Thursday bullet points

There's a lot going on today.   Here are a few thoughts on some of the salient bits:

* The UK court ruling.   It says something about the current state of the UK that the ruling that Parliament will be able to vote on a constitution-altering change is seen as good news by sterling.  One might have thought that that should be de rigeur.  Anyhow, the court's decision is not final, with the Government already announcing its intention to appeal to the Supreme Court.  There are a number of legal and constitutional complexities that ensue, most of which suggest that the PM's Q1 deadline for triggering Article 50 is highly unlikely.   A useful summary of the state of play can be found here.

When all is said and done, it does seem likely that Parliament will go ahead and vote for Brexit, obviously perhaps subject to some amendments to the Government's preferences.   There is actually an interesting political philosophy issue at play here, because a healthy number of Remain-supporting MPs represent Leave-supporting constituencies.   Are these MPs representatives, there to vote along the the preferences of the people they represent, or are they trustees, elected to do as they see fit because the populace does have the time or expertise to opine on a wide range of issues?   Even if the relationship is ordinarily the latter, it seems likely that when it comes to Brexit the former will be in play.

Interestingly, midcap equities loved the court ruling, though that appears to be more of a knee jerk reaction (given that the MCX swooned on the initial vote.)  Uncertainty seems likely to be extended, if anything, as a result of the decision.


* The BOE rows back.    We all knew that Mark Carney is the height of central banking cool, but Macro Man didn't realize until today that he is the living embodiment of the Fonz.



The inflation and growth profiles were raised sufficiently to merit the elimination of any easing bias to policy, along with the inclusion of a salutary warning that there are limits to the Old Lady's toleration for higher inflation.  When pressed to explain the volatility of their forecasts, Messrs. Carney and Broadbent sounded suspiciously like Arthur Fonzarelli in the clip above.   Meanwhile, sterling seems a reasonable candidate for a short covering rally from here, perhaps up to 1.28 or so.

*Oil.   Q:  What's even more volatile than BOE forecasts?  A: Oil inventories.   A few weeks after oil stocks registered their second largest decline on record, they delivered the biggest build on record yesterday.  You don't need Macro Man to tell you what this meant and likely means moving forwards; it certainly feels as if the narrative tide is tilting back towards favouring a look at the downside.


 *  It's nice to see a hedge work.    It wasn't the sexiest recommendation ever, but it's still nice to see the VIX butterfly mentioned a couple of weeks ago work exactly as intended, for exactly the reasons intended.


  * Payrolls.  Payrolls tomorrow, and while yesterday's Fed statement left the door firmly ajar to do nothing, there was enough shift in the language to suggest we're on course for a rate hike unless something goes badly awry.  Macro Man's model forecasts a rise of 162k, which is clearly insufficient to qualify for "badly awry".

Indeed, per Monday's post it seems likely that politics will trump economics (pardon the pun) when it comes to determining the outcome of December's Fed meeting.   While a risk asset sell-off courtesy of a Trump victory is the most obvious risk, it's hard to see the market welcoming an indictment of a freshly-elected Clinton, either.  Frankly, this election season has been so bizarre that it's kind of hard to rule anything out at this point...which is why the Fed is keeping their options open.
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abee crombie
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November 3, 2016 at 3:31 PM ×

Price action in headline Spoos and big name tech is looking awful. I'm sure there will be a bounce heading into Nov 8th, but have to watch the reaction afterwards. 1 day of buying or back down lower.

The market is killing growth names the past several months. The only reason we arent lower is bc cyclicals like financials and oil are bouncing. But they are not the strong link (though thier EPS expectations are a big reason why next years EPS for most indexes are still moving higher) .. I'm still feeling really bearish about this market, though might pare back some shorts soon

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Leftback
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November 3, 2016 at 5:53 PM ×

The most likely event in the near future is a snap-back knee-jerk relief rally if HRC wins and Congress stays under GOP control. [LB is not expressing any preference here]. That will see the vol sellers and dip buyers return with a vengeance but we doubt if it will do last long, maybe from election day into expiration, and perhaps goose equities by 3-5% and crush VIX back below 15.

In any case (unless the BLS tomorrow serves up a complete turd) we are probably looking at people lifting hedges and buying US small cap equities, energy and dollars again, and selling safe havens such as fixed income, JPY and precious metals.

Beyond expiration, we remain bearish equity markets, crude oil and America in general. It's hard to see either of these damaged candidates producing an administration being terribly functional, and that's relative to Obama, which is a sad commentary in itself. The usual bank-nominated individuals will show up for work and begin a new cycle of corruption.

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checkmate
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November 3, 2016 at 7:05 PM ×

Vix as got some way to go to get to it's historic range ceiling at the 30 mark so LB's hammock looks pretty good if you're not already short.

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Anonymous
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November 3, 2016 at 7:54 PM ×

http://www.zerohedge.com/news/2016-11-03/crispen-odey-endgame-arrives-after-assets-plunge-60

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Leftback
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November 3, 2016 at 8:39 PM ×

@checkmate: In the era of Dame Janet's Central Bank Put, we hardly ever reach Vix 30, so anything above 25 will probably get the vol sellers and dip buyers salivating. For once, LB may be very tempted to join them, but yes it's the Hammock for now.

We are starting to see protection get quite expensive here, as the crescendo of fear is growing [along with a steady increase in goldbuggery], but let's wait until there are a few panic stories in the more clueless sections of the mainstream media. LB thinks we are 24-96 hours away from a short-term bottom in equities, although we may see Vix peak ahead of that, perhaps on Friday or maybe on Monday morning (b/c of the way options markets work).

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Nico G
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November 3, 2016 at 8:40 PM ×

am taking a break a 2082 - a clean 80 points that have taken ages

ready to reload on 2106 retest and higher if ever

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Macro Man
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November 3, 2016 at 8:40 PM ×

@ Anon 7.54, yes his performance has really been- wait for it- Odey-ous, hasn't it?

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Anonymous
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November 3, 2016 at 10:07 PM ×

http://ibankcoin.com/flyblog/2016/11/03/wikileaks-ties-hillary-to-known-child-kidnapper-laura-silsby/

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checkmate
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November 4, 2016 at 5:58 AM ×

There's an ugly rumour that Hilary and Mary Berry may have been up to no good in the kitchen. Was that really flour on their hands or? Catch me later with more shockers om whose got the worst 'soggy' bottom' on Capitol Hill.

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Anonymous
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November 4, 2016 at 6:21 AM ×

yea that pedo crap is so out there that even the donald cult on reddit is rejecting it.

clinton has plenty of shit on pay to play/corruption to sink her without going cuckoo

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Celeriac1972
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November 4, 2016 at 12:49 PM ×

My spidey-senses are telling me that 12yo is back in the building and looking forward to HRC interfering with his p&l...

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Leftback
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November 4, 2016 at 1:15 PM ×

Good call, Nico, on the bleed down into the election. Didn't see that coming b/c, well, who expected another appearance from Anthony Weiner? [LB is studiously avoiding a raft of weiner jokes here].

One can only surmise that when he got caught the last time he went looking for some stuff he could use to cut a deal with the Feds and try to keep himself out of places where very bad things happen to former Congressmen - who happen to be pervs. Honestly if someone had written a script like this for The West Wing, it would have been thrown out as ridiculous.

CLZ6 still bleeding lower. LB could have owned half of Manhattan by now... but, still beating Crispin Odey handily, not to mention most of the HF industry, and the Passive Investor, as we are also ahead of the mufu benchmarks of SPY and AGG (having lagged painfully for most of the year).

Still waiting for entry prior to what seem like inevitable bounces in USD, SPY, IWM, CLZ6; sell-offs in JPY, GDX, SLV, and TLT. Silver short seems especially enticing. Gap to 17 and a reversal already in place. Vol selling also beyond tempting now.

Technical considerations alone seem to dictate a bounce, as for the politics, how could it get worse? I mean, unless there is a dead heat or Weiner himself became POTUS, we seem to have already plumbed the depths of the US political psyche.

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Anonymous
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November 5, 2016 at 1:51 AM ×

"yea that pedo crap is so out there that even the donald cult on reddit is rejecting it."

I wouldn't be too sure about that.

http://www.breitbart.com/radio/2016/11/04/erik-prince-nypd-ready-make-arrests-weiner-case/


So who would you rather be (just for the purpose of winning) at this point - Clintion, ahead and trying to hang on, or Trump, behind with all of the momentum?

Real Clear Politics has moved NH and ME2 to Trump, which would give him 270 had they not moved Florida back to Clinton right before that. Actually, while Clinton needs 270, Trump only needs 269 - or less, as long as Clinton doesn't reach 270, because even if the Democrats take over the House, they are not going to control anywhere near the number of the House delegations that the Repubilicans will.

Leftback, I can't see any bump in equities (and drop in precious metals) until at least the election result is known (if Clinton wins), and probably for a few days beyond that if Trump wins, but yes, there are plenty of things that are stretched (and this is seasonally the best time of the year for bonds), and some unwinding will likely occur soon.

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Anonymous
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November 5, 2016 at 7:36 AM ×

I keep hearing more and more about left-wingers involved in pedophilia, and other heinous crimes. Frankly it's so offensive that I don't want to believe it, and yet I can't help thinking there's no smoke without fire.

Here are some things we do know:
- MSM is exhibiting strong bias in these elections (depending on your preferred candidate you will either like or loathe this)
- The Democrats have been found lying about many key issues and are facing FBI investigation

What else don't we know?

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Anonymous
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November 5, 2016 at 7:47 AM ×

http://www.politicalears.com/hit-fan-anonymous-remember-remember-5th-november/

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