Another day, another beefy increase in the CNY reference rate. Over the last week the RMB has been marked some 0.8% lower versus the dollar, even as a number of other major currencies (y'know, the kind of company the RMB hangs with now that it's in the SDR) have rebounded smartly. As Bill and Ted might say, "strange things are afoot at the Circle-K."
The thing about flamingo-hunting season and other periods of the pain trade is that it sometimes easy to get emotional and let one's P/L do the thinking. As a result, punters can sometimes lose sight of the bigger picture (and even the smaller one) thanks to just wanting the pain to go away and/or looking at prices through the jaundiced eye of preconceived notions.
One way to eliminate emotion and preconceptions is to look at charts unlabeled and with the axis changed. By concentrating on the price action, rather than the name, one can occasionally find opportunities that might otherwise pass one by. So Macro Man is curious what readers make of Tom....
....Dick.....
...and Harry
The thing about flamingo-hunting season and other periods of the pain trade is that it sometimes easy to get emotional and let one's P/L do the thinking. As a result, punters can sometimes lose sight of the bigger picture (and even the smaller one) thanks to just wanting the pain to go away and/or looking at prices through the jaundiced eye of preconceived notions.
One way to eliminate emotion and preconceptions is to look at charts unlabeled and with the axis changed. By concentrating on the price action, rather than the name, one can occasionally find opportunities that might otherwise pass one by. So Macro Man is curious what readers make of Tom....
....Dick.....
54 comments
Click here for commentsAs the least capable technician on these boards here are my guesses. Holding period 3 days to 3 weeks (assuming your data points are daily).
ReplyTom - Do nothing
Dick - Buy 'em
Harry - Yours
http://www.zerohedge.com/news/2015-12-10/ft-shocker-eu-unveils-standing-border-force-will-act-even-if-government-objects
Replyciao MacroMan.... as long as Tom, Dick and Harry are positively correlated to liquidity, buy'em all.
ReplyCBs can't withdraw liquidity too quickly or the drug addict (i.e. the mkt) will have another crisis and CBs do not want that.
what worries me is the old said... "if Santa misses to fall, the bears will take the wall"
arrivederci
Harry is way too young to he hanging out here.
ReplyTom is a tempting base and likely to draw in some longs, but this set-up I would say is bound to go lower still.
Dick is a buy imo.
Tom - meaningless
ReplyDick - meaningless
Harry - meaningless
Meaningless - whatever your personal bias is.
I would strongly advise against trading in any of these three markets, as Tom, Dick & Harry are full of predatory HFT and phantom liquidity. Furthermore any long-term direction comes not from supply/demand or T,D&H market forces, but central bank manipulation.
ReplyMM-tom( chart looked very familiar and i have some if it is what i think it is)
Replybottoming -long , with levels to add above and defined stops below
dick-no clue
harry -short with stops above, break looks too big so trend change i think
Liquidity, anyone?
Replyunk Fund’s Demise Fuels Concern Over Bond Rout
The FED crescendo. Markets are starting to rattle.Can't blame China this time. Two holiday rallies, Chinese & Thanksgiving kept markets up last time. Will they hold with weekend Chinese data, FOMC & opex? Is it time to dump, take a break and look again in New Year? Putin beating the drum this morning.
ReplyI think it is easy to look at the ECB as disappointing markets. But, look at how quickly the first QE unwound. Additional QE was going to unwind anyway. QE is over. It will not work again anywhere. It fostered malinvestment that is now unwinding.
Putin reminds me of this Simpsons clip:
Replyhttp://www.dailymotion.com/video/x1ee465_copy-of-simpsons-soviet-union_fun
Also, China devalue is killing ECB QE.
ReplyCharts have to be used with fundi's. For goldminers, it's probably still early. Suger, meh. I can't figure the last one.
ReplyHow did I do.
The disappearance of china's Warren buffet (ha) from fosun is just another bad sign from there. Regardlesd if he is guilty, it sends the message they don't care about markets. Capital says goodbye. Not good.
Buy Tom, watch Dick and sell Harry
Reply@abee 1/3
ReplyTom - if volume was lower on the latest bottom than the previous (clustering bottom) its a great double bottom buy, possibly for the long term - else watch
ReplyDick - Watch for signs of a H&S formation - nothing to do till then - pattern incomplete
Harry - Pattern incomplete but seems to be trying to carve out a pennant which is continuation 2/3 of the time.
Cheers.
This Third Avenue story is scaring the heck out of me ... what if Templeton et al are next. We be screwed!
ReplyCV, they are gating withdrawls. Dreaded words in the HF space, even worse for a mutual fund with supposed daily liquidity. To be fair the fund wasnt marketed to avg joe 6 pack. I bet they probably make some money on the current positions but you are right, the market doesnt want to hear.
Replyhttp://ftalphaville.ft.com/2015/12/11/2147652/the-flight-before-christmas-and-that-potential-third-avenue-hy-canary/
If spoo's start selling out of the gate, call up mortimer bc its time sell
Thanks for the perspective abee, the non-retail point is important.
ReplyThird Avenue has a history with restructuring/distressed (though not a seller pedigree) and the focused credit fund was leveraging that aspect. They only bought bonds price for, or already in default. Not your average HY bond fund for sure. Its a good indication though of the stress in the CCC space, as I have mentioned before. However you have Oaktree saying finally now there is opportunity.
ReplyFinally, evidence that Fed policy is working on Main Street: SB shooter Farook recently obtained a personal loan for $28,500. Too bad he won't be spending it at Amazon this holiday seasonn.
ReplyRossmorguy
...and new there are vague headlines of China adjusting its FX mechanism. Happy Friday the 13th!
ReplyAbee,
Replythe "problem" with Oaktree is that they are a) picky, i.e. don't buy everything and b) provide their (!) price, which you most probably won't like. If they move in there is a sufficient amount of reasonably desperate sellers and not all will like their quote.
Just sayin...
Anon 10:30 AM
ReplyBulk of its holdings Lvl 3 securities, If that's case then saying there's lack of liquid. is redundant.
Tom, Dick and Harry were the names of the tunnels in The Great Escape. That didn't end well for Capt. Bartlett, MM. If Ze Germans stop the truck so you can take a walk, you and Mac should watch out.
ReplyTom - this looks more than vaguely familiar, we see tons of charts like this at the moment* and this one might be the GDX, which we have been watching and we think it is a buy. There are some charts in the oil patch that look a bit like this too, especially some of the drillers, which is interesting in view of the action in crude.
Dick - no idea what this is, would probably wait for a pull back to support before getting long. Knowing what it is might help as well (!), although yes, I do understand the point of the exercise.
Harry - probably some horrible biotech or something similar - is it that one where a tiny punter was short and got rear ended by the major shareholder?. No idea, wouldn't touch anything that rockets like that, although might short it if it breaks down, but no clear pattern here yet.
*Often in names that we have been long for some time, ouch.
http://in.reuters.com/article/us-global-investment-flows-idINKBN0TU1DQ20151211
ReplySome stats:
So far this year, the contrast between Europe and the United States could not be greater: European funds have attracted +$118.7 billion, while U.S. funds -$133.3 billion.
The $3.5 billion net inflow last week into European equity funds was the largest in 14 weeks, and was the 28th inflow out of the last 30 weeks.
Money market funds attracted $13.4 billion last week, the 10th weekly inflow in a row, the longest streak since March 2008.
Wild ride in the markets today. All I can say is thank god we have HFT market makers stepping up and offering much needed liquidity in times of need... BWAHAHAHAHAHA...
ReplyThis is a nice chart summing up the performance of global credit.
ReplyThird Ave managed ~$790m and are liquidating. As a result markets are having liquidity issues today. There are over $300 Billion in junk bond mutual funds - what if they all liquidate next? lol. Christ this is funny.
ReplyThanks anon for the thoughts about Oaktree. I figured as much as that is how most distressed guys work. I heard Tepper say once he is not at all worried about liquidity in the bond markets bc he said he [ and others ]will always make a price, just a price most ppl dont like. I agree.
ReplyAnd just bc distressed is starting to do something doesnt mean it will turn. Oaktree and a lot of others loaded the boat on bulk shipping and are most likely underwater ;-).
The point I think is that if some people expect HY to implode something like 2008 they probably will be waiting a while, IMO, direct commodity names excluded. When CHK or another big oil/gas goes bust I think that is time to get dawn the Kevlar for those guys.
HYG is below 80 today ... any guesses where and when it might bottom?
ReplyAll I can say is, at a big picture level energy HY, roughly equity mkt cap weighted, is down 50% from the highs - a basket constructed from those same equities is down around 40% from the highs, when it is further down the capital structure, so form your own conclusions.
ReplyHonestly none of this is news to anyone on this board - to CV/abee's point, the key here is - is there a transmission channel for the energy distress to spill over into other sectors because of loan and credit portfolio contagion.
I did call Janet and she assured me it was contained.
Price action is not too different from Friday, August 21st. Double tops both in EMU stocks and SPX carving out and it feels there is still a lot of complacency around: should the weekend go by with no major news a spinning temporary bottom on monday is possible .... And then I wonder if this risk-off is enough to push the Fed in reconsidering the well telegraphed hike..... EM same sort of stress, CNY deval, oil ..... Etc. How will the markets take it if they pass? Not sure very well and December 2015 could turn out in history as the month of the great CBs communication failure.
Reply"is there a transmission channel for the energy distress to spill over into other sectors because of loan and credit portfolio contagion."
ReplyWell indeed. My base case in this cycle has always been that it would end when the corporate bond market (potentially linked to the buyback circus) ends. Liquidity is only one aspect here of course but it is an important one. I think PIMCO, Templeton, Blackrock etc are the new AIGs, and I would be very worried if they started to curtail their liquidity. Another one would be one or more blockbuster credit events in the corporate space. CHK anyone?
So far so good, though, and I am sure a credit specialist will school me in the Third Avenue case being contained, but I have to admit that it stinks a bit! Then there is of course, as we have also discussed, the disconnect between equities(!) and HY/credit, which does suggest a whole lot of nothingness below if Spoos, FANG etc break down.
Not donning the tin-foil hat just yet ... but getting closer!
For example ... the sell-off in BEN US equity today. If these guys start to change the rules, how long before ETFs do so too?
ReplyYes, I think we are looking at a nice set-up for a flush down on Monday morning and then a retest of those lows ahead of the upcoming FOMC. The situation in high yield is really quite ugly and I think capitulation lows will be upon us shortly in that sector. Most likely M or Tu next week. The usual relationship between govies and high yield has manifested itself (welcome back, "flight to quality"), so those who don't understand the dynamics of fixed income markets and doubted our purchases of Treasuries can, you know, eat me. [Can we say that here, MM?]
ReplyI now believe that the stage is set for Dame Janet to re-enter the spotlight, only to drop her drawers and moon the markets by revealing that she is doing "The Full Carney" here. I don't believe that they will move this year. Mr Gundlach is correct. With no inflation in sight, with the bottom once again falling out of key commodities and emerging market FX as well as US high yield corporates, so often the canary in the risk exposure coal mine, why on Earth would you risk making it worse? Even if they were to announce a 25bp hike, the market will immediately shift its attention to La Paloma Blanca and what is likely to be the softest of her forward guidance. Go on, MM, rip that off for next Thursday's post headline, I dare you!!
Should this scenario play out there will be an ungodly short squeeze for about three weeks in emerging market FX debt and equity, US high yield, gold miners, energy and REITs. Treasuries and US equities harder to predict, but both may sell off if the dollar is dumped - so we will take profits in Treasuries next week and then stay away. Q1 '09 isn't a terrible analogue here. US equities really struggled while emerging markets, REITs and US high yield began a party that lasted for several years. The circumstances aren't the same, but there are bargains out there in exactly the same sectors.
"Why on earth would you risk making it worse"?
Reply...Lefty, haven't you reached the conclusion that a taper tantrum was automatic here? Don't you think Janet knows this? When does better come if you don't "normalize"? Would you like to opine a rough date if not this month?
...You see that IS the problem after 7 years....there is no there, there.....
We are coming to a point when liquidity mismatch between not-so-liquid underlyings (e.g. corp bonds) and supposedly-liquid derivatives (e.g. credit ETFs) will manifest itself in a very ugly way. Sell-side is not in position to absorb selling as they (usually very profitably) did pre-2008. It was bound to happen at some point.
ReplyPulling a Carney would have a greater negative impact then a raise-and-reassure imho. Absolute levels of rates down here don't matter all that much imho. Credit markets are either on or off at the issuer level.
ReplyCHK gets all the headlines but its across the board. With strips where they are it seems likely that there are going to be a whole bunch of technical defaults. In the fall there was the whole 'bank revolver redetermination' scare that ended with the banks mostly passing the buck, will the bondholders do the same? I sortof doubt it - EBITDA's are still fairly healthy - its the debt service thats the issue. Post-reorg the shale drillers will move WAY down the cost curve.
re T,
ReplyRegarding CHK and its peers, chapter 11 makes a lot of sense based on what you just said.
Possibly, B in T, but you remember we are often spot on about bonds. If we are correct about either : a) no hike or b) 25 bps + ultra-dovish guidance from La Paloma Blanca (go on, FT Alphaville, steal it, you know you want to, go on, you Shameless Bitches!), then the advice being touted here by MW will prove to be 180 degrees from correct and will be exactly WRONG:
ReplyHow to Prepare Bond Portfolio for a Rate Hike
The market is/was still full of punters who are short the belly and/or long bond, and they remain long the front end. I have talked to several of them, and they are convinced that they are right, even though they have been hemorrhaging money in US1-2y while we have been coining it at the long end. They just KNOW they are right!! The giveaway is that most of these punters are not the sharpest tools in the drawer or are not usually bond market participants [fixed income HF tourists].
Now if you haven't puked yet over my casting Dame Janet as La Paloma Blanca, here is something really puketastic for you. A horrible song from the 70s that you might not be able to get out of your mind on Wednesday afternoon. The video is really creepy, with those wide collars from 1975 and the Creep of All Creeps, Jimmy Savile himself, introducing the song on TOTP. Finally the video appears to feature, for some reason, not a white dove - but a vulture.
Paloma Blanca
If that wasn't bad enough, a falsetto version by Demis Roussos. [Yes, I am still feeling bad about the NBG delisting]. Apologies in advance. We wish we didn't remember this musical period. Truly awful.
https://www.youtube.com/watch?v=uaI4mXFMENs
Some punters may be singing falsetto next week if they are caught bending over the wrong way in front of Dame Janet.
Sorry. HTML challenged today. The links:
ReplyBarbell Strategies for a Rate Hike
Paloma Blanca, 1975
Demis Roussos
Rate hikes are over-rated as macro-economic tool, Bluce...
ReplyLB - I don't see a carney - not by a long shot - even under the assumption that yellen and friends would rather subject themselves to a habanero laced anal probe than preside over an equity collapse,the events of september would point to them hiking as a short term bullish catalyst (whatever the implications are in a few months) - so I expect them to hike and immediately set about fellating the market, which the latter will probably like.
ReplyAgree with capitulation lows soon in credit, with the caveat that its still probably not the long term bottom.
i covered last 1/3 on close better be a Santa rally so i can reload a monster short or else i eat my balls - that one time when you're wary of a squeeze and it does not happen
ReplyLet it be noted that Washedup has today up-dated the popular "Pump and Dump" motif and introduced the concept of "Hike and Fellate". Splendid.
ReplyYes, next week in credit, A Bottom but not The Bottom.
Stone Lion blocking redemptions.
Replyhttp://www.wsj.com/articles/stone-lion-capital-partners-suspends-redemptions-in-its-oldest-fund-1449870782
Market focus on Fed's decision = pinkest of flamingos. Will they or won't they - it's irrelevant at this point, fundamentals are back.
ReplyHike = policy error
No hike - would be viewed as lack of confidence in the recovery and not well received.
Yes, yes, ... and double yes ...
Reply"We are coming to a point when liquidity mismatch between not-so-liquid underlyings (e.g. corp bonds) and supposedly-liquid derivatives (e.g. credit ETFs) will manifest itself in a very ugly way. Sell-side is not in position to absorb selling as they (usually very profitably) did pre-2008. It was bound to happen at some point."
Probably the perfect synopsis of the risk we face here. For anyone not cued up on this, just google one of Matt King's liquidity pressers (Citi) ... all the relevant info is there. We have been debating this on this board of course for ages, and it is the main reason that i have been uber defensive in the past 12 months (while still of course trying to pick up the stray dime here and there ;)).
LB: agreed, good odds of a dollar correction on fed announcement whether they hike or do a Carney.
ReplyGold looking interesting and could be a tradable rally coming up, although we are unlikely to have seen the bottom.
Tuesday will be interesting to see whether the Fed data dependence is a direct feed of spoos level or not. Pass the popcorn !
http://www.streetinsider.com/Fed/Gundlach+says+never+just+one+cockroach+in+any+kind+of+credit+meltdown/11147805.html
ReplyGundlach, who has been warning that the U.S. Federal Reserve should not tighten monetary policy next week, said: "They're just hell-bent on raising rates. They talked that they would do it and they want to do it -- and yet nominal GDP is lower than it was in September of 2012. Yet they did QE3 in September 2012."
Gundlach said investors should note that the PCE deflator is currently lower than it was in September of 2012; junk bonds are massively weaker, as are emerging Markets and the CRB index.
"How is it that QE3 was necessary with all of those indicators substantially stronger than they are today and yet we are going to raise rates now 'because we promised'."
Also, Gundlach said the best investment trade at the moment is to sell the S&P 500 Index and buy closed-end credit funds "because closed-end credit funds are down massively and the S&P 500 was at its high." There's ample downside protection in beaten-up close-end credit funds, he said.
ReplyAnon 4:21, this is looking very similar to 1998. I would not touch credit funds until the redemptions scare, washout and first stage fed bailout before investing.
ReplyThe US stock market is over-valued on every measure and is likely to crash ~40%+ soon:
Replyhttp://www.businessinsider.com/stocks-2015-8
DON'T PANIC....
ReplyHilsenrath has just spoken to the Fed and informed us that the Fed may drop rates back to zero if the market drops too much. Who would've thunk it?