tag:blogger.com,1999:blog-34323687.post1564199383795640590..comments2024-03-28T12:22:11.704+00:00Comments on Macro Man: Catharsis or beginning?Macro Manhttp://www.blogger.com/profile/12324967552369915949noreply@blogger.comBlogger93125tag:blogger.com,1999:blog-34323687.post-22241047789684959932016-02-10T07:09:13.227+00:002016-02-10T07:09:13.227+00:00MM, so far tonight usdjpy is holding up or at leas...MM, so far tonight usdjpy is holding up or at least not falling precipitously. We will see whether Dame Janet provides punters with a happy ending tomorrow.Leftbackhttps://www.blogger.com/profile/07728096415928915882noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-90256653572201233572016-02-10T05:41:37.757+00:002016-02-10T05:41:37.757+00:00Forgot to mention the biggest long term macro news...Forgot to mention the biggest long term macro news of the day - Aleppo. Europe about to receive another large wave of human capital. What a tragedy.Coreynoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-11274319769697682572016-02-10T05:29:42.798+00:002016-02-10T05:29:42.798+00:00@ washed
"Nico - how are we at the next fina...@ washed<br /><br />"Nico - how are we at the next financial crisis if the the bulwark against the previous one (the transfer of liabilities from private to public sector) is so heavily favored that it carries negative yields?"<br /><br />First the yields are negative doesnt mean the coupon pymts on debt stock has decreased, just subsidized new issuance.<br />Everyone is thinking about it from the standpoint of "we cant have a financial crisis bc banks are better capitalized." Of course they are. Take another step back - subprime was the catalyst in 08, but the real issue was overabundance of debt and there is more of it now than in 08 at a time where markets are having serious questions in central planners ability to wave their magic wand. They have done their part and are now looking to the fiscal side to do theirs and no matter whether you are rooting for candidate x,y,z none of them seem to have a clue. <br /><br />We tried to grow our way out of debt when one of the effects of over indebtedness in the first place is slower growth (Rogoff & Reinhart). We would have had to double down just to keep growth the same, but increase growth? What simple stupid creatures we are that we cant see our own folly in that logic. Suppose it's just human nature. We've had 6 yrs to find solutions to the problem and just like every other crisis we choose to avoid them bc we think everything has been fixed once the market starts going up. We've got to the point where we've been successful in perpetuating the myth for so long that we dont want to believe it's not true. And no 2016 is not 2008 we have a whole different set of problems and I'm not talking low oil prices or DB stock. Many of them are of the kind of cycle that is completely missed bc of its long term nature; peak margins, peak debt, peak demographics. And now peak confidence in our central planners to be capable of fixing everything when it goes bust. You want to make money in this environment, just do what the government is doing, double down on your own debt. Buy as many long bonds as you can with as much leverage as you can and there's the added benefit that your career risk is aligned with those of politicos and CBsers. You cant lose.<br /><br />Janet will do what Janet does, there has been an increase in volatility yet US data havent fallen off a cliff (yet) so she will stick to her guns hoping to bore everyone to death with her endless monotonic droning. She and her ilk are likely to view the mkt response to the Kurodatastic policy though the lens that the market has lost confidence not because negative rates are bad (they helped Europe until this whole DB fiasco - which again in her mind will be a separate issue) but the change in policy as the source for the loss of creditability (read any paper on forward guidance). So, she will be fearful of doing the same. Ah, what is it they say about pride?<br /><br />Seriously though if someone can provide a rational explanation for why the yen is strengthening when rates are negative it'd get me to stop thinking that the financeapocalypse is near. Right now I feel like the lunatic standing on the street corner holding up a cardboard sign with something to that effect.Coreynoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-32656693406942658112016-02-10T04:41:56.795+00:002016-02-10T04:41:56.795+00:00washed
Europe is already having its next financia...washed<br /><br />Europe is already having its next financial crisis. You remember how folks saw Europe as the last 'relay' (read, hope) for world growth last year? with depressed commodities and consumer fatigue all around the world i am not sure EM will pull Europe/US out of their misery buying DM exports as consumers of last resort like they did 2009-2012<br /><br />MM<br /><br />ditto on the line up this year - but i do believe elections will have a monster impact on markets come November, be it Trump or Sanders i did not think it was off topic. Someone needs to step in and regulate your house of cards (US capital markets)<br />Nicohttps://www.blogger.com/profile/06532015745155347229noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-31134879455207058572016-02-10T03:16:01.061+00:002016-02-10T03:16:01.061+00:00http://www.project-syndicate.org/commentary/futili... http://www.project-syndicate.org/commentary/futility-of-quantitative-easing-in-japan-and-eurozone-by-daniel-gros-2016-02<br /><br />"Despite their shared struggles with deflationary pressures, these countries’ monetary policies – and economic performance – are now diverging. Whereas the United States and the United Kingdom are now growing strongly enough to exit their expansionary policies and raise interest rates, the eurozone and Japan are doubling down on QE, pushing policy long-term interest rates further into negative territory. What explains this difference?<br /><br />The short answer is debt. The US and the UK have been running current-account deficits for decades, and are thus debtors, while the eurozone and Japan have been running external surpluses, making them creditors. Because negative rates benefit debtors and harm creditors, introducing them after the global economic crisis spurred a recovery in the US and the UK, but had little effect in the eurozone and Japan."<br /><br />....one bubba's reasoning...who knows what Janet will decide..<br /><br /><br /><br />Bruce in Tennesseenoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-89565704048336919462016-02-10T01:54:30.824+00:002016-02-10T01:54:30.824+00:00USDJPY was a bit above 109 on Oct 31, 2014 - befor...USDJPY was a bit above 109 on Oct 31, 2014 - before the BoJ launched another round of easing. Nikkei was 16413.<br /><br />As or right now, USDJPY is 114.373, Nikkei is 15836.<br /><br />It was curious that the BoJ's Oct 31, 2014 announcement happened *right* as QE3 ended. To me this suggested, at least some sort of interaction between the BoJ and the Fed. A global QE handoff as it were.<br /><br />What might trigger another mainlining session by the BoJ? Will they act alone? By comparison, the Plaza Accord seems odd and quaint.MrBeachnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-72496773995948383592016-02-09T23:46:26.296+00:002016-02-09T23:46:26.296+00:00120. there's something ineffably satisfying a...120. there's something ineffably satisfying about that number....Macro Manhttps://www.blogger.com/profile/12324967552369915949noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-85366819587245013352016-02-09T23:17:20.407+00:002016-02-09T23:17:20.407+00:00Short covering may be on the way. Dame Janet's...Short covering may be on the way. Dame Janet's Humphrey-Hawkins testimony ahead, but it might be the Humphrey-DOVEins testimony tomorrow. Anyone made that joke here before? Not expecting to hear about 4 rate hikes in 2016.<br /><br />Relief rally in USDJPY looks likely from here, and Spoos and oil may follow. We are looking to fade the recent plunge in rates for our punt of the week. Options expiration beginning to appear in the near distance and that will drive some profit taking.<br /><br />Very quietly, EMs have been performing a little better as the USD has softened since the Kuroda NIRP spike. We'll see a lot more of that as the year progresses.Leftbacknoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-5271469057493021612016-02-09T22:32:56.249+00:002016-02-09T22:32:56.249+00:00@abee, there are at least $450 billion of Cocos th...@abee, there are at least $450 billion of Cocos that have been issued, all of which have an uncertain pricing dynamic to some degree, and most of which were issued in the last 3/4 years. That may not be 'a ton', but it's not peanuts either.Macro Manhttps://www.blogger.com/profile/12324967552369915949noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-6228874236501331892016-02-09T22:30:00.103+00:002016-02-09T22:30:00.103+00:00@abee, agree with TBS. People who understand the...@abee, agree with TBS. People who understand the situation re the banking system aren;t thinking like Zervos at all. I think he's drunk too much of his own Kool aid.Macro Manhttps://www.blogger.com/profile/12324967552369915949noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-81853328975944529442016-02-09T22:27:20.187+00:002016-02-09T22:27:20.187+00:00@abee, you arent undestarding what's happening...@abee, you arent undestarding what's happening.. Nirp is the problem, not the solution.<br />Please read last Bill gross's letter<br /><br />Cet1 of CS was 14.1%. Adjust for the equity collapseTheBondStrategisthttps://www.blogger.com/profile/15654760354283741885noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-55246296169799372352016-02-09T22:19:14.925+00:002016-02-09T22:19:14.925+00:00From Mr Blues and Spoos yesterday. I guess this is...From Mr Blues and Spoos yesterday. I guess this is what most traders are thinking<br /><br />I just want to make the claim that the Smart Car and P45 style monetary policies of the ECB and the BoJ are insufficient to create reflation. In that sense I am quite happy to have pulled away from the long Dax/Dollar trade and the long NKY/short Yen trade back in December after both institutions disappointed. Looking ahead, I am not sure how quickly Mario and Haruhiko will come to the conclusion that purchases need to be in the multiple hundreds of billions per month, and nominal short rates need to be LESS than MINUS 1%. My guess is it may take some time (and some nasty currency and equity market price action) for them to come to their senses. For now, I am quite happy to sit back in US risk parity land with Spoos and Blues. So far that trade has held up remarkably well to start the year given all the market turbulence (thanks to those wonderful Blues).abee crombiehttps://www.blogger.com/profile/13320039155613443039noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-89950378657097789352016-02-09T22:05:17.705+00:002016-02-09T22:05:17.705+00:00CS CoCo XSIN XS0989394589. Bloomy is saying if CET...CS CoCo XSIN XS0989394589. Bloomy is saying if CET1 <5.125% you get a writedown. CEt1 Currently at 14.3%.. bond is trading ~93.5 for 8% yield. SocGen i was just looking has a 10% yield. <br /><br />There are only certain investors who hold CoCo's and its not like there are a tone out there, mostly in EU banks, a few in Brasil and a few in China. <br /><br />If I had the extra min purchase size lying around I'd be looking at something like Intesa, Llyods or BBVA, something without an IB<br /><br />Nico what makes you so sure we are having a financial crisis? Maybe I am stupid but I dont see how you have a crisis when interest rates are so damn low. To me its more like a buyers strike of anything risky. Granted this EU CoCo stuff is not good but I dont see bank in nearly the same poor shape as in 2008. <br /><br />I welcome a test of 1600 in the Spoos. That would be a great buy for LT investors, IMO as you'd have valuations pretty darn attractive vs 1% 10yr rates. <br /><br />I frankly worry a lot more about what kuroda will do in terms of bringing out a bazooka vs S&P going down another 10% (even though it will still hurt). He's all in IMO and Japanese savers gotta do something with their money, like everyone else when they wake up from under their hole<br /><br />abee crombiehttps://www.blogger.com/profile/13320039155613443039noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-19502148310330589302016-02-09T21:56:37.222+00:002016-02-09T21:56:37.222+00:00Thanks for that anon 3:42. So if I get it right it...Thanks for that anon 3:42. So if I get it right it's usually better to produce the max amount from the reservoir at the same time from multiple wells in order to make the pressure drop matter less and get a better recovery rate, whereas otherwise water needs to be later injected making it more costly? I read once that Siberian wells can't be "turned off" (=makes no sense) either, probably temperature related.<br /><br />Re: price, apparently a flattening future curve is the thing to watch:<br /><br />https://pbs.twimg.com/media/CaPKgAaVAAAcE5Q.pnghipperhttps://www.blogger.com/profile/10934536233703452719noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-46242489913276558112016-02-09T20:54:45.503+00:002016-02-09T20:54:45.503+00:00Debt Tsunamis, Doom Loops & Death Spirals?
Un...Debt Tsunamis, Doom Loops & Death Spirals?<br /><br />Unlikely. More likely: 'hyperbole bottom'.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-47866324870386373202016-02-09T20:38:14.970+00:002016-02-09T20:38:14.970+00:00@MM: It is not clear to me how they might generat...@MM: It is not clear to me how they might generate the cash to retire the debt. My observation is that if this is a negative feedback loop death spiral caused by the unique structure of the Coco bonds, then it behoves DB to find the money wherever they can. At some time a death spiral could lead to loss of confidence as a counter party - making an equity raises impossible (outside of a European TARP). So doing whatever is necessary to kill the death spiral seems to me to be the most prudent action.<br /><br />From the NYT article: "Consider Deutsche’s 6 percent perpetual bonds. In early January, these yielded around 7 percent, on an expected maturity in 2022. Yet as equity prices fell, investors started to discount AT1s with equitylike yields, pushing down prices. As yields rose, the chances that Deutsche might not call the bond in 2022 increased, thus extending the possible maturity and magnifying losses. Finally, renewed threat of coupon termination meant the risk of a smaller near-term cash flow. What looked like a short-dated bond risked becoming a long-dated, zero coupon instrument. The price fell to 72 percent of par on Monday, from 93 percent at the start of the year.<br /><br />The problem for regulators and investors alike is that all this creates a feedback loop. As AT1 prices fell, investors had few places to sell. Banks do not like making markets in the distressed debt of their peers, and Asian private banks – big buyers of high-yield securities – were on holiday on Monday. So investors sold credit default swaps. That pushed Deutsche’s senior credit default swaps to over 270 basis points, a level not seen since the eurozone financial crisis. Yet the risk of Deutsche failing is barely comparable: Its 53 billion euros of tangible book value is 40 percent higher than the 2011 figure."MrBeachnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-54243110042530700112016-02-09T20:24:21.190+00:002016-02-09T20:24:21.190+00:00Not sure that could work really but let's try....Not sure that could work really but let's try...it's a trade versus a sistematic loss of confidente.<br /><br />What's is stunning is that spoos is outperforming also now vs eustoxx futuresTheBondStrategisthttps://www.blogger.com/profile/15654760354283741885noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-71843530468373594342016-02-09T20:22:55.893+00:002016-02-09T20:22:55.893+00:00@ Mrbeach, if DB had all this loose change to buy ...@ Mrbeach, if DB had all this loose change to buy back debt, wouldn't the Cocos and stock be doing better? their core capital took a nasty hit with that last "earnings" statement, and I would be surprised if they bought back debt without issuing some equityMacro Manhttps://www.blogger.com/profile/12324967552369915949noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-13582684096332526402016-02-09T20:20:17.944+00:002016-02-09T20:20:17.944+00:00@washed, saying I think x will be bad for bank sto...@washed, saying I think x will be bad for bank stocks and y for pharma is one thing, saying I hope z wins is something entirely, all the more so because just about all of them are direct descendants from the father of the categorical imperative.Macro Manhttps://www.blogger.com/profile/12324967552369915949noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-83617219410310729192016-02-09T20:10:04.524+00:002016-02-09T20:10:04.524+00:00BTW - if the DB trade described above works, this ...BTW - if the DB trade described above works, this would be potentially describe the effects of a European TARP. Force feed the banks money, allow them to retire outstanding debt, and pulling them out of death spirals caused by CDS sellers hedged thru equity shorts. <br /><br />Hypothesis: European TARP --> Face ripper in European banks?MrBeachnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-62291811861922067312016-02-09T20:09:22.152+00:002016-02-09T20:09:22.152+00:00Thanks for that BinT - want to quickly exchange e-...Thanks for that BinT - want to quickly exchange e-mails before MM banishes me for making that comment? I am really regretting it..<br />insight Nazi - thats what we call MM in hushed tones - thought u'd like to know!<br />washedupnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-63215248273096731922016-02-09T20:01:58.937+00:002016-02-09T20:01:58.937+00:00Based on this rumor:
http://www.marketwatch.com/s...Based on this rumor:<br /><br />http://www.marketwatch.com/story/deutsche-bank-may-buy-back-billions-of-euros-of-debt-ft-2016-02-09?link=MW_home_latest_news<br /><br />Thinking that sellers of CDS who simultaneously shorted the stock may be forced to cover if the death spiral can be stopped.MrBeachnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-77699706561493307362016-02-09T20:00:12.055+00:002016-02-09T20:00:12.055+00:00Just bought some DB.
http://www.nytimes.com/2016/...Just bought some DB.<br /><br />http://www.nytimes.com/2016/02/10/business/dealbook/deutsche-banks-hybrid-bonds-are-in-a-death-spiral.html?_r=0<br /><br />MrBeachnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-76590738754025512932016-02-09T19:58:54.244+00:002016-02-09T19:58:54.244+00:00washed,
There are plenty of sites that talk nothi...washed,<br /><br />There are plenty of sites that talk nothing but politics...I suspect MM knows if you allow politics in a financial site soon you have nothing but crazies..Bruce in Tennesseenoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-88437732633271592382016-02-09T19:31:09.781+00:002016-02-09T19:31:09.781+00:00Nico - how are we at the next financial crisis if ...Nico - how are we at the next financial crisis if the the bulwark against the previous one (the transfer of liabilities from private to public sector) is so heavily favored that it carries negative yields?<br /><br />We have big problems, yes - could spoos go to 1500 or further in an eye-blink? totally with you there - these are markets. But a total financial system freeze and a 4% contraction in (local currency) GDP? Nope - this will go down as garden variety when the dust settles.<br />Talk to me when we get corporate spreads and US govt yields expanding at the same time with productivity continuing to trend lower - thats the big one that could break the system - this ain't it. <br /><br />MM - with all due respect, politics are currently a bit relevant aren't they? You don't think sanders' 'all of wall street are crooks' and donald trumps 'we are in a big fat equity bubble' are impacting sentiment on financials? Whether or not they see it that way, clearly these guys are talking their books (I see their beta as 5% increase in polls for every 200 point drop in spoos) but they are hardly fringe loonies at this point - investors in financials were beginning to see green shoots and low price to book and they've been reminded everyone hates banks and any money they make could be confiscated readily - that matters. washedupnoreply@blogger.com