Everything wrong with the Eurozone summarized in one chart

Self-appointed financial moral guardian Germany continues to see its trade surplus burgeon, even as import growth (not pictured, obviously) drops into negative territory.  Das ist nicht gut...
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checkmate
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May 11, 2016 at 8:46 AM ×

I'd guess if Hitler had any insight he'd be thinking about now "why didn't I think of that".

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Amplitudeisofftothebettingshop
admin
May 11, 2016 at 8:57 AM ×

Piss #ff, Macro Man. Are you writing essay's these days.

Compare then Contrast
Compare then contrast

We know now who it is that takes risks , and those that shit talk.

End of blogging career. chow.

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Hotairmail
admin
May 11, 2016 at 9:39 AM ×

Is someone pissed in another time zone?

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Polemic
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May 11, 2016 at 9:44 AM ×

Isn't that the geat thing with time zones? There's always somewhere in the world where it's pub kicking out time.


Greece and germany really should merge their balance sheets. Would solve all their problems in one go. I wonder if thats the EU project end game. No regional reporting. Bit like Bradford being Greece and Chelsea being Germany. No one screams about surpluses/deficits between those two.

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Polemic
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May 11, 2016 at 9:46 AM ×

And I see we can add the first comment to the the proof of Godwin's Law, which i thought David Cameron had proven early this week.

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checkmate
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May 11, 2016 at 10:14 AM ×

I'd have tried harder for originality, but I didn't want to stand out from the crowd.

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jbtfd
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May 11, 2016 at 10:31 AM ×

Macro Man said...
I ask again...where are the concrete articulations of definable benefits that go deeper than Trumpian rants against damned foreigners. (As an aside, if the US is any example, the idea that not being in the EU is some sort of failsafe against bureaucracy and over-regulation is laughable.)


Ok, let's answer the above in reverse order. In my view, all the problems of US federalism demonstrate just why Britain should leave the EU, not stay in it. As for the benefits of staying in - if the main benefit is trade, we can have free trade agreements without full federalism (the US has NAFTA, Scandinavian countries trade with the EU whilst staying out of it etc). To keep my point brief, Jim Rogers (the investor) summed it up nicely in one of his books, saying, "If there has been one lesson from the 20th century, it is that statism doesn't work". I agree with him, and for that reason I'm voting out. The UK Telegraph also sums up a similar view here:
http://www.telegraph.co.uk/news/2016/05/10/i-think-were-having-the-wool-pulled-over-our-eyes-about-the-eu/


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Polemic
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May 11, 2016 at 10:38 AM ×

Wonder if there is Brexit in/out bias along market jbtfd/jstfr lines, with risk sellers prefering in and risk preferers wanting out. Intuitively that makes sense. But IF it were true then if we drilled down and asked the market risk sellers why they were selling risk and they cited Europe, then there is the twist. BUT .. it's all sumise and wondering and only raised as it's the sort of thing my mind wanders off to think about in the great behavioural universe.

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Anonymous
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May 11, 2016 at 11:37 AM ×

@POl on your 11th/12th trade. Have you looked at the weekly timing of opex? Have found in the past, the market tends to bid a the start of the third week, into the third Friday of the month. 11/12th probably falls on a few of those weeks. I think Januaary was the only time in the last 10/12 months equities didn't bid into it at the start of the week.

You're right on the risk sellers wanting Brexit. At least from my point of view. I'm from an EU nation but I think the model is broken. I really don't like the way things are run, aside from the free travel and ease of use of currency when on holiday/business. However, the damage the currency and artificially cheap rates has actually done to the PIGS etc is comprehensive. I'm talking about what lead into the events of 2007/08 here, not the fallout. Then, you look at how the EU has bent over for Turkey....

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Polemic
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May 11, 2016 at 12:19 PM ×

Anon .. thanks .. maybe more of a comment for the post where I mentioned the 11th 12th dates than here.

can someone give me a link to these opex dates?

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Anonymous
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May 11, 2016 at 12:42 PM ×

Don't have anything to hand but it is the third Friday of every month, with the big ones being the quarterly witching roll of future, options etc.

@northmantrader regularly puts up charts on it hostorically. Might be worth checking his blog

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rp
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May 11, 2016 at 1:45 PM ×

Glad to see Italy swiching sides. Some looks just don't go out of fashion.


...sorry that is very little-englander isn't it.

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Anonymous
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May 11, 2016 at 2:45 PM ×

well about Brexit, i think common people bias in continental Europe prefer exit. People are feed up with GB special status. That does not matter though.

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checkmate
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May 11, 2016 at 4:12 PM ×

UK manufacturing ...toilet. . So much for the effect of QE easy money.

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johno
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May 11, 2016 at 4:29 PM ×

jbtfd -- re Brexit, I'm not so sure about your assertion that "we can have free trade agreements without full federalism (the US has NAFTA, Scandinavian countries trade with the EU whilst staying out of it etc)." Dug the below out of my notes, by Kaletsky on Project Syndicate 2/20/16:

"Among the conditions accepted by Norway and Switzerland that the EU would surely regard as non-negotiable are four that completely negate the political objectives of Brexit. Norway and Switzerland must abide by all EU single market standards and regulations, without any say in their formulation. They agree to translate all relevant EU laws into their domestic legislation without consulting domestic voters. They contribute substantially to the EU budget. And they must accept unlimited EU immigration, resulting in a higher share of EU immigrants in the Swiss and Norwegian populations than in the UK. If Britain rejected these encroachments on national sovereignty, its service industries would be locked out of the single market."

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Anonymous
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May 11, 2016 at 4:34 PM ×

S&P500: the weekly 50MA has crossed over the weekly 100MA, something that has not happened but twice in 25+ years. Harbinger?

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Polemic
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May 11, 2016 at 4:38 PM ×

In the absence of Nico, am I going to have to take his place? Or will someone else put their hand up?
I keep thinking that today could morph into an 'omg, everythig s fallen over really hard without a new catalyst' type of day.

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Macro Man
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May 11, 2016 at 4:44 PM ×

Pol, you seriously need to stop staring at screens. Spooz and Stoxx down less than a %, oil copper gold higher on the day. Anyone who is panicking at all over price action like this on a random Wednesday is either a moron or cannot distinguish noise from signal.

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Leftback
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May 11, 2016 at 4:57 PM ×

Agree, MM. Even those of a bearish inclination can't get excited about days like this, catalyst or no catalyst. We bought IWM puts into the close yesterday, and sold them before 10am.

Using today as an opportunity to add to long USD and short CAD and EUR, among other things. It's hard to know why the long bond is bid today, except that it's just noise, or as MM would say - it means a few people are buying 'em.

We all know where and how this is going to end, the big question is WHEN? June, July, September? That might be the consensus point of view - or perhaps quite suddenly, on some US data point that shocks the Fed funds rate market into life.... ?

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Anonymous
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May 11, 2016 at 5:02 PM ×

Spain sells E3B 50-yr bond. Yields 3.49%. Orders >E10B.

3.5% for BBB+ rated 50yr bond that falls of face of earth if EU collapses .

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Leftback
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May 11, 2016 at 5:20 PM ×

EURUSD is more likely to collapse than the EU. It's the only way this holds together. Brussels and Tokyo want a strong USD, so they don't have to take additional measures. Dame Janet realizes she needs to give Draghi and Kuroda a Happy Ending now.

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johno
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May 11, 2016 at 5:43 PM ×

An interesting observation from a UBS note dated 5/8/16: "In the past, the Fed has reacted hawkishly following equity rallies. We find that the most significant driver of changes in the Fed dots from one meeting to the next is changes in equity prices." They looked at the correlation with intermeeting changes in Fed median dot for end-2016 (so not sure there's enough data there to make a strong statistical inference, but ..). Correlation with S&P was 0.53, with ISM mfg 0.37, with breakevens 0.20, with UER declines 0.14, and with payroll growth -0.25. Maybe we get that hike this summer ...

Same note observes EURSEK has highest correlation with S&P of any G-10 cross. Anyone have a view why that is?

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AB
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May 11, 2016 at 6:00 PM ×

What am I missing?

I fail to understand how a country running a deficit lacks bargaining leverage in trade negotiations. Why can't the U.K. dictate terms? Why isn't Europe thinking "a big net customer is about to be able to renegotiate the deal"? Why doesn't the U.S. have Asia over a barrel in TPP?

Don't get me started on who has leverage over who due to China's holdings of U.S. Treasuries (it ain't the Chinese).

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johno
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May 11, 2016 at 6:03 PM ×

Taking a stab at answering my own question on EURSEK ... it's widely thought SEK is fundamentally cheap ... if I were a Swedish investor, I'd be running a high FX hedge. So say I own some foreign stocks .. I'd short foreign FX against SEK. If stocks fell, I'd adjust my hedge by buying back some of the short. It's curious that the correlation with the S&P is much stronger for EURSEK (-0.78) than for USDSEK (-0.21). Note, these correlations are based on last 6 months, weekly returns.

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AB
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May 11, 2016 at 6:03 PM ×

MM your chart shows what is wrong with the world economy. Europe has swung to a big surplus which is being borne by oil/commodity exporters currently. If oil rises and commodity exports adjust, then the burden of Europe's surplus will fall on the economies large enough to bear it: U.S., China, Japan.

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Anonymous
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May 11, 2016 at 6:59 PM ×

@AB,

Regarding the negotiation on trade, here is the thing: the US has little leverage because the imports provide great benefits for corporations and improve their profit margins and total revenue, which in turn is good for CEOs salaries and pension funds' portfolio returns. It all comes down to who have the upper hand and more political power: the losing group of the international trade, or the winners.

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Anonymous
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May 11, 2016 at 7:10 PM ×

“In his classic 1870’s book on banking, “Lombard Street,” Walter Bagehot wrote: “Every banker knows that if he has to prove he is worthy of credit, in fact his credit is gone.”

Trump and others are now saying it’s too late to prove it, the credit is in fact gone, and the creditors of the US must now recognize this fact, and write off much of the debt they hold.”

https://www.billcara.com/my-current-thinking-bill-caras-view-may-9-2016/

There is a change coming and it will effect all of us especially our trading decisions.

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AB
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May 11, 2016 at 7:14 PM ×

Good point Anon 6:59

The popularity of certain candidates is perfectly logic in light of your comment.

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Leftback
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May 11, 2016 at 7:22 PM ×

Opinions differ today as to whether JPY has resumed its inexorable march higher or whether this is just a corrective f'in dip to be bought in the USD. What is unusual today is to see the extraordinarily strong demand for both of those traditional opponents in terms of inflation expectations: the 10 year and WTI. Maybe this is again just a reflection of all of the excess liquidity slopping around in search of yield and/or appreciation and trying to find a home.

Will the Fed finally take responsibility and do the heavy lifting on its own? Or will it wait, as we suspect it will, until one day an alarmingly strong US data point stings Mr Market into action and wakes up all the lazy sunbathers? Will the Fed heads then pile on with their own unique brand of "forward guidance"? In any case, the short history of the Yellen Fed suggests that by the time Dame Janet finally delivers, everyone and their uncle will know exactly what is coming (e.g. December), so whether the hike is to be in June, July or September, the market will surely have priced the next move in weeks before the event. Whether market participants believe in the possibility of a June hike does not in any way preclude a June (or even May) swoon in anticipation of a potential July hike.

Watch the retail sales number and the PPI/CPI combination in the next two weeks, as these might just give the Fed enough rope with which to hang the most enthusiastic of dollar shorts and reflationists. It is clear that they are no longer watching the employment data but instead are fixated on inflation measures at this time. Of course for Main Street, "real" inflation [in rents, health care and education] continues to soar, and the Fed is not unaware of the importance of this in an election year.

Once the jawboning begins (Rising Bullard, Dudley and Fischer) and the leaks start coming via the WSJ, the die will be cast. Whether it is a July or a June hike, Mr Market will surely be ahead of the game. Even if Bucky simply floats back up to the top of the accepted DX trading range (94-100), there will be some very severe dislocations in the commodity universe, where prices have far outstripped any evidence of a rebound in demand, and in China, where a huge credit bubble awaits pricking.

Should this scenario play out, we see the CAD as the most vulnerable of all currencies, especially in view of Canada's twin dependence on oil and hot money from China to keep the housing bubble inflated. There is likely to be an equal opportunity slaughter of the leveraged, however, and in the event of a rapid unwinding it may be hard to find safe assets anywhere for a while, other than the dollar itself. July and September calls remain attractively priced.

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Macro Man
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May 11, 2016 at 7:45 PM ×

@AB What you are missing is services, particularly financial services, which represent a substantial (though not complete) offset to the UK goods deficit. The UK is kidding itself if they think they will have any leverage on that front.

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Cityhunter
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May 11, 2016 at 8:08 PM ×

@LB, I would put China risk second to Fed's hike hence AUD is more vulnerable than CAD. In fact, Aud has turned ahead of CAD

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Leftback
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May 11, 2016 at 9:50 PM ×

@Cityhunter: We agree on AUD, but a big part of that move has already occurred, whereas the party is just getting started in CAD. Another leg down in AUD seems assured, though.

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Tim Schulace
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May 12, 2016 at 2:32 AM ×

LB,

Copper is telling you all you need to know about bond yields. Copper doesn't care about the FED and its silly 25 bps here or there. It. Is telling you that GDP growth globally is headed lower and you best be ready for the deflationary wave that washes over everything. The widow-maker trade is not confined to Japanese fixed income.

AUD and CAD move lower because the interest rate differential is going to collapse and not from higher U.S. rates. Look at Aussie 10's over the last 10 days and tell me yields are gonna move higher.

Hope I'm not coming across as critical. I enjoy your perspective. The comments are part of the reason I like this site as much as I do.

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Anonymous
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May 12, 2016 at 4:43 AM ×

Oh my, .... they were the last AAA debt trading at higher yields than UST

"BTIM warns Reserve Bank of Australia may adopt negative interest rates on weak inflation."

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St James
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May 12, 2016 at 7:52 AM ×

@AB,@MM. I would also add that the UK's goods deficit is dominated by Germany and Spain. Negotiations would need to be agreed by all EZ states some of whom trade v little with the UK and may have local agendas that can easily stall/derail the process. Spain is an interesting example as it has the Catalan/Basque separatist agenda which it doesn't want to encourage through an easy exit process. Baroness Ashton said at a recent event that we should not dismiss that states could be deliberately vindictive. OK a EU insider and sure a Bremainer but anyone remember their history - how de Gaulle kept us out of the EU in the 60s despite British please to an ally (and a general at that)

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