Monday morning bullet points

*  The latest Brexit poll shows a slight move towards Remain, as does the betting in the bookies.   The margin of movement in the poll, however (+3% for Remain) is sufficiently small as to be difficult to ascribe much if any significance towards it.   That being said, markets have opened Sunday with the kind of gap movement that you'd expect with an increase probability of Remain.   Here's an hourly cable chart 9disregard the bad print from last week:


* This came out last week, of course, but the St. Louis Fed's latest flip flop might plumb new depths.   A few weeks after flirting with a neo-Fisherian view of the world (implying low interest rates might put downward pressure on inflation), Bullard presented a new "regime-based forecasting model" that now thinks that the real rate on short term government debt should be -137 bps and that the policy rate should sit at 62 bps for the next several years (thus answering the question of the identity of the ultra-low dot plot.)  Whatever merit the new model may have (and the schematic, depicted below, does not inspire confidence), the constant changes of posture- well beyond what any evolution in the data might suggest- has entirely destroyed the market credibility of Mr.  Bullard.   He would do well to recall the aphorism that 'tis better to remain silent and be thought a fool than to speak and remove all doubt.

* So farewell then, Raghuram Rajan, who will be leaving office in September after getting stick from the government for doing the right thing.  While it's not always been smooth sailing in India, Rajan has helped steer the ship into considerably calmer waters than would otherwise have been the case.     Prior to Rajan assuming office, India was a fully paid-up member of the "Fragile Five".   Since he took office, the INR has more than held its own against the dollar, unlike its erstwhile compatriots.   Note to the Modi government:  Be careful what you wish for, because you just might get it.


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June 20, 2016 at 7:41 AM ×

Good times to take profit on long Eurostoxx vs Spx.... happy to keep some cheap put on Spx.

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Anonymous
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June 20, 2016 at 8:17 AM ×

Central banks pumping equity markets overnight and into the European session... oil being bought heavily Friday. The powers that be already know that Britain will not be allowed to exit. Risk on.

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henner
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June 20, 2016 at 8:17 AM ×

yeah, I did the same. sold half of my position in the DAX future and some barrels of oil... Surely we'll recover more once Brexit is off the table but given the binary outcome it seems wise to me to take some chips off the table.

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Anonymous
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June 20, 2016 at 8:29 AM ×

If Britain leaves EU, it will become a disaster like non-EU states Norway and Switzerland instead of EU states Portugal, Spain and Greece

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Skr
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June 20, 2016 at 10:08 AM ×

Anon 8:17
Thanks,but it could be likened to an under 12's match - No structure,just everyone chasing the ball. For the next few days anyhow?

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June 20, 2016 at 10:14 AM ×

Volatility bloodbath... as expected. It's always the same song.
In normal mkts govies are absolutely overpriced at least in relative terms..
nobody keeping a look to spanish election (and not pretty results also in Italy for the status quo..)

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Anonymous
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June 20, 2016 at 10:39 AM ×

She seemedvery pretty to me!

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Bruce in Tennessee
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June 20, 2016 at 12:15 PM ×

http://wolfstreet.com/2016/06/20/share-buyback-announcements-plunge-stocks-at-risk-financial-engineering/

Share-Buyback Announcements Plunge, Stocks Risk Getting Clocked


...Hmmm...if the Chinese government is now unloading US equities and we have fewer share repurchases.....Washed, maybe my desire for SDS is once again on the horizon!...


We'll see....

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Leftback
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June 20, 2016 at 12:36 PM ×

A good week to watch and sit in cash once again. The Hammock™ returns..... it is mid-June, after all.

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Anonymous
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June 20, 2016 at 12:51 PM ×

looks like an island reversal in european equity futures...this could push further o an in vote- a lot of position cutting in eu equities...has more to go do i reckon

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Anonymous
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June 20, 2016 at 2:15 PM ×

http://www.zerohedge.com/news/2016-06-20/martin-armstrong-assassination-conspiracies-theres-too-much-stake-allow-brexit

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Nothing to see here
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June 20, 2016 at 2:30 PM ×

$12.3 trillion of money printing
$10 trillion in negative-yielding bonds
654 rate cuts since Lehman
2% or less GDP growth

Clearly the problem is that rates are too high, and we don't have enough debt.

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CV
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June 20, 2016 at 2:35 PM ×

"The Hammock™ returns"

+1. This bounce is doing the world of good to me, but I have no intention chasing it. Could still be some twists and turns in this story.

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Anonymous
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June 20, 2016 at 2:46 PM ×

There will be no 'twists & turns', instead it's the same old story: risk event = Central Banks jointly intervene to buy risk assets. Shorts get wiped. When will you guys realize that markets are now all centrally planned? US equities will make new all time highs by the end of the week, Asian and Eu equities will also climb higher. Oil and risk ccys will get bought.

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Macro Man
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June 20, 2016 at 2:49 PM ×

Please just piss off with the conspiracy theories.

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johno
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June 20, 2016 at 3:07 PM ×

Bruce, JPM's Flows and Liquidity piece this weekend did some analysis on executed buybacks versus announcements. Their #s also show a decline in announcements and steady executed buybacks (as a % of the market). They also looked at how M&A, LBOs, secondaries, and IPOs affect the net equity withdrawal picture and it looks like there's a slight upward trend the past two years. It's still off the peaks of '11 and '07, however.
It would seem logical that if buyback authorizations fall, eventually executed buybacks would fall off too. Just wanted to remind people that there are other important corporate flows in the market, like M&A.

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Leftback
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June 20, 2016 at 3:12 PM ×

Today is fairly simple. A shift in the Brexit polls to "remain" + op ex week = monster relief rally + vol selling frenzy. Good luck to anyone playing on the long side this week, I am convinced you will make money, and also that Brexit isn't happening.

Next week is another market, however, and another matter entirely. Remember it has been pointed out several times that the Brexit vote was a major reason not to hike in June, but once that is off the table, a July hike may therefore be back on.

Anyone shorting early this week is going to get a steamroller up the arse, but once we see the VIX crushed down to 12 again, we will see a change in the risk/reward landscape.

It's a great week to look at charts and think about entry points. In FX especially. USDJPY remains fascinating as a risk proxy, and note it is doing nothing much today. The terrible twins AUDUSD and CADUSD look like becoming overbought again.

The view from the Hammock in downtown NYC is lovely this time of year. Tomorrow is the Solstice. Best of all, there's an England game on telly later. We're going to leave Mr Market to abuse Mr Shorty and check out for a day or two.

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abee crombie
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June 20, 2016 at 4:23 PM ×

As a believer in India I am sad to see Rajan go. Sadly he will be like most reformers, lost in history as the benefits of his tough inflation stance probably accrue to the next administration.

Thanks Johno, have to try and see if I can get the report. Buyback are certainly a big supporting factor in this market. Its no coincidence that as we enter Q2 earnings season (and the buyback window closes) that the markets often lose thier footing only to regain during/after earnings. Same old story. Shorts and longs know it.

I still have a feeling S&P makes a new high, only to suck in a lot of ppl before going lower later in the year, but the LT chart of many markets have already started to roll over so I am open to the possibility of it not happening. Transports stuck in a rut.

Russell reblancing at the end of the week and Brexit means trading at the end of the week will be massive. I wouldnt get too caught up in todays opening move

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Corey
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June 20, 2016 at 4:46 PM ×

Agree w Left except for "Brexit vote was a major reason not to hike in June, but once that is off the table, a July hike may therefore be back on."

C'mon we all know that July is about as likely as a Leister repeat. Then again you called J.Yells last pivot, so we shall see.

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June 20, 2016 at 4:53 PM ×

Kuroda spoke this morning:
Negative rates having positive economic impact
Drag on bank earnings limited
BOJ won’t hesitate to act if needed
KURODA: UNEASINESS ON NEG. RATES AMONG JAPAN BANKS HAS FALLEN
IMF LIPTON: NEGATIVE RATES ARE WELCOME POLICY ADDITION IN JAPAN

don't like to be boring BUT... do i have different prices on my Bloomberg screens?? are they joking?
however some italian bank stocks are not joining the party... keep note!

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abee crombie
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June 20, 2016 at 5:22 PM ×

I missed this from last week, I'm sure you guys will love

"The results of both the FOMC and BoJ meetings in the last 48 hours should leave no doubt in anyone's mind that there exists a coordinated effort by the world's major central banks to fight off the financial market instabilities which would surely arise from significant USD strength. In the case of the Fed, the movement of the longer-run dots was the most telling sign of such a commitment. The end of year 2018 fed funds rate forecast in the SEP was slashed by 60bps, and the long run equilibrium fed funds rate forecast was cut by 30bps. It is actually amazing to think that from the start of the dot plot releases in 2012, we have seen the median equilibrium funds rate forecast fall from 4.25% to 3%, with a significant trend lower starting only in the last 12-18 months. This shift has huge implications for the valuation of long dated cash flows such as those associated with equities and real estate, as well as the foreign exchange value of the USD. Reassured by the lower long term dots, detente believers could also take comfort from Janet's positive response to the press question on helicopter money. In the face of unwanted USD strength Janet would absolutely consider unleashing the dilutive choppers. More generally though, I do suspect that the concept of a helicopter money driven debt "Jubilee", which we first wrote about back on May 6th, will become widely discussed at all central banks as unconventional monetary policies evolve during the next business-cycle downturn. And as you may have surmised, I am quite excited about the prospect of helicopter money. I have recently been working on a follow up note to the one from May 6th which I hope to send out in the coming weeks. I am also thinking about adding some helicopter propellers to the top of our I ♥️ QE hats!!"

then goes on to talk about if Brexit occurs it could be a big risk off dollar trade and everything is out the window. But I thought MM would like the first part.

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Corey
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June 20, 2016 at 6:25 PM ×

Aren't we all be a little hard on the Fed - since GFC my own target for where ff would max out this cycle has continue to come down. Right after crisis I figured we'd be lucky to see 3%, as time passed and the reality of new normal set in I lowered my expectations to 2% then 1.5%. Now I'd say .75% seems reasonable. It shouldn't surprise me to believe that even that could come down. Of course I'd agree they should be higher, but reality has always been an L shaped growth trajectory w increasing dovish meddling by a fed that's consistently overestimated gdp would lead to such outcomes. Scenarios exist that could change those assumptions, but for now at least they are nothing more than "what if" thought excercises.

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Anonymous
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June 20, 2016 at 7:37 PM ×

Prime Ministers listen too much to voters, complains EU's Juncker...

http://www.telegraph.co.uk/news/2016/05/05/prime-ministers-listen-too-much-to-voters-complains-eus-juncker/

Vote Bremain to keep the fascist EU in power a while longer.

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hipper
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June 20, 2016 at 8:10 PM ×

Glad to get the Brexit festival out of the way. I think the outcome is similar to Grexit when Tsipras pulled the rag beneath that one. Fed viewing itself as a world bank can also get back to what they were doing before. Interesting to see to what extent the crazy gold, bitcoin and govvie rally's can be attributed to this and how much they reverse. Despite all the noise SPX, EEM and most of the commodities are higher and DAX only a bit under YTD.

Meanwhile shock and awe all the stimulatory effects of NIRPageddon which are finally beginning to materialize on a large scale:

http://davidstockmanscontracorner.com/the-pension-crisis-begins-407k-workers-to-get-60-cut-but-still-not-enough/

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henner
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June 20, 2016 at 8:31 PM ×

great note abee. who's the author? quite like that guy.

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washedup
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June 20, 2016 at 9:10 PM ×

@abee imagine thats our friend from the coke snorting i-bank. I think there is a difference between predicting what CB's wish to see happen and assuming their wish will be granted - thats where he may be losing the plot.

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Skr
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June 20, 2016 at 9:26 PM ×

Easy money today for the taking, but I wonder will all the self-proclaimed trading God's last the week...yawn!

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