A small confession

Macro Man is still a bit bleary-eyed from a long weekend at a kids' footy tournament in Boston.  With two boys playing in five different venues in temperatures ranging from blazing 35C sunshine on Saturday to a rainy 15C for Monday's knockout games, he fully expects at least half of his household to come down with some sort of illness over the next few days.  Still, it was a good time despite the typically loutish behaviour on display from a depressingly high proportion of the parents...

It seems as it equities are also determined to have a good time no matter how "loutish" the Fed or other central banks are determined to be.  While Yellen didn't exactly sound the klaxon for an immediate rate hike on Friday, she did of course suggest that one is likely forthcoming before too long.  With Brexit fears still possibly hampering a June tightening, market expectations are now coalescing around July;  the August/July Fed funds spread has widened sharply in recent days.

Macro Man has found the market a little frustrating recently insofar as much of the macro focus has remained fixated on the Fed.   To be sure, there are other compelling stories as well- most notably the ongoing renaissance in the energy complex and speculation about its durability, as well as the event risk posed by Brexit- but it still feels as if the Fed is dominating much of the narrative.   To be sure, some of that is to be expected- after all, the long road to normalization was one of the primary stories behind the dollar bull market (and the various fall outs from that) over the past few years.

In another sense, however, you can focus on whatever you want to.   Looking at recent output, Macro Man does feel as if perhaps he's fallen into the trap of focusing a bit too much on the Fed at the expense of potentially interesting stories elsewhere.   Some of this is a time zone and resource constraint, and some of it is down to demands on Macro Man's own time- he's had a lot going on in real life that may have precluded doing the type of deep dive stuff that he likes to do.  While the next couple of months are shaping up to be very busy indeed on the home front, he does hope to rectify the issue and bring some more balance to the Macro Man universe by looking a bit further afield.

In the meantime, however...err..how 'bout them Spooz!
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The Black Hole
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May 31, 2016 at 7:23 AM ×

Do the Fed not realise how stupid they sound by raising Brexit as a reason to not hike?

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amplitudeinthehouse
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May 31, 2016 at 8:41 AM ×

Glad you enjoyed your weekend at the footy , Macro Man. The betting on when the next Fed hike will happen is intriguing . But if you were to do me one last favour to end this career trade it would be to help me source a betting outlet that will take on every house I own and put it on a bet that I've always directed my strategy on since the trade itself invited me too..which may seem remarkable by as simple as it may sound.

WHAT'S THE BETTING BEFORE THE ELECTION AFTER NEXT THAT YELLEN FINALLY FINDS A WAY TO INFLATE OVERSEAS BASED HEDGIES TOP LINE. It'll find way to get over there deflation obstacles and be walking hand in hand with the hedgies look at me and the economic wizards.

I'm used to waiting long periods for plunges to come off...but this one is ridiculous. Ed does talk.

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Rossco
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May 31, 2016 at 8:58 AM ×

A few months back, many of us were saying what a great sell those spooz were at 2100. Just sayin

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Celeriac1972
admin
May 31, 2016 at 9:14 AM ×

Rossco - I think short at 2100 remains a good call. We all have a chance to reload...

MM I'm looking forward to some more of your deep-dives. Hang in there!

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amplitudeinthehouse
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May 31, 2016 at 11:09 AM ×

Macro Man, I remember a couple years ago James Bullard gave a speech and he insinuated that he loves it when the global economic commentators bag the Fed. Little does James know that as a trader I'm easily pleased..broke and all. Something the predecessor chairman knew only to well. Tell me James Bullard , you loving it now!

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amplitudeinthehouse
admin
May 31, 2016 at 11:19 AM ×

I love you too , James Bullard!

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amplitudeinthehouse
admin
May 31, 2016 at 3:27 PM ×

Macro Man, while we're looking for trades , I'd like to call out to the trader on my timeline @psychotrader....yes you. You succeeded.You thought you could make a bigger mug of me than the coffee barista that is two teaspoons short of tablespoon of sugar. It set precedent any you gallop past it in a hand canter. Well done. You exposed the international form for this years 2017 Melbourne cup because there's nothing like a trier in a race of dromedaries to light up the clockers.

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Error404
admin
May 31, 2016 at 3:41 PM ×

Even without any 'deep-diving', MM just swimming across the surface of our tempestuous little pool still provides one of the best daily reads on the Web. Especially for those of us who occasionally forget our water-wings. All analysis - deep or not - is gratefully received.

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Leftback
admin
May 31, 2016 at 3:50 PM ×

Interesting observation for a Tuesday morning.... Spoos are up and so is the VIX. Not everyone is buying the idea of a breakout to new highs... Or wait, maybe they are buying calls for that big upside breakout we keep hearing about?

MM and most of us here now agree that a July hike is the consensus. Between now and then there are some interesting things that can happen. One set of things relate to this week's employment data, which will likely set the tone for the dollar for the next few weeks or so. A weakish number would likely set off a dollar correction and cement the Fed into a path to a July rather than June rate hike. At the same time this would likely trigger some flight to safety in JPY, which is usually equity negative. A strong number pulls the Fed forward to June and also brings a second [September] hike into play, all of which is dollar positive and likely commodity negative.

Mr Market may not wait around for ever waiting for liquidity to tighten slightly, and may soon anticipate even a July rate hike by unloading some short-dated Treasuries and Spoos well in advance of the event. As always, the timing and the trigger event for selling are anyone's guess. The preponderance of punters short JPY indicates one potential source of reflexivity. Another is the preponderance of punters long crude oil. Either of those trades can unwind painfully if given a surprise.

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Anonymous
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May 31, 2016 at 4:39 PM ×

From Bloomberg:

*Babson Said to Raise $2B for Private Loan Funds
*Apollo Said to Seek $3.5B to Scoop Up European Debt
*Direct Lending Seen as 'Brilliant' Option for Insurers

These headlines are just three of the myriads of announcements of lending being shifted away from banks to unregulated entities. There is where the next crisis will happen and it will be bigger and more surprising to "regulators" than the '08 meltdown. But timing is everything in this biz and considering money is still being raised by the billions (let alone having been lent) it will be a long while before these lenders hit the skids.

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Anonymous
admin
May 31, 2016 at 5:24 PM ×

China non-governmental debt has increased from $4 trillion in 2008 to $26 trillion today ... and the day isn't over :)

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Leftback
admin
May 31, 2016 at 5:47 PM ×

It almost seems too obvious that the next really BIG global meltdown will begin with a Chinese credit crunch and a full-blown Chinese banking crisis. But the charade could go on for another decade before it all crashes down. Chinese demographics are an eerie replay of the Japanese experience. How that all plays out against the backdrop of a bizarre form of centrally managed pseudo-capitalism is anyone's guess but mine is that a lot of little people in China will lose a lot of money and so will a bunch of sleepy foreign punters.

Back to the SuperSpoos show on our domestic screens! TV talking heads will have their Dow 18,000 hats ready for another episode of the Clown Show. Meanwhile, Risk and Price Discovery lurk in the shadows along with their muse, Illiquidity. The JPY we bought first thing today is already looking good here. Now that's become the ultimate in unpopular vehicles once again. January began with a nice gap open in the yen, wonder if we might see that again some time soon, like June or July? JPY is going from the lower left to the upper right... those gaps in SPY and IWM are still open, a bunch of them.

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abee crombie
admin
May 31, 2016 at 6:01 PM ×

Oil back at $50, Spoo's near 2100 ppl still worried about china, US growth etc uggh I dont want to play this game anymore

Although I would say I am more open to an upside break (grind more likely) than others seem to be

India jumped up a lot the past few days.. is that from the elections/budget there?

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Leftback
admin
May 31, 2016 at 8:12 PM ×

More than a few of us have been watching USDCNY in a corner of our screens, here is one observer's expression of concern:

http://www.acting-man.com/?p=45111

Abee, I am open to the chance of an upside break, but don't expect it here, and of course would prefer it not to happen!!

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