The Fed put is real, and it's spectacular

It's payroll day today, and while the number of course is very important, somehow it feels a bit less so given that the Fed is almost certainly out of play this month.  Yesterday's ISM was worse than expected and better than feared, judging by the published consensus and the word on the strasse.  Markets seemed uncertain of how to digest things, even though the annualized vehicle sales numbers were a blowout, registering their highest reading in 15 years.


Also released yesterday was a very interesting paper authored by Boston Fed president Eric Rosengren and two others, arguing that the Fed acts as if it had a treble mandate, with financial stability joining inflation and (un)employment as explanatory variables in determining Fed monetary policy.  The authors identified a number of buzzwords that reflect concern over financial stability in Fed meeting transcripts, and then included their frequency of use in a regression to explain changes in Fed policy.

If Macro Man were to summarize the findings of the paper in one sentence, it would be this:  The Fed put is real, and it's spectacular.

Cynics will be unsurprised to see that the Fed's use of "downside" financial stability words like "volatility" and  "bust" occur much more frequently than "bubble" during the 1987-2009 sample period.   Perhaps not coincidentally, the FOMC's use of the buzzwords has trended noticeably higher since the 1990's.

                                                         source: https://www.bostonfed.org/macroprudential2015/papers/Rosengren-Peek-Tootell.pdf

What is somewhat surprising, however, is how much of an impact the buzzwords (or, more accurately, the concerns conveyed by them) have had in explaining Fed policy.  Over the sample period, each 100 buzzwords included in the transcripts equated to a 45 bp move in the Fed funds rate.  Believe it or not, that's a stronger impact than a 1% change in the forecast for inflation or the unemployment rate had over the same period.

Perhaps most telling is the skew in the Fed's reaction function.  The paper broke the sample down into quintiles using credit spreads, with the widest spreads representing a "bust" and the tightest spreads a "boom."  During the "bust periods", each 100 words of moaning about financial stability explained nearly 67 bps of easing, while a similar volume of concern during booms (which we've already established doesn't happen anyways) would only explain 36 bps of tightening.  In fact, the explanatory power of the financial stability buzzwords during "busts" is stronger than any reading for inflation or unemployment, the Fed's ostensible policy targets.  As many have suggested, the Fed not only doesn't take away the punch bowl these days, it spikes it with Everclear.   A simplified summary of the findings is set out below.




Based on these findings, perhaps the appropriate question is not "does the Fed make policy based on financial stability", but "does the Fed make policy based on anything else"?   

Elsewhere, the Atlanta Fed slashed its GDPNow Q3 forecast to just 0.9% yesterday, which raised eyebrows (and more doubts that the FOMC will ever pull the trigger.)  The basis of the downgrade was preliminary goods trade data for August, which showed sharp declines in both exports and imports and a widening of the deficit.   Forecasting the impact of trade on GDP is sketchy at the best of times, using preliminary data even more so.

One counterpoint to the notion that trade collapsed in August is the Long Beach Port data, which showed quite a substantial surge in traffic in that month.  Obviously the port data can be quite sloppy, but as a sense check it certainly doesn't confirm the basis of the GDPNow downgrade or suggest undue cause for concern.  After all, if the economy's going into the tank, why are Americans buying so many cars?




Finally, today's number.  The consensus forecast is rather unimaginative at 201k for the headline number, but Macro Man is hard pressed to argue against it; his own model looks for a rise of 209k.  Ordinarily, one might say that the unemployment would be of interest, given that it's approaching the NAIRU identified by the FOMC in the latest SEP last month.   The again, that NAIRU projection itself has come down by 0.3% since the end of last year, so it's pretty clear that the Fed is willing to lower it as much as necessary based on the spot unemployment rate reading.


Moreover, the table posted above suggests that it doesn't really matter anyways; during the good times, the Fed doesn't give a monkey's about the unemployment rate.   Indeed, based on all available evidence, they don't give a monkey's about anything but keeping the market supplied with (virtual) puts, thus blowing up the next (unmentioned) bubble.  The problem is that when the bubble bursts, that tends to be pretty spectacular, too.
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Nico G
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October 2, 2015 at 7:46 AM ×

good morning

ZH relayed a quite interesting angle on Fed/risk assets today:

http://www.zerohedge.com/news/2015-10-01/there-are-five-times-more-claims-dollars-dollars-existence-why-matters

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CJ
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October 2, 2015 at 7:46 AM ×

MM,

If you look at Long Beach & LA port traffic broken down by inbound vs outbound containers, then it does imply a significant deterioration in the trade balance, which, all things being equal, should translate into a quite negative net export contribution to Q3 GDP.

Now, I will say that the trade balance deterioration is much more a function of surging demand for imports, which says something about the strength of US domestic demand. So while agree that things are hardly falling apart, I can envision a rather downbeat Q3 GDP report owing to a widening trade deficit. For this reason, I prefer to focus on real final sales to domestic purchasers, so as to strip out the effect of exports and inventories.

-CJ

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Anonymous
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October 2, 2015 at 9:28 AM ×

i think most important component will be hourly earnings, unemplyment data is fine...earnings start trending and fed looks boxed
and i agree as bearish as i am on us equeties us economy is doing ok ...nothing spectacular but plodding along.which doesn't have to translate into higher equities given state of earnings and the valuation boost already received from higher multiples. I'm sounding very repetitive but value looks to be in eu equities...valuations, margin, qe, lending pickup, lower commodities,growth upturn etc etc...reminds a bit like the tepper call in 2012/13 regarding valuations qe growth....and fully expect similar performance from europe, though price action like yesterdays shows will not be a straight line up..expecting chop, will try trade around but will not be too cute( which cost me to miss a chunk of spoos move in 13!)

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Anonymous
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October 2, 2015 at 9:30 AM ×

i think most important component will be hourly earnings, unemplyment data is fine...earnings start trending and fed looks boxed
and i agree as bearish as i am on us equeties us economy is doing ok ...nothing spectacular but plodding along.which doesn't have to translate into higher equities given state of earnings and the valuation boost already received from higher multiples. I'm sounding very repetitive but value looks to be in eu equities...valuations, margin, qe, lending pickup, lower commodities,growth upturn etc etc...reminds a bit like the tepper call in 2012/13 regarding valuations qe growth....and fully expect similar performance from europe, though price action like yesterdays shows will not be a straight line up..expecting chop, will try trade around but will not be too cute( which cost me to miss a chunk of spoos move in 13!)

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washedup
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October 2, 2015 at 11:25 AM ×

MM so you think the Fed cares about nothing but equity prices in deciding prices? How , um, unsavory of you.

I think this study reaches the conclusions it does because of the sampling period which coincides almost perfectly with the bond bull market - in other words, the right questions to ask would be, how was the Fed able to get away with this approach, and can those conditions be expected to persist indefinitely into the future.

The put has an expiration date - it happens to coincide with the secular trough in long range inflation as seen on a global basis.

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Adrem
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October 2, 2015 at 11:26 AM ×

Come back McChesney Martin. All is forgiven.

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Anonymous
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October 2, 2015 at 11:42 AM ×

oooohhhhh!!!!! Finally someone stating it as it is!!!!!! The King is naked!!!

"Moreover, the table posted above suggests that it doesn't really matter anyways; during the good times, the Fed doesn't give a monkey's about the unemployment rate. Indeed, based on all available evidence, they don't give a monkey's about anything but keeping the market supplied with (virtual) puts, thus blowing up the next (unmentioned) bubble. The problem is that when the bubble bursts, that tends to be pretty spectacular, too."

I could not agree more.

Bravo Macro Man and may the Steelers be a little less crap than usual.

Ciaooooo F

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Nico G
admin
October 2, 2015 at 12:18 PM ×

it is shutdown season soon

Treasury Secretary Lew read at The Fly:

“Over the past ten days, we have received quarterly corporate and individual tax receipts and additional information about the activities of certain large trust funds, including military retirement trust funds,” Lew wrote in his letter to Boehner. “The tax receipts were lower than we previously projected, and the trust fund investments were higher than projected- resulting in a net decrease of resources available to the United States government.”

Lew added, “Based on this new information, we now estimate that Treasury is likely to exhaust its extraordinary measures on or about Thursday, November 5. At that point, we would be left to fund the government with only the cash we have on hand, which we currently forecast to be below $30 billion. This amount would be far short of net expenditures on certain days, which can be as high as $60 billion. Moreover, given certain payments that are due in early to mid-November, we anticipate that our remaining cash would be depleted quickly.”

Lower tax receipts are another confirmation that US economy is slowing.

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Anonymous
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October 2, 2015 at 12:45 PM ×

FT: hence we can forget about any tightening for the foreseeable future; once the marginal effect on the US economy of the EM slow down wears off and considering the teflon like mindset of consumers, I expect a strong growth pick up in Q2 at the latest;
We should see upward earning revisions as soon as Q1.

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Macro Man
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October 2, 2015 at 1:13 PM ×

Out of curiosity, do you guys always take what politicians asking for money say at face value?

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Anonymous
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October 2, 2015 at 1:14 PM ×

FT: by the way my model (which is a bit skewed towards regional surveys impact) shows 187 000
Goldilock?

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CJ
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October 2, 2015 at 1:40 PM ×

ruhroh... Kocherlakota might have some company in the neg rates camp soon :)

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Booger
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October 2, 2015 at 1:57 PM ×

whoa, that was a very timely bad number, I was starting to feel a bit a pain from that spoos short...Which has now been ejected into the profit zone and I think I will take that while I can.

My bearish bias remains and I will be looking to short spoos again on break of the 1830 area. From 1900 though, short aud.usd looks a better shot from current levels as the Chinese should be back from holiday soon. Without the butlifting pre-holiday dress up we could see more china falling apart.

Dissapointing PMI's from China, Japan, Europe, EM. The only PMI that exceeded expectations recently was the UK. Dissapointing US PMI yesterday and now NFP. Commodity prices at 2009 lows, points to some serious deflationary forces developing IMO. Expected Fed hike now probably will be pushed back to ? 2017.

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Anonymous
admin
October 2, 2015 at 2:26 PM ×

hmph , my short mar17 $s not looking good....ok number wasn't great but seriously this looks like a bit of a overreaction??

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Nico G
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October 2, 2015 at 2:28 PM ×

i hope noone in this forum is left believing that the 2009-2015 QEed price action did not end last August. Good luck and good week end

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washedup
admin
October 2, 2015 at 2:33 PM ×

I am really beginning to think that this idea of selling the USD whenever there is weak data in the US getting lame - if the US is catching flu induced by an EM slowdown, it will only exacerbate a rush into USD eventually - I have been on the sidelines on USD for a while now, but am dipping my toe in - seasonality in USD has been good in Q4 regardless of risk on or off - I agree with Boog that AUD is the best short against it, but I think thats a matter of detail.

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abee crombie
admin
October 2, 2015 at 3:00 PM ×

HY in the dumps AGAIN, EM FX trying to figure out if news is good or bad. Pink flamingo trade is for Euro to go to 1.20 imo.

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October 2, 2015 at 3:03 PM ×

As I have been whispering we are past the "cyclical" peak in the US, services also is about to roll over in coming months...

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abee crombie
admin
October 2, 2015 at 3:07 PM ×

btw, MM now that you have access to a Bloomy, a better one for world trade is MWT VWT from the CPB Netherlands, tracking the volume of trade

http://imgur.com/Uv7J9JL

to be fair, global volumes of trade have been in the dumps for a while when looking at the above

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Booger
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October 2, 2015 at 4:01 PM ×

Interesting move in nat gas futures in the last few weeks, that seems to have broken 2.43 and may be headed to 2. This may have an interesting effect on Chesapeake and other leveraged gas plays. CHK bonds have cratered in the last 2 weeks, now starting to price in significant risk of default.

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Anonymous
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October 2, 2015 at 4:03 PM ×

@Adrem 11:26

"While money policy can do a great deal, it is by no means all powerful. In other words, we should not place too heavy a burden on monetary policy. It must be accompanied by appropriate fiscal and budgetary measures if we are to achieve our aim of stable progress. If we ask too much of monetary policy we will not only fail but we will also discredit this useful, and indeed indispensable, tool for shaping our economic development." -- William McChesney Martin, 1955

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SJ
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October 2, 2015 at 4:14 PM ×

The FTSE 100 appears desperate to rally
the uk a real pocket of inflationary optimism at the moment
hardly been any real selling beyond the go go names

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Anonymous
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October 2, 2015 at 4:17 PM ×

Does anyone really think the Bank of Japan - not to mention every other major central bank - will let equities fall too far? These f*ckers will do whatever it takes to keep stocks bid. Those with large short positions have only one outcome ahead of them: http://www.imdb.com/title/tt1615147/

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Anonymous
admin
October 2, 2015 at 4:43 PM ×

QE3 was $85 Billion/Month at its peak if I remember correctly.

What form will QE4 take? Size/duration?

Will China participate?

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Macro Man
admin
October 2, 2015 at 5:21 PM ×

Tks for that abee. I don't dispute that trade has tumbled....all I was pointing out was that this initial goods report (for the US only) suggested a collapse in volumes of both imports and exports in August, which doesn't seem to square with the sharp rise in both in the LB port data for the same month (nor indeed the auto sales from last month.)

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Anonymous
admin
October 2, 2015 at 5:24 PM ×

BUllard & Fischer due. This should be interesting.....

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Anonymous
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October 2, 2015 at 5:27 PM ×

"After all, if the economy's going into the tank, why are Americans buying so many cars?"

Well,

"According to Experian, in the second quarter of the year nearly 29% of new-car loans were financed for terms of 73 to 84 months, an increase of 20% over the same period last year. The portion of used cars financed for these six- to seven-year terms increased by 14.8% in the past year, to 16.1%, the highest ever. Lease financing showed similar characteristics as drivers stretched three-year leases: the number of 37- to 48-month leases increased 18%."

"Experian says buyers borrowed an average of $28,524 for a new vehicle and $18,671 for a used one. Since wages are essentially flat, extending the term is the only route to make the monthly nut affordable. And ultimately more expensive: borrow $29,000 for eight years rather than four at the national average rate of 4.81% and you’ll pay about $3,000 more in interest."

http://time.com/4038084/the-8-year-auto-loan-is-here-but-is-it-in-your-best-interest/

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Macro Man
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October 2, 2015 at 5:31 PM ×

That explains how, not why.

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Anonymous
admin
October 2, 2015 at 5:40 PM ×

@ Anonymous at 12:45 PM

re: "the teflon like mindset of consumers"

We'll see how long that lasts . . .

"Over the past 12 months the EPI has fallen 2.8 percent while the CPI has increased 0.2 percent. The difference between the two is due to a drop in energy prices. The EPI assigns a greater weight to energy."

Through August, 2015, the rolling 3-year change is EPI about -0.35%. No wonder some people are feeling better.

https://www.aier.org/research/new-epi-gasoline-drives-index-lower

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Anonymous
admin
October 2, 2015 at 5:43 PM ×

A few hours after NFP and I'm already hearing chatter about QE4 and/or -ve interest rates from the Fed. Check this for starters: http://www.pragcap.com/so-long-rate-hikes/?utm_source=dlvr.it&utm_medium=twitter

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Anonymous
admin
October 2, 2015 at 5:49 PM ×

The "availability" of such loans might explain why?

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Anonymous
admin
October 2, 2015 at 5:51 PM ×

Why buy now? Pull forward demand to lock in cheaper credit with expectations of rate rise?

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Anonymous
admin
October 2, 2015 at 5:51 PM ×

MM said...
"That explains how, not why."

Vehicles are getting older,

http://www.rita.dot.gov/bts/sites/rita.dot.gov.bts/files/publications/national_transportation_statistics/html/table_01_26.html_mfd

Plus, this is America. If you market it, they will come.

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Macro Man
admin
October 2, 2015 at 5:55 PM ×

That people are even talking about QE4 (let alone negative rates, which ain't happening) after 1 lousy job number is he exact reason why the Fed should lift off (not that they will, necessarily.) Anyone who thinks the Fed should engage in those policies has become seriously unanchored from reality.

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Anonymous
admin
October 2, 2015 at 5:58 PM ×

HUGE buying of equities here by Bank of Japan:
http://www.zerohedge.com/news/2015-10-02/yen-driven-buying-panic-lifts-nasdaq-green-now-what

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Macro Man
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October 2, 2015 at 6:03 PM ×

I wasn't aware that auto companies only recently started marketing vehicles in America... ;) I suspect the solid state of consumer confidence is the real reason 'why', and that sort of belies the notion that it's all going to hell- witness the solid readings on employment for September, for example.

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washedup
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October 2, 2015 at 6:16 PM ×

MM - not even raising the specter of QE4 before permanently discarding it to the dustbin of financial history would be kind of hard for the federal reserve of all institutions wouldn't it? It would be like Charles Darwin suddenly expressing serious doubts about the Earth being more than 6000 years old. Messrs Kuroda and Draghi would consider such an admission extremely rude at best, and a complete stab in the back at worst.

They need a respectable way to admit, as they all privately know, that it was all garbage beyond QE2, but it takes time to build an intellectually defensible case without saying, guys, yes we overdid it a bit. Somewhere along the way, if data continues to worsen, there will be a 'whatever it takes' type conversation - WTF else could they do in an election year?

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Anonymous
admin
October 2, 2015 at 6:23 PM ×

"i hope noone in this forum is left believing that the 2009-2015 QEed price action did not end last August".

Oh dear... Dow now up +350 points in a couple of hours (due to BOJ QE buying)...

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Anonymous
admin
October 2, 2015 at 6:27 PM ×

"Dow now up +350 points in a couple of hours (due to BOJ QE buying)..."

How do you know its BoJ?

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Anonymous
admin
October 2, 2015 at 6:37 PM ×

"Models used by Federal Reserve to measure financial conditions have been “broken for a while” and Chair Janet Yellen has backed herself into a corner by focusing on the timing of a rate rise, said Peter Fisher, senior director at the BlackRock Investment Institute.
BlackRock’s Fisher spoke on Bloomberg Surveillance with Tom Keene and Michael McKee
Says Fed can’t figure out if zero-rate policy is still working
Says the Fed’s ability to stimulate the economy with monetary policy “has played out”... SOOO, the real question, I guess, is whether the Fed decides that exiting a USELESS policy is better "in the long run" than engaging in it for too long -- "in the long run". In both cases, they look like inept, arrogant dufuses (Kocherlakota-style). Or do they try "more of the same", a bit like Wenger at Arsenal? :) I believe Einstein called this insanity... Which might explain why he never became an economist. Economics -- a dismal pseudo-science for failed mathematicians/physicists...:) i^i

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abee crombie
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October 2, 2015 at 7:30 PM ×

William McChesney Martin had no idea what he was doing. He governed by 'feel'. Even though some of that 'feel' is probably warranted, he wouldnt survive in todays academically/statistically oriented Fed

Car sales are a great leading indicator but I dont think we are on a new sustainable trend above much above 18M. But it sure isnt a warning sign. Nor are any of the housing numbers. Thats why I agree with MM on the confidence of the current economic situation, even if the CFNAI and other broad economic indicies are rather lackluster.

But that said, I finally got a chance to watch mr ichan's video, which I thought was rather good. He didnt really pound the table too hard on HY bonds (except on Larry Fink). But did say that it will be a crowded exit when the economy turn in that assset class, which I totally agree with. So the question is now, is the current HY market sell off due to simply supply/demand issues, technicals, and the market getting upset with some recent M&A, or is the HY market trying to tell us something?

First it was energy, now its the serial acquirers, soon with will be IG M&A that gets the HY wrath (listen up 3G).

Lastly, I am hearing that there is going to be some big redemptions coming in a lot of funds in Q4.

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Polemic
admin
October 2, 2015 at 8:19 PM ×

Been a classic day. In the good old days of the "Nico 'n' Funny Money" We would have been in round 12 by now. But I'm beginning to hatch a theory to the Agatha Christie mystery of who is actually who amongst all the anons and pseudonyms here.. and that theory is.. that FM and Nico are actually the same person !

Back to where we started in spoos. The one thing I have decided from all this is that guessing NFPs is as fruitless task as guessing Fed. And as stocks don't even know what to do on any result due to the two memes of FM Cb forever meets Nico world econ collapse, unresolved (As the blog has been testament to) the worth of guessing any of it is becoming academic.

Have a great weekend

Cimelop.

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Anonymous
admin
October 2, 2015 at 9:03 PM ×

LOL @ shorts...like I said months ago, this isn't different.

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rp
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October 2, 2015 at 9:10 PM ×

'i hope noone in this forum is left believing that the 2009-2015 QEed price action did not end last August.'

Oh yes he did!

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Anonymous
admin
October 2, 2015 at 9:22 PM ×

still think trade around core long book and maybe flatten headline deltas into 2000 spy
iwm first up day in 10 i think...might get follow through but who knows....now if they would only buy some of this european stuff i'm long .....and this might be first time since aug lows that vix curve in contango...though i still think option premiums looks very cheap given the size of moves
good weekend all....

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AL
admin
October 2, 2015 at 9:26 PM ×

Man, I feel stupid today. Been running a mild underweight equities into NFP (i. e. 95% of the benchmark) having watched macro data being so so lately. Today's action plan was simple: bad number = increase underweight to 90%, good number = move back to BM. Said done and smoked. Technically the reversal is significant and hard to ignore, even if I really sense macro will deteriorate in coming weeks as I don't buy at all the argument that DMs are completely immune from EMs' slwdown. But looks like that the only game in town of the last few years will keep on playing a little longer. Congrats to whoever bought the dip post NFP today .... Definitely getting to old for this.

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Leftback
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October 2, 2015 at 9:40 PM ×

LB (along with CV, FT and others) were long days ago, and were afraid for Shorties going into the Q4 fund flows... Ohh dear. Look away, all those of a delicate disposition.... that reversal must have been painful.

Vol selling and Q4 performance chasing might be the name of the game for a while now. Non-apocalyptic earnings will persuade insties that they have to chase this market again and we might see a sub-15 Vix before this rally runs out of steam.

December might not be very clever this year, especially if consumers look weak, as there will be a lot of people trimming their books and doing tax selling. But that's a long way away right now, and so is the December FOMC meeting which will be the next opportunity for the Fed to chicken out. Standing pat in October is already a done deal. For the time being, hikes are so totally off the table, money remains cheap and there are yields to be hogged and profits to be made in risky assets worldwide.

No high 5s today. We'll just do "the nod", with perhaps a "you da man finger point". That street enough for you?

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Anonymous
admin
October 2, 2015 at 10:36 PM ×

"Something for the weekend, sir? Perhaps sir might savour some cold steel?"

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Anonymous
admin
October 2, 2015 at 11:18 PM ×

@LB - Good call on those equity longs. Well done sir.

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Anonymous
admin
October 3, 2015 at 12:45 AM ×

FT: what a day....I came within a pubic hair of getting stopped on my DAX longs (4355) we had an a) b) c) in a matter of 2 days and the c today was scaaarrrryyyyy
I take no pride, a few more stops on the dax would have taken my position away but better lucky than smart
stops on NDX were comfortably further, but still....painful it was from the morning highs
I just hope for a little bit of comfort and rest for a few weeks without any third world war being ignited in syria or any tremor from SF to Tokyo...
Is that too much to ask for?

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Anonymous
admin
October 3, 2015 at 1:02 AM ×

FT: by the way, XAG was the real icing on the cake.....I don't know if this rally has any legs but XAU/XAG ratio tends to be inversely correlated to equity performance....this leaves quite some room for xag performance even with xau unch ish....
I was stopped yesterday on my xau longs but the GDX xag and xau calls kicked in nicely today....got more psychological satisfaction from that than than the equity v shape reversal
Good we

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Booger
admin
October 3, 2015 at 3:18 AM ×

Boy, was that a choppy day on spoos. A real bear vs. bull action packed episode, so perhaps it's an environment to take quick profits, trade small size and be nimble until one side clearly takes dominance.

I couldn't help but resist taking a cheeky small short on spoos on the close though @ 1950. A melt up does seem to me far fetched at this point, so perhaps more chop and with the bears slapped around from 1900 and with the bulls confidently closing, I am guessing they will be slapped around a bit early next week. I am setting a tight stoploss though. The only fly in the ointment is that the Chinese are not back from holiday until next Thursday.

It's a period of uncertainty until we find out whether the ROW slowdown pushes the US into recession or not. If it is there is further indication of this in the next few months, there is much further downside in risk trends, if not then there will be a nice end of year rally as most commentators have suggested.

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CV
admin
October 3, 2015 at 12:10 PM ×

Indeed, what a reversal, and indication, I think, that the market wants to rally more so than fall here. NFP is such a stupid number and the recent weakness could easily be revised away in coming reports, but in the short term, a rate hike is not happening. Indeed, as far as I can see, the ECB is next on the stage and Mr. Draghi will likely be in early Christmas mood given that the Eurozone just slipped back into "deflation". I hear LB's point about U.S. selling for tax reasons in December, but I think indices such as FTSE 100, MSCI EM and DAX have real legs here well into Q1.

The warning from credit markets is real, but as long as it doesn't happen in a GENERAL taper tantrum, 9%-to-10% yield on selected US. HY energy names will eventually prove too lucrative. Note also that the big re-financing/maturity hurdles have been pushed out. The next big ones are in 2017/18 if I remember correctly, same applies to EM non-finanancial corporate. There will be a glorious chance to make money on the short side here, but it requires higher inflation and either more complacent or constrained CBs. It won't happen as part of a deflation panic.

Watch EM too ... consensus is way too bearish here, and I think a counter move is just around the corner, which will take a out a lot of "macro/1997-98 redux" tourists.

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Anonymous
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October 3, 2015 at 12:46 PM ×

A decent rally off lows but Spoos only closed 14handles above its price pre figure. Its the first US led rally in what feels like months, maybe even all year. Most US moves have been overnight or on the back of something else. Wouldn't be gettimg carried away with a 6hour move.... Need to see a bid sustained for the week. Bear market rallies.....

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Anonymous
admin
October 3, 2015 at 12:50 PM ×

To add: China being closed for the week might just facilitate a massive bid/grind higher. If it does, we can all blame China for recent down moves. If we stall and fall, well, China can no longer be the excuse.

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abee crombie
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October 4, 2015 at 3:48 AM ×

for what it's worth I think we just established a trade able double bottom in equities. We probably rally or range trade for the next few months. But I think I will be trimming length at we get up there. Just doesn't feel like the recent dollar move, commodity move and credit move are fully done. If you asked me about the magnitude of the move, i think a 60% fall in oil, 7% in HY or current fx rates seems pretty substantial but I doubt all these moves have been fully digested in all markets. They took 5 years to go up, so going down for 1 year just seems a little too short.

Time to take off the stoic investor top hat and put back on the trader cap.

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hipper
admin
October 4, 2015 at 7:05 PM ×

Wow TPP close to done deal:
http://www.cbc.ca/news/politics/trans-pacific-partnership-near-deal-1.3256151

I'd bet TTIP can't be too far behind - with the exception of EU having a lot crappier negotiators than Japan. If you like connecting dot patterns, conspiracy theories and tin foil hats, then think VW - with a result favorable enough, perhaps those juicy fines just might get "faded" into irrelevancy.

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Nico G
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October 4, 2015 at 8:43 PM ×

it sucks to be the local Dr Doom here 1) when all i have written about is CAUTION and 2) a more recent theme has been to drastically shorten your timeframe, from investing to trading

LB since you were worried about shorties remember i was long into quarter end then reversed short on October 1st indeed. To your surprise I covered that short on Friday at 3127. That is one tick above the low of the day i know you don't believe it (Dec stoxx). I have no problem at all sending you IB trades of last week to make a point, i kid you not.

I would never want to show off here - this ain't a place to post trades - but i certainly do NOT want to sound like bullshit. To boot: Dr Doom is flat before heading to Brazil tomorrow for a well deserved holiday. There will be a time when i am bullish vs. most of you decisively bearish. I am longing for that day, to become MM resident Peter Sellers (the Party edition)

Good luck everyone

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Nico G
admin
October 4, 2015 at 8:50 PM ×

Edit: sorry, 3027 for a Friday low of 3026

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Nico G
admin
October 4, 2015 at 9:01 PM ×

one more thing i just came across. Catching Russian knives sure ain't a walk in the park

"Mann paid the equivalent of $2.20 when he purchased Sberbank’s Moscow-listed shares in March 2014. He thought he was getting a bargain, buying around the time the stock tumbled to a four-year low as President Vladimir Putin annexed Crimea and investors fled from Russian assets. Now Sberbank sells for $1.12 and Mann has 2.4 percent of his $381 million Motley Fool Independence Fund invested in the lender. "

CAUTION

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Anonymous
admin
October 4, 2015 at 9:02 PM ×

FT@ Nico: well done, I, for one, wouldn't think you would say such a thing if it weren't true, u sound like a straight block....did u just cover shorts or got long (for a short while obviously)?
Anyway, have a caipirinha for me, I'm going there in November for a bit of surfing....

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Anonymous
admin
October 4, 2015 at 9:04 PM ×

Nico, not that i doubt you but, was that a random order fill working orders at that area or were you trading flow? Pretty hard to get that price on flow scalping point and click. Not impossible but, at the time, flow certainly felt like one more move was coming. But then, it always does. Lots of buts!

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Anonymous
admin
October 4, 2015 at 9:41 PM ×

There will be a time when i am bullish vs. most of you decisively bearish.

Class.

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Anonymous
admin
October 4, 2015 at 10:41 PM ×

Even IF you were Dr. Doom all the time, Nico, I would still enjoy reading your commentary. And I do hope you get an honest "feel" for what is happening in Brazil these days and that you will share it with us, in particular, has EWZ bottomed this week and has it now officially begun a monster rally? :)

Enjoy the sights1

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Anonymous
admin
October 5, 2015 at 5:51 AM ×

anyone else think markets should be more concerned re Syria ?

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