we see were based on much higher commodity prices and its quite possible that many of the names are going to surprise in 2016 with their ability to control costs. While im nibbling across the spectrum (aluminum, cooper, oil, gas) the oil patch in particular looks risky-but-interesting. One theme thats gaining traction is the nimbleness of the NA shale patch. Deep water looks horrible - multi year, billion dollar projects with fairly high amortized costs vs the DUC wells? Who is better able to capitalize on price swings and control capex?

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Polemic
admin
August 13, 2015 at 9:22 PM ×

Thank god for that Mr. T.. I have company on commodities and Chinese hysteria.

Take a look at my blog for recent thoughts on both..
"Polemic's Pains"

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Anonymous
admin
August 13, 2015 at 9:34 PM ×

cny- while 4.5% doesn't sound big , is is a huge move for a 2% implied vol pair...for me china is having a hard landing and are struggling with the credit binge...market might be waking up to this possibility and thus repricing risk accordingly.(way too many bottom pickers in commodities-feels a bit like banks in 08, before they really went....i'm just curious, where does demand come in commodities , especially to meet the oversupply

i can see buying them for a quick sell but not for me ( oil just went from 62 to 42 with hardly a squeeze so trying for a counter trend bounce needs luck


for disclosure I'm short spx and xbi....( via long puts)



us credit moving to wides again but spooz haven't budged...is hard work but next 5-10% looks down in the us





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washedup
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August 14, 2015 at 1:00 AM ×

T/Pol re: the China action yes I think the market is concerned more about the medium term recurrence of this episode, justifiably so - in the short term its deflationary for the US but inflationary for China, and I would argue would be net stimulative across the two.
I have generally been pessimistic about global equities (though more biding my time than short) but this intrigues me about renting (not owning) a commodity pop - I remain structurally bearish and I don't think you play for much - maybe a quick 5 to 10% in crude and commodity stocks like we saw in May, but I do agree bearish sentiment is way overdone on those.

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Anonymous
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August 14, 2015 at 4:47 AM ×

Iceman writes...

Mr T you are definite not alone in the thoughts but we are a minority.. significant minority. Whilst i think the $cny carry trade is definitely significant, i think we must differentiate between fast/short term money vs sticky money. It was never all that easy to access CNY onshore products until quite recently and the fast money were probably mainly in via the shanghai - hk conduit (equities) which really is not all that much in relative terms (and lets face it, the way equities move in china, whats a -4% move in the fx).

I think the magnitude of the ccy move itself was insignificant (an anon 9:34pm, just because the street misprices it at implied vol of 2% doesnt make it significant impact move) however i will add that its not so much the move but the new way they are setting the fixing.

I for one do not buy the whole "pboc will delay the fomc arguement" and neither do i buy the whole "this is a start of a new round of currency war thingie". In fact i think once this whole move gets digested i can only see it being good for asia and commodity complex in general. In the meantime though, sit back and watch the show.

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Anonymous
admin
August 14, 2015 at 2:08 PM ×

FT: Sure, this round of volatility will eventually be forgotten, same as the summer / October period of 1998 was distant memory in DMs by 1999. However, what usually creates the said volatility is the accumulation of carry / risk on positions over a period of time and eventually, there is some pain contagion; what saved us on wednesday were corporate CFOs ordering a new round of buybacks and correlations algos did the rest....
I still believe we haven't seen pain contagion;
These crisis always unfold in 2 steps; first a serious but manageable stress confined to a particular asset area (EM and commodities?) and, a few weeks later, we hear about some financial entities which report surprising P/L stress and EMG companies confessing to being closer to the abyss than anyone thought.

I would think that we will see, by the end of September, a second episode of volatility which will be relatively serious and will offer some good buying opportunities. I sit on my cash, and wait for the goodies.

Another fake break on the upside in US equities is not out of the question

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Mr. T
admin
August 14, 2015 at 6:13 PM ×

Heres a funny thing: China Rebar Spot Price

Longer Term the bump looks insignificant, which maybe it is, but maybe its not as bad as we think?

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washedup
admin
August 14, 2015 at 9:25 PM ×

T - i follow a simple rule - the commodity business is headed back to the late 90's early 2000s regime - that implies that by the time these markets adjust to the new reality, we will have crude around $30-35, API coal around 40, met coal around 50, and rebar around 1000-1200.
For full disclosure, I got long commodity type stuff last couple of days and am playing for a short term bounce with a tight stop.

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abee crombie
admin
August 15, 2015 at 1:20 AM ×

Thanks washed up for the comments. Makes sense why the euro is rallying. As for commodities, man that is a tough one. Declines are steep but demand is dropping ( that is one thing you can take away from the rmb move, that their economy is slowing) at stock level you have a few that look interesting but why buy stuff that is going down, why not buy what is working in this market...HY is killing me, along with EM, it's a real warning sign, but also a sign I think we are near a time period of divergence before the ultimate convergence and resulting big move down.

But frankly I'm a little lost here.

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hipper
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August 16, 2015 at 11:46 AM ×

Re hitting the nail with the shoe and fiscal/regulatory constraints, it might actually be that as bureucrauts and policymakers have had a free reign over things for a decade if not even several decades, a big chunk of the current economic activity might've already been built directly or can be deviated from the increasingly sizable and complex regulatory environment. A huge chunk of the legal industry for sure, all the regulated monopolies, taxis, utilities, environmental this and that, banking etc.

If there was a period of deregulation then surely things would atleast theoretically spin and flow freely, but at the same time one has to wonder how much of the current economic activity can be derived directly and indirectly out of that exact environment? A big chunk of legal, compliance, insurance, bureaucrats etc. high paying folks would go out of the job and services created through the multiplier effect etc. Maybe it would be actually good for the long term but short term a very mixed bag, whether the newly founded purchasing power outside said environment is enough to compensate purchasing power lost within the environment. But of course it's completely understandable, what was created in decades lasting time frame won't be replaced in a year. This might actually be a much bigger problem for Europe, which one might think have crossed the point of no return or is very near to it and there is no other way than to keep expanding bureaucracy. Benefited short term growth in limited quantities earlier but restricting much larger growth potential in the future (now). It's kind of like drug rehab. Need a very very long time and will power to get rid of it.

E.g. the taxi industry, it's quite intriguing to see the massive panic among taxi drivers vs. Uber and everybody is running to the state crying for help as the carefully crafted pricing monopoly of decades is in harms way. Really Uber is nothing more than a service app revolutionizing the match making of suppliers and consumers and eliminating the slop out of inefficiently used waiting times and middle man management. And there's really no reason the personal transport industry should be such overly regulated, when you break it down to fundamentals getting a person from A to B doesn't really need anything other than a driver (for now), fuel, vehicle and the customer. That's it. Might be countless of similiar examples from other industries as well.

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Anonymous
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August 16, 2015 at 9:25 PM ×

Uber is way better than a taxi. An uber black car is cheaper than a car service or a taxi, can pick you up 5 minutes after your request and have you at the airport on time with no stress. Last ride in a cab from the airport cab line at LGA into Manhattan was horrible. The driver muttered under his breath, drove more recklessly than any joke, and was basically a lunatic. The expensive over-regulation in that cab driver's case produced an inferior product in every way. I don't see how the economics of overhead could possibly work out for an Uber driver in a BMW SUV, but as long as it's an option I'll take it.

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Dan
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August 17, 2015 at 2:11 PM ×

Back in February, I had a brand new Porsche Cayenne GTS arrive on an uberX page that a friend made. The younger black driver and his cougar partner handed me a business card and offered to drive me extended distances. The cost was under $6 for the ride.

It was weird and I would be hesitant to utilize such sharing services, if you should ever have any real concerns about kidnapping.

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washedup
admin
August 17, 2015 at 5:05 PM ×

See Dan thats the difference between you and FM - you are focused on the risk of being kidnapped, whereas he would go 'wow, shared service from this handsome couple for $6? sign me up!!'
Sorry FM, just picking on u coz its boring out there - unless you are a hammock dealer of course.

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Anonymous
admin
August 17, 2015 at 5:58 PM ×

Goldman Sachs team of analysts led by David Kostin: "An economic contraction is decidedly NOT in our forecast. Investors point to the 18% collapse in Brent during the past six weeks, the weak macro data from China and the spillover effect on global demand growth, lingering uncertainty in Europe, and the 25 bp compression in 10-year US Treasury yields during the last 30 days (to 2.19%) as reasons for concern about a US downturn. Our response is that, while the current US expansion is long in temporal terms (6 years), the magnitude of the recovery is weak and on that basis the expansion phase is closer to early-/mid-cycle."

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washedup
admin
August 17, 2015 at 7:13 PM ×

anon 5:58 - that makes perfect sense - thats like me saying its a matter of time I turn handsome for no reason other than I've spent most of my life looking rather average.

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peter smith
admin
August 17, 2015 at 7:36 PM ×

so Golmans say Its different this time ....

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hipper
admin
August 17, 2015 at 8:33 PM ×

Indeed 7-8 years of recovery is the historical norm as measured in the time dimension but then again, why/how should/could something crash that never really took off. One would think big corporations will continue to thrive in these conditions. Well if not thrive owing to lack of topline growth, not necessarily collapse either. Profit margins aren't probably going to disappear as a result of many sectors becoming more concentrated to fewer oligopolies and mega corporations. If one would want to make the comparison to 2007 then this "cycle" indeed seems to never have lifted off - rather been sluggish almost the whole time and even contractionary recently. Where as 2007 ran off the cliff literally, straight from the top of the debt fueled China/EM boom, at the time extended in the ruler extrapolationists growth outlooks. The question is can we get a decent sized "collapse" triggering the next recession from the current conditions or will things keep contracting/sluggish at a slow pace for years to come. Either way (at the risk of sounding concensus) these seem likely possibilities given how the DM consumer is slowly getting strangled with globalization, over-regulation, taxation etc. Indeed governments throwing more debt creating less growth, increasing taxation is going to become the silent, methodical assassin here. And with bonds pricing in the weak growth already is there anything other than subpar returns available anywhere. Is Druckenmiller hoarding gold a bet and omen of the soon to materialize lack of conviction on the Feds part and of Janet being way out of line?

OECD seems to think EZ is the only place where growth is going to accelerate towards the year end. But like many here it's easy to be skeptical on how it could be self-sustainable without outside support.

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Anonymous
admin
August 17, 2015 at 9:38 PM ×

Hope no one bought hteDec HY energy credit lows...

http://imgur.com/EMXgJU7

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Anonymous
admin
August 17, 2015 at 9:42 PM ×

$OIH sensitive CDS @ January highs. This is not the bottom to pick $XLE

http://imgur.com/IcWKLhQ

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Anonymous
admin
August 18, 2015 at 12:42 AM ×

"America's not a country. It's just a business. Now fuckin pay me."

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peter smith
admin
August 18, 2015 at 8:08 AM ×

You will have noticed the ASX 200 started going downhill early this afternoon, with banks leading the falls.
The timing of that turn coincides very nicely with the release of a note from ratings agency Fitch which read:
A further increase in capital by Australia's four largest banks is likely over the medium term as regulatory changes stemming from the December 2014 Financial Services Inquiry (FSI) and Basel framework are implemented..
That's comes hot on the heels of this month's $5b capital raising from CBA and a $3b raising from ANZ. Good, but not good enough for a rating upgrade, reckons Fitch:
The increase in capital will be supportive of the big banks' current ratings, though upgrades are not likely given their already high ratings and weaker funding profiles relative to their international peers.
Then the really bad news kicks in:
Fitch believes that the higher risk-weights are likely to be only the first of a series of new measures to be implemented. In addition to the FSI, the Basel committee is also expected to finalise their proposals for an update to the global framework by end-2015/early-2016. Together, global and domestic regulatory changes are likely to result in yet higher capital requirements.
The Australian banks are likely to use a combination of retained earnings, discounts on their DRPs, underwritten DRPs, and equity issuance to increase their capital positions.


Read more: http://www.smh.com.au/business/markets-live/markets-live-profits-pour-in-20150817-gj1czd.html#ixzz3j9FHv2BY
Follow us: @smh on Twitter | sydneymorningherald on Facebook

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FunnyMoney
admin
August 18, 2015 at 9:59 AM ×

@washedup 5:05 - no offense taken :)

As an aside, I see BAML have just updated their "FunnyMoney" survey:
https://twitter.com/LadyFOHF/status/633536367486746625

Right, back to the hammock..

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Anonymous
admin
August 18, 2015 at 8:07 PM ×

Regarding energy MLPs,

http://thereformedbroker.com/2015/08/16/the-mlp-myth-blown-to-smithereens/

Rossmorguy

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Anonymous
admin
August 18, 2015 at 10:35 PM ×

http://www.businessinsider.com/r-gundlach-says-bad-idea-for-fed-to-hike-rates-when-junk-bonds-at-four-year-low-2015-8

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Anonymous
admin
August 19, 2015 at 12:11 AM ×

Great post.

I would be careful to compare the current situation with the the 80s and 90s simply because asset prices (I am london based ) and nominal level of debt are already much much higher. Plus, with a very low inflation, financing those assest is a never shrinking burden.
So the room for manoeuvre is quite low to maintain such prices.

P.s: overheard at school between 10 year olds. - And you, your parents, do they have to work ? ;o)

Travis

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Rossco
admin
August 19, 2015 at 6:17 AM ×

@Peter Smith

I'm not sure why you specifically mention Aussie banks (apart from them being a grave yard full of macro shorts) but with the deflation that is seemingly sweeping through both em and dm Asia it strikes me that Australian exports and hence terms of trade seem about to crater.

Bad loans ?

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peter smith
admin
August 19, 2015 at 7:34 AM ×

The banks are a large component of the ASX, where they go it goes. Latest releases say only slightly increased provisions for next year, I think fitch just reminded people of possibility of further capital rounds. ASX looks to be further off boil the S&P 500 trending between US and EM markets

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Rossco
admin
August 19, 2015 at 8:59 AM ×

yes I get that but what is the relevance to the rest of the post ? Are you saying that the deteriorating situation in China and Fed tightening should be expressed by a short in Aussie banks ?

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Anonymous
admin
August 19, 2015 at 12:24 PM ×

Showing the losses...MLP spreadsheet:
https://docs.google.com/spreadsheets/d/1nOH3U936Cie4ZmoKCeXmf7--loZi4Tlh2HGkPbGOew4/edit?pli=1#gid=0

I hope all the Masters of the Universe and big swinging ***** out there have your backs covered:

"Hackers post stolen Ashley Madison user data: Report."

Will this be the macro event that brings the market down?

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Jim
admin
August 19, 2015 at 3:12 PM ×

Was Bernanke hired by China Central Bank?

http://en.people.cn/business/n/2015/0819/c90778-8938284.html

A reverse repo. They copy everything>

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abee crombie
admin
August 19, 2015 at 5:07 PM ×

Abee has been spending a lot of time looking into some of the HY E&P space. While not convinced we are at the bottom he does think we are near. Some decent values in strong names and some unpredictable values in distressed names. Clearly NatGas in the marcellus is going to be profitable for someone, otherwise prices will rise. But apparently we will need to see prices go lower to get some HF money really interested. And probably at CHK bankruptcy to light a fire! Stay tuned this is a place to watch


On aussie banks, agreed it is a macro tourist grave yard. Really need to see loan impairments pick up substantially for it to play out, as well with CDN banks. And for that you need property prices to go down, which is another graveyard, so I will stay away. Also aussie banks giving generous yields, so not my conviction short. Play the FX IMO..

Feeling very nervous about my overweight European equity call...

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Anonymous
admin
August 19, 2015 at 6:49 PM ×

Fed leaning towards no rate hike in Sep. Macro guys wrong again.

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Anonymous
admin
August 19, 2015 at 7:13 PM ×

BoE back-tracking on rate rise...
Fed back-tracking on rate rise...
Fed minutes leaked early again (just to show how manipulated these markets are)
S&P bid, BTFD rewarded once again...

Come back FM, all is forgiven....

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Polemic
admin
August 19, 2015 at 7:15 PM ×

Count down to FB saying he bought SPX 2 hrs ago .....10 .. 9 ..... 8 ...

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Anonymous
admin
August 19, 2015 at 7:20 PM ×

No idea who FB is, but since the minutes were leaked way early and USD was dumped before equity algos kicked in, I would have thought everyone got long equities (unless they were totally clueless).

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Nico G
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August 19, 2015 at 9:30 PM ×

Abee Europe is broke you are betting your overweight money on a dead bum

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hipper
admin
August 19, 2015 at 10:55 PM ×

The problem with oil is still even if some frackers start dropping out there's a lot of suppliers lurking around to grab that market share. When there was only OPEC the high price they managed to maintain most certainly wasn't because inability to supply more volume, rather conciously managing to keep supply down. Now there's competition that isn't going away easy so it's a war of market share.

Supposedly $40 is starting to hit the upper boundary of offshore OPEC countries like Nigeria, Angola and Venezuela. But their still niche rest being those very low cost producers using workforce comparable to slavery perhaps. Even though those guesstimates were in 2011 and tech probably lowered costs since then ultimately all of frackers being underwater is still no small deal. Some kind of hunchy compromise mixed from that "data" then but $35 might be a nice sustainable bottom and $30 the no-brainer bottom. But maybe more likely it just starts to trade sideways as no fuel for other than the occasional bounce unable to gain escape velocity.

So if it's near to a bottom then maybe the Fed can forget about the non-sensical headline inflation and start paying more attention to core again which is hovering very near 2%. And fuel for USTs is going to run out as oil starts freezing for the eventual sideways trading.

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abee crombie
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August 19, 2015 at 11:19 PM ×

I think Pol meant Funny Money (FM)... Nico I can always count on you to pummel Europe :). I'm still in the camp that thinks Europe is a few years behind the US and that low interest rates are the only tool they have to stimulate. Therefore equities by default should do OK as money changes asset classes. Its also cheaper than the US and the economy is so crapy, any bounce would be good.

However i wont be dogmatic about it. it was a good trade, still is a decent trade but I will cut it if things start to change which it looks like they are. Because outside of the headline S&P 500 & Nasdaq, its a slow moving train wreck in almost all sectors.

Sadly, as in the last cycle, when Europe started to outperform, that was a sign of the top, so I hear you Nico. Just waiting for my sign in the Spoo's (which I am short) to dump the rest of my Europe

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abee crombie
admin
August 19, 2015 at 11:19 PM ×

I think Pol meant Funny Money (FM)... Nico I can always count on you to pummel Europe :). I'm still in the camp that thinks Europe is a few years behind the US and that low interest rates are the only tool they have to stimulate. Therefore equities by default should do OK as money changes asset classes. Its also cheaper than the US and the economy is so crapy, any bounce would be good.

However i wont be dogmatic about it. it was a good trade, still is a decent trade but I will cut it if things start to change which it looks like they are. Because outside of the headline S&P 500 & Nasdaq, its a slow moving train wreck in almost all sectors.

Sadly, as in the last cycle, when Europe started to outperform, that was a sign of the top, so I hear you Nico. Just waiting for my sign in the Spoo's (which I am short) to dump the rest of my Europe

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Anonymous
admin
August 20, 2015 at 2:03 AM ×

Aussie banks are all about 18-20% off peaks (someone is doing ok....) ASX200 is 11% off peak, maybe the index is a better short

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Anonymous
admin
August 20, 2015 at 3:04 AM ×

Nicole is a fade...and a bum

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