A public service announcement from MM

Hi, it's Macro Man here.  It was good to see a strong first week from TMM2, with a couple of familiar faces...err....names and a couple of new ones as well.  Look out for a few new authors in the coming days/weeks as well; something tells Macro Man that there will be plenty to write about.

In that vein, he is settling in nicely at his new literary digs.  Indeed, the biggest struggle has been to settle into the requisite sleep pattern to get both sufficient rest and the 6.10 to Grand Central.  A lingering cold is evidence that he hasn't quite nailed it yet.

Perspicacious readers have, he's noticed, identified a bit of his output in the comments section, and a number of others have inquired offline how to get his stuff via the terminal.  If you are interested in receiving his commentary via the Bloomberg terminal, please hit him up at his contact address and he'll tell you how to do so.

He's also pleased to say that he will be able to make some of the commentary available to non-Bloomberg subscribers who have been regular commenters or correspondents over the years.  So if you have and are interested in receiving his columns and commentary, reach out and he'll add you to the list.   Please do so even if you've contacted him over the last few weeks, because he has too many emails in his file to go back and figure out which are from non-terminal users.

Enjoy the forthcoming efforts from TMM2 and best of luck with 2017!

MM
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checkmate
admin
January 9, 2017 at 10:50 AM ×

Ok, this the first real trading week of the year which is why I banked my equity santa trades end of last week ,because to me this all looks like a relatively thin seasonal market that's run a bit too far in front of economics and with a blithe disrespect for the political backdrop of 2017. In that respect Europe looms large ,but let's not forget Trump and China. To quote Trump trade should be considered as economic warfare and at this juncture his appointment list appears to support the idea that the old relationships for trade and China are not going to survive. I think last year we touched on winners and losers in a new environment so no need to rehash.
I've a sense that this year the portfolio will be far more heavily cash and trading positions will continue to outstrip any attempts to buy and hold. I'm still trying to workout my thoughts for the dollar and until I do it's going to be hard to engage meaningfully,because I think currency volatility is driving so much at the moment.

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Sam H. Fawaz
admin
January 9, 2017 at 12:39 PM ×

How do we contact you to get the comments that you publish if we don't have a Bloomberg terminal. I'd like to get your comments that you're able to share. Don't want to leave my e-mail here. Thanks!

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Anonymous
admin
January 9, 2017 at 1:36 PM ×

Click the "contact" link at the top of the page

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johno
admin
January 9, 2017 at 3:15 PM ×

Agree with CV. Last week/now feels like a good time to cash out of long equities trades.

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12yo HFM
admin
January 9, 2017 at 3:20 PM ×

For my part, I will be shocked if the SP500 doesn't hit 2500 this year. #contrarian

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Anonymous
admin
January 9, 2017 at 3:32 PM ×

I think 12yo HFM is actually 10yo HFM, who has _the_ insider connection to the white house...

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Anonymous
admin
January 9, 2017 at 3:54 PM ×

12yo HFM ... any thoughts on how low the SP500 will hit this year? And when?

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abee crombie
admin
January 9, 2017 at 4:07 PM ×

12yo, I am waiting for you to make an official post. After being annoyed at first, I am enjoying the humor. Same goes for some of the other regular commentators. If everyone did a piece once a month there would be more than enough content.. just a thought

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IPA
admin
January 9, 2017 at 4:51 PM ×

MM,

You may have a flu, there is an influenza outbreak in the city. Wind tunnel effect in midtown is a bitch, long winter ahead. Honey and lemon should be a big help.

Going with the theme... Picking up some nat gas here, 20% off sales are my specialty.

Get well soon!!

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johno
admin
January 9, 2017 at 6:42 PM ×

Thought GS piece on the potential for rotation to equities was very interesting.

"Debt accounts for 19% of household financial assets, close to the lowest level over the last 30 years. Pension fund allocation to debt is also close to the lowest level of the past 30 years, with Defined Benefit plans at 20% and Defined Contribution plans at 6% of total financial assets.... Debt holdings by mutual funds accounts for 30% of total mutual fund assets, in line with the 5-year, 10-year, and 25-year averages."

Takeaway is maybe mutual funds have some room, but overall, there should be limited appetite to rotate into equities. Investor allocations are the best predictor of long-term returns (10Y horizons). That last point is a long-term consideration with little relevance to the near-term, but thought I'd mention it. Probably the single most important thing stocks have going for them right now is that no recession is seen in the next year (and historically you need that for a big bear market). Ed Hyman, who is highly regarded, apparently sees the expansion going on for years yet.

Anyway, this may be an interesting spot to go short. I have, but timing equity markets is not my forte (not sure what is, but equity market timing definitely is not).

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Anonymous
admin
January 9, 2017 at 10:34 PM ×

About $70B of corp issuance MTD, AND SPREADS HAVE TIGHTENED!! Wrap ur head around that..

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Polemic
admin
January 9, 2017 at 10:38 PM ×

easy .. because it's thought that Trump saves corps at expense of increasing state debt. So spreads tighten corp to gov.

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checkmate
admin
January 10, 2017 at 8:32 AM ×

Ftse hit 7250 with almost inevitability this AM and I'll take an initial short position 7246. Obviously paired with an LB paired oversell of govt bonds this as all the hallmarks of a mean reversion pairing.

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Polemic
admin
January 10, 2017 at 8:49 AM ×

Me too checkmate but ftse is simewhat gbp weakness driven at the moment.

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checkmate
admin
January 10, 2017 at 9:18 AM ×

Yes Pol , currency indeed. If the £ continues to sell off against the dollar then this short may not work. This is what I was saying yesterday about the dollar and 2017 making it difficult to take significant positions this early in the year. However, I am wondering if the overpositioning spotted in short US bonds might also be true conversely for longs in the dollar ? Cue some of our posters with access to that info to fill us in.

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checkmate
admin
January 10, 2017 at 9:27 AM ×

I will make one point that I have not yet seen articulated anywhere else. I think there is a fundamental error shorting the £ against the dollar. Simply it is this. There is more political risk this year to the continuing existence of the Euro than there is to the effects on the £ of a hard exit. Indeed , if one looks at the current corporate plans for the future post a UK EU exit it appears to me that there are more inward flows than outward flows. This certainly makes sense from a tax point of view ,because the UK's ultimate weapon against any EU hard line is always going to be 'hey Europe how would you like a low tax rate offshore island right on your doorstep' just think of us as a modern day reinvention of Cyprus without the sun.

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Rossco
admin
January 10, 2017 at 9:29 AM ×

I don't think it pops up on too many punters' radars, however, if you believe in a latent and grinding outperformance of EM over DM, which this punter does, then short GBP/AUD screens rather nicely.

There is some carry, of course, and despite the overwhelmingly bearish China headlines I think 6 or more years of commodity and regional equity underperformance has done a good job of discounting some very bad outcomes.

Using a linear regression that is similar (though not as elegant as Macroman's $AUD model mentioned here in the past) the pair seems there or thereabouts, however, longer term techs look compelling to me and this is one pair that when it decides to trend, does indeed trend beautifully.

A brief, maybe useful, observation on China.

I learnt the hard way to leave Chinese equities to people braver and smarter than myself and prefer to take relative exposure in the least illiquid China proxies. In saying that though, having observed the maniacal gyrations in HSCEI and the sphincter tightening that typically goes with them, I've never seen such stability in the face of a strong dollar as the last few months. Granted, equity vols are globally on their lows but I posit that it does feel like the last guy out, may have just about turned out the lights.

How many people have considered that China is indeed more f***ed than most people think but the response is to turn up the wick even more on the fiscal side and embrace the old model.? The one belt one road thing - though I am a sceptic - does provide a huge stimulus outlet should they decide to take it on. A monrail from Guangzhou to Helsinki is unlikely to be in many people's best interest, for example, but since when have people's best interests mattered in the Middle Kingdom?

BTW - a number of bulks closed limit up on SHFE today


https://pbs.twimg.com/media/C1y2ublUQAEwCT5.jpg





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Anonymous
admin
January 10, 2017 at 1:07 PM ×

Maybe I am missing the obvious, but can't people just go to this page to read your wisdom?

https://www.bloomberg.com/authors/ATFjzjgHReY/cameron-crise

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EM/PM
admin
January 10, 2017 at 1:29 PM ×

Rossco, I recommend the link below on how the actual credit creation looks in China. Maybe this reminds of you something you saw in 2008.

http://www.scmp.com/business/article/2060917/mainland-developers-are-money-mills-rely-spiralling-asset-prices

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Hotairmail
admin
January 10, 2017 at 2:23 PM ×

Hi MM. First time I've been back for a while (been out of the markets for the Season) so didn't see your 'farewell mk2' post.

All I can say is, there is a certain sadness one feels when things/people move on. The period covers some huge events of which your commentary is an integral part of the soundtrack. Levity, occasional angst and cold hard analysis all rolled into the one blog.

I'm sure you'll do really well in whatever you choose. I just hope you are happy and the family keep well.

(I'll contact you to see if I can beg some scraps ;-0 )

I'd like to give a shout out for "Polemic's Pains" (Polemic's blog) for those who are not aware of it.

Al

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Rossco
admin
January 10, 2017 at 2:28 PM ×

@EMPM

thx for the post - I guess the point is this type of thing can go on longer than most people think - they can stay solvent longer than most people can be rational

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Anonymous
admin
January 10, 2017 at 6:37 PM ×

Where has the volume gone? It has been extremely low for months now.

Wile e Coyote might know.

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IPA
admin
January 10, 2017 at 7:03 PM ×

Crickets...

Short copper/long nat gas is making me feel like suffering from a dual personality disorder. Absolutely no disrespect meant to the patients of the disease (no matter what Meryl Streep says).

Speaking of Streep... URBN, FIVE, and HGG remind us why we stay at home, watch football (played with hands or not), and click the mouse to shop. Happily adding to XRT short here.

Are we there yet? Will DJT give us the short version of his inauguration speech tomorrow during the presser? Adding to DJT short (the other one, transports) via IYT.

Apologies for an abundance of puns above :)

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AB
admin
January 10, 2017 at 8:05 PM ×

http://www.scmp.com/business/article/2060917/mainland-developers-are-money-mills-rely-spiralling-asset-prices

This can't be how banks lend in Asia, can it? Collateral is not collateral if you had to borrow to obtain it. They have to look back to the total equity capital of the business at some point.

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Nico G
admin
January 10, 2017 at 8:35 PM ×

reminiscent of credit score 'rental' in 2006/2007 USA

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Nico G
admin
January 11, 2017 at 7:47 AM × This comment has been removed by the author.
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Nico G
admin
January 11, 2017 at 7:50 AM ×


Transition period post election seemed all sweet and exciting while Obama was still in control, everyone loved to imagine what could be, and the two men were talking. Equity markets throughout November/December have depicted a gorgeous vie en rose thereafter. Now that Obama’s farewell address is behind us one suddenly feels eerie before that big leap into the unknown. Certainly the most fascinating phase in American history in a long time

VIX compression pattern calls for a imminent acceleration. We'll see soon enough if we leap to the moon or if so much uncertainty and risk finally take their toll

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12yo HFM
admin
January 11, 2017 at 10:04 AM ×

@Anons/abee - thx, altho not sure my 'mad skillz' are quite up to the std of MM posts :)

@Nico - We are readying our spaceship for that "leap to the moon" ;)

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Rossco
admin
January 11, 2017 at 11:29 AM ×

The high yield ETF has failed to take out the October high twice now on waning momentum.

In a bond market that may be about to see more issuance with infrastructure spending (or not) this is worth watching imo

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CV
admin
January 11, 2017 at 2:38 PM ×

I have loaded up on some FTSE shorts too. I don't think this weak GBP/higher FTSE meme has legs. Either the GBP comes back, taking out the FTSE or both simply dump together. Either case as a GBP investor, with quite a bit of FTSE exposure (home bias, right ;)), I am trying to catch it here.

That said, though, I have not had a good hand on the shorts recently. Q4 was one long run of misery. It has been heavy work for the shorts!

I think healthcare is the best global GICS 1 sector for Q1, which chimes with LB's view on bonds. I am also slightly long duration here.

Also, you have to say that oil looks ripe for a fall here. The y/y rate will surge in Q1 due to base effects, and then what? Mean-reversion suggest sideways at best.

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johno
admin
January 11, 2017 at 3:34 PM ×

Today's the day.
I'm short through Feb put spreads. Vol is cheap and I can't take the strain of delta-one short. Could well envision the market breaking higher and the top coming months later.

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johno
admin
January 11, 2017 at 5:52 PM ×

If the market can rally on THAT, then God bless it! Trump knee caps Pharma (competitive bidding hit to revenues, and re-shore its manufacturing hit to costs), talks big border tax on any company that tries to cut costs by offshoring, fires warning shots at GM and Lockheed, and NO mention of corporate tax cuts. NONE!

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washedup
admin
January 11, 2017 at 6:02 PM ×

@johno - biotech is down on that as you would expect, so is nasdaq - energy is up because they are attributing the GS effect to XOM because of the tillerson hearing.
I think its just a hot potato market where people go sector to sector, which keeps overall vol extremely suppressed (self fulfilling, since the owners of those pension fund vol product sales have to hedge the gamma whereas the sellers simply walk away) - then we have occasional liquidations when everything gets tagged for a day or two regardless of value, and rinse and repeat.
I do get the sense today things are a lot less calm than the price action in equities would suggest - we shall see.

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IPA
admin
January 11, 2017 at 7:25 PM ×

johno,

No word on repatriation or fiscal stimulus either. It was a war on press rather than substantive policy outlook. We'll have to wait a bit longer for anything cohesive on any of that, I guess.

I am adding a bit of XHB short here. ETH bad news is telling me the consumer is tired and his home is stuffed, and he is done refi activity (nor is willing or able at higher rates) as his piggy bank is almost empty, and it's time for builders and suppliers to take the hit, imho...

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Mr. T
admin
January 11, 2017 at 8:58 PM ×

Rossco: "The high yield ETF has failed to take out the October high twice now on waning momentum."

I'm assuming this is looking at the price without adjusting history for dividends (they {HYG,JNK} are well above Oct. highs adjusting for dividends). I see lots of people looking at charts this way - why? It's never made any sense to me.

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johno
admin
January 11, 2017 at 9:05 PM ×

Suppose it was naïve to think the market would be allowed to break lower the day of Trump's first presser, regardless of what he said. Corporate managements and Wall Street are generally Republican, so there may have been some plunge protection at work.
We'll see whether a break comes in the next days. Nothing to say it has to and local markets rallied well beyond inaugurations of other populist leaders like Modi and Duterte.

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12yo HFM
admin
January 11, 2017 at 9:19 PM ×

PM Report: Stardate 20170111:

As our spaceship lifts off for Nico's aptly named "leap to the moon" (powered by 'Fed-rocket-fuel' & algorithmic robots), we find ourselves heading up thru the stratosphere toward Dow20K, our course set to "Infinity and beyond". With these current endless-bid tail winds, I estimate our arrival at Infinity in Q4 2017 or soon after - either way, for this Starship, "nothing's gonna stop us now".

Mood is currently good on the bridge of our ship, & volatility has returned courtesy of our soon-to-be Supreme Leader. Whilst the ship is overweight long equities, we're confident that we can reach warp-speed and enter tripe-digit-returns.

Live long & prosper.

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Unknown
admin
January 11, 2017 at 9:26 PM ×

There's no way you're really 12 years old if you're quoting Starship.

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12yo HFM
admin
January 11, 2017 at 9:32 PM ×

Unknown - Please... next you're gonna say I'm not really running a billion dollar Hedge Fund from my bedroom with annual returns in excess of 200% pa.

Haters gonna hate :)

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Nico G
admin
January 11, 2017 at 9:51 PM ×

https://www.youtube.com/watch?v=FKQD_cKEICk
https://www.youtube.com/watch?v=Vqpzk-qGxMU

that Trump bashing CNN is music to the ears

go to see you back 12yo HFM

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Anonymous
admin
January 11, 2017 at 11:04 PM ×

@ Unknown and 12yo

You guys are way more fun than any press conference - and yes, indeed, I do believe you have given away your true (not at heart) age, 12yo.

beam me up, scotty (in 4 years, thank you).

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Polemic
admin
January 11, 2017 at 11:19 PM ×

Unknown.. you got the startrek but I thought the mork n mindy ref more telling!

Nanu Nanu..

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Nico G
admin
January 12, 2017 at 6:55 AM ×

apologies for bringing a short seller and ZH but Chanos' thoughts are worth a read

http://www.zerohedge.com/news/2017-01-11/chanos-fears-trumps-unmet-expectations-warns-investors-rethink-almost-everything-you?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29

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checkmate
admin
January 12, 2017 at 8:00 AM ×

When in doubt earnings ,earnings ,earnings. Strong dollar and earnings the theme tune won't be Jackie Wilsons theme tune. Trump that. Meanwhile Scotty to Bridge 'Cap'n we're down to 25% power and we canna make warp drive'.

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checkmate
admin
January 12, 2017 at 9:05 AM ×

Sterling thoughts.
The harder the EU policy on Brexit then following Action and Reaction wouldn't you expect the UK govt to become increasingly Corporate friendly? Think corporate tax level.
2016/17 corporate tax is approx. 6% of tax revenues vis a vis approx. 17% attributable to VAT. What would Vat have to become to soak up incremental decreases in corp tax rate?
Social (inflationary) impact on poorer parts of society what would personal taxation levels have to be to offset inflationary impact of policy and make friendly corporate tax rate financially neutral?
Goals to make the tax rate increase inward investment flows over and above the losses attributable to EU brexit policy.
Given that I think medium term the economic outcome of Brexit is basically zero sum as players (winners and losers) close out economic opportunities I think something like the above policy is very doable which makes me think WTF short sterling.
Just musings , but why wouldn't a UK govt play the nuke tax rate weapon of potentially zero corporate tax rate if pushed to it?

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Nico G
admin
January 12, 2017 at 9:52 AM ×

you damm right they will

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12yo HFM
admin
January 12, 2017 at 3:09 PM ×

So I unload our fund's holdings at the open and then this happens...

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Anonymous
admin
January 12, 2017 at 3:13 PM ×

WIle E Coyote just looked down.

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Rossco
admin
January 12, 2017 at 3:42 PM ×

long R2K?

Bueller , Bueller, anyone, Bueller ?

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Nico G
admin
January 12, 2017 at 5:37 PM ×

i am pleased to see that Italy and its banks are once again back to facing reality, and facts

'follow your shot', as Navy seals friends say

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henner
admin
January 12, 2017 at 5:55 PM ×

can anyone tell me where I can find MM on Bloomberg? i sent him an Email but he didn't reply...

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Anonymous
admin
January 12, 2017 at 6:04 PM ×

Nico,

Thanks for the link, though you can (and usually should for privacy reasons) leave off the question mark and everything after that. Glad to see the trolls haven't chased you away.

I think your themes are spot on. I remember a while back (a year or two ago) reading some analyst complaining that some debt ratio was "growing above trendline" and I am thinking "WTF? - debt ratios eventually have to flatline; they simply can not keep increasing monotonically forever").

Like some others here, when the next fifty percent decline hits (and it is coming, whether it starts next week, next month, next year, or sometime in the next decade), I am more interested in capturing the last forty-five percent rather than the first five percent. The movements you are trying to capture make up the most difficult type of trading, and I am suitably impressed with your success at it. You are going to be wrong a lot ("being early is being wrong"), but while I am not quite ready to put on a significant short position, I don't think there is much risk of a spike higher from here (is there any possible good news not already priced in?), and expect to see a decent payoff for your fortitude (most likely this year).

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Skr
admin
January 12, 2017 at 6:06 PM ×

You mean something like this Nico?

http://joellambert.com/665/virtuosity-navy-seals-use-shooting-fundamentals-forge-elite-warriors/

Fundamentals and virtuosity been the key words... Somewhat missing from a certain speech last night.

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Macro Man
admin
January 12, 2017 at 6:10 PM ×

@henner can you re-send please? I thought I got everyone but with >150 emails to sift through some slipped through the cracks

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thud
admin
January 12, 2017 at 6:25 PM ×

@IPA... I forgot to tell you nice call on the NG 20% off sale.

Vol compression continues despite the lack of concrete (or even mushy) details on economic policies and tax reform. Uncertainty? Nah, we're good... back to work MAGA'ing and whatnot. Sell vol and carry on... was that Thad and Brad or another group of 12yo HFM's bros?

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Anonymous
admin
January 12, 2017 at 6:52 PM ×

Just when Nico thought he'd make some money the JBTFD'ers step in and.... IT'S GONE.

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Anonymous
admin
January 12, 2017 at 6:53 PM ×

The purpose of today was purely to remove the weak longs, and trap shorts so that we can drive the Dow up through 20K and beyond.

Equity short sellers are gonna get pole-axed again.

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IPA
admin
January 12, 2017 at 7:12 PM ×

thud,

Thanks! Even a blind squirrel finds a nut once in a while. It was a nice cushion for my blunder in copper though.

I am starting to think more and more that DJT and his team are going to pull all-nighters strategizing on how to get away from pesky reporters. It's the same theme that hunted Clinton during his days as a pres. This takes the full attention from the policy decisions. Makes him tired, frustrated, agitated, unreasonable, uncooperative, with the latter being so important in DC in order to get the things passed. I am pressing all my shorts now: XRT, XHB, IYT, SMH, and adding to my metals shorts as well.

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Nico G
admin
January 12, 2017 at 8:33 PM ×

My last post was only about Italy, anything beyond -1.5% down gets my attention. (US equity markets are still dead boring at the moment, when Spooz really leave their range it will be fast and ugly). For anyone trading Europe or EURUSD Italy will be the main story this year so i watch it closely. I do not think there is a clean way out for Italian banks. Bankrupt means bankrupt this time. Italians hold the (bleak) future of the EURO project in their tomato sauced hands.

One country, at least just ONE developed country needs to see its banks fail for too much greed and cronysm, laxism and a lack of internal audit. The Italian population is starting to learn who got cosy deals with Monte Paschi and ran with the money. The Italian population is footing the bill as we speak. Until there is proper banking regulation and supervisation, bankers will always take too much risk. The risk/reward - personal bonus, or socialised loss - has never been better it's the perfect morally bankrupt martingale.

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