tag:blogger.com,1999:blog-34323687.post2088159868752514460..comments2024-03-28T12:22:11.704+00:00Comments on Macro Man: What a long strange trip it's beenMacro Manhttp://www.blogger.com/profile/12324967552369915949noreply@blogger.comBlogger38125tag:blogger.com,1999:blog-34323687.post-79484059641852282182016-05-22T16:52:48.185+01:002016-05-22T16:52:48.185+01:00The most useful thing is probably common sense: th...The most useful thing is probably common sense: the incentive here to be long risk is very small in my opinion. Corporate profitability is clearly deteriorating, margins eroding and employment costs rising; the macro picture is pretty far from being encouraging, with today's retail sales and consumer confidence the only bright spots in a long string of disappointing data in the US. Central Banks? Well, in my humble opinion, the time to bet blindly on their action and trust unconditionally the effect of such actions on asset prices is long gone <a href="http://whistory.org" rel="nofollow">I liked your blog, Take the time to visit the me and say that the change in design and meniu?</a>Anonymoushttps://www.blogger.com/profile/10405664942732517369noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-72924877716234627672016-05-15T11:23:45.198+01:002016-05-15T11:23:45.198+01:00I'm not sure about the comment that the "...I'm not sure about the comment that the "US has to pick up". In my view the global drag has been and remains to be European. For me growth in Europe is what it will take to put the brakes under the Asian (China) slide. By comparison because of it's domestic economy bias the US has toodled along. In essence the marginal consumer that makes the difference between low global growth and average long run global growth is European in origin albeit I also suspect demographics is lumped in there somewhere.<br />In effect with a belief like this you can't look for a pullout of low global growth without first seeing marked improvement in Europes labour market which remains fairly dire. So, lower and longer really means longerrrrrrrrrr way past most people's views.checkmatehttps://www.blogger.com/profile/03688082792316894545noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-71022811414796774342016-05-15T09:51:50.876+01:002016-05-15T09:51:50.876+01:00Booger, I think we will continue with the Bulgaria...Booger, I think we will continue with the Bulgarian model for a while (some incorrectly attribute this strategy to Bernanke, but the Bulgarians knew about this and applied this theory of money long before).<br /><br />The Bulgarians always say: "Brother, if you can't solve a problem with money... solve it with a lot of money."Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-13578170369439331712016-05-14T13:33:09.285+01:002016-05-14T13:33:09.285+01:00The next BOJ move should be very interesting. They...The next BOJ move should be very interesting. They cannot stay pat. They have to eventually wind back QE or scale it up. Marc Chandler has some interesting ideas about that in his recent article/blog. The rational thing to do would be to say QE has not worked in Japan in raising rates or even equity prices and redefine their goals and inflation/GDP targets to GDP per capita or something more favorable. I wonder what the effect of the BOJ capitulating would be ? Would Kuroda be able to do it or would they have to get rid of him first ? Boogernoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-90857262600880197562016-05-14T13:16:47.733+01:002016-05-14T13:16:47.733+01:00B in T: gold may well go up a bit further but if t...B in T: gold may well go up a bit further but if there is further dollar strength due to a risk aversion move i.e a mudslide, it is hard to imagine gold not croaking in a major way. It is probably headed to $700 before new highs if you believe a mudslide is imminent. <br /><br />I have to say, I am not convinced with the move in the dollar to date and still am wary of one further plunge in DX before a durable rally into the high 90's. I am pretty much in cash except a small short Spoos position. Boogernoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-13635341313037723762016-05-14T13:16:07.621+01:002016-05-14T13:16:07.621+01:00BinT - aren't gold coins a rip off i.e. you en...BinT - aren't gold coins a rip off i.e. you end up paying strange fees and markups vs wholesale physical gold? Interested in knowing what you learnt - if I buy gold I will definitely go the same route - I am not a huge fan of buying gold for 'armageddon insurance' and then having it (or rather, thinking you have it!) in an electronic brokerage a/c as a paper ETF called GLD held for you by a custodian, or so they say.washedupnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-71410808084574011402016-05-14T12:46:47.169+01:002016-05-14T12:46:47.169+01:00I bought gold coins Friday, my first time to do so...I bought gold coins Friday, my first time to do so in decades. I generally believe investing in gold is for nitwits, but.... I look at the landscape and feel we are in for ever more interesting times. You boys probably read the same things I do, and most of this stuff continues to look weak to me. Retailers are getting whacked and it isn't just Amazon. ZIRP and NIRP look like long-term negatives to me, and I've already stated my reasoning is that it removes a source of income from people who don't like the market here.<br /><br />This year, I've been putting cash into very short term notes awaiting the decline in equities. Some of these things happening today remind me of the tech bubble in slow motion..and I still like LB's UUP....Bruce in Tennesseenoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-584936140127580842016-05-14T12:08:30.667+01:002016-05-14T12:08:30.667+01:00CV - I must stress that I am a very small player i...CV - I must stress that I am a very small player in the landscape, therefore I assume that different conditions are probably applied to cash balances for bigger players who have much greater negotiating power.<br /><br />As for the portfolio balancing: issuances in corporate bonds this past week were at insane levels. How much will it last I do not know and if inflation picks up it's gonna be a carnage of historic proportions. I have also a decent allocation to I/L bonds which makes me sleep a bit better.<br /><br />In equities I perfectly see your point, but I also observe that since the ECB started with QE last year, EZ equities are in a bear market. The problem I have here is that allocating to such dividend plays has become really really expensive in EZ and the only cheap dividend plays in town are banks (with all the exceptions you are all well aware of), autos (which are also adding a lot of beta to the portfolio). To these two sectors I add technology in EZ which is trading on the cheap side after the recent underperformance and partially Travel and Leisure, i. e. mostly airlines.<br /><br />The key point here is economic growth: US must pickup as LB is expecting otherwise we are cooked, while I fear at the same time we are soon gonna see disappointing data from the Euro Zone. Guidances from corporates are far, very far from being encouraging on this topic.ALnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-3689264825644832482016-05-14T10:44:11.044+01:002016-05-14T10:44:11.044+01:00@ Anon 10:22 PM - No one is bullish but no one is ...@ Anon 10:22 PM - No one is bullish but no one is strongly short either. Sentiment is most useful at the extremes and we are not there.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-57185452593449242582016-05-14T08:20:52.319+01:002016-05-14T08:20:52.319+01:00Great stuff AL, thanks for sharing! I believe the ...Great stuff AL, thanks for sharing! I believe the recent aggregate ECB data show -ve deposit rates for large corporates (on average) for the first time ever (I will check), but it is definitely a narrower path as you say.<br /><br />The thing about the "portfolio balancing" effect is that it isn't working as well as the ECB thought it would be. You see ... according to the ECB, you're doing it all wrong ;). Why not invest in some dividend yield in the equity market and corporate bonds en masse? O.k. you said you had corporates, which is a smart move since these things will go up an up in the next six-to-12 months. But interesting to hear your thoughts. An insurance PM I know also noted recently that the very fact that rates on the "safe" part of his portfolio are being eroded leaves him less room to take risk with the rest (i.e. the buffer for losses disappear). CVhttps://www.blogger.com/profile/16843402165210120665noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-5505099616032916562016-05-14T00:09:35.524+01:002016-05-14T00:09:35.524+01:00MM - Pension funds are spared from being imposed n...MM - Pension funds are spared from being imposed negative rates so far .... Don't know for how long though.<br />Managed accounts and mutual funds are charged 0,5% above a certain cash balance, but here you can avoid the penalty by transferring the excess cash to the margin account of ETDs' brokers, where, in most cases, negative rates are not yet applied.<br />But it's a narrow path yes, and getting narrower.ALnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-24332434190107623682016-05-13T23:56:41.148+01:002016-05-13T23:56:41.148+01:00Today was seemingly a "good news" day, y...Today was seemingly a "good news" day, yet everything was pear shaped. Things to consider heading into next week. Exposures right now are long gold miners, long duration, short commodities, modestly net short equties and long dollar vs aud cad NZD mxn zar etc. <br /><br />Those numbers should have killed me but they didn't. Just sayin. shoelesshttps://www.blogger.com/profile/07834810780006373841noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-23084664974402819222016-05-13T23:44:12.404+01:002016-05-13T23:44:12.404+01:00AL - out of curiosity, do you get charged for hold...AL - out of curiosity, do you get charged for holding EUR cash or are you just getting nothing for it (= huge win)?Macro Manhttps://www.blogger.com/profile/12324967552369915949noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-45888401586313622312016-05-13T23:30:11.849+01:002016-05-13T23:30:11.849+01:00Trying to guess or measure others' positioning...Trying to guess or measure others' positioning is often a useless effort. I mean, it could be useful for the classic punt or a short term trade, but in order to position a portfolio strategically is another story. The most useful thing is probably common sense: the incentive here to be long risk is very small in my opinion. Corporate profitability is clearly deteriorating, margins eroding and employment costs rising; the macro picture is pretty far from being encouraging, with today's retail sales and consumer confidence the only bright spots in a long string of disappointing data in the US. Central Banks? Well, in my humble opinion, the time to bet blindly on their action and trust unconditionally the effect of such actions on asset prices is long gone .... As such I position the portfolios accordingly, being very much UW equities, zero commodities, zero emerging markets, nervously neutral in EZ govvies and corporate bonds and pretty long cash (partly in USD - I am EUR based)... Yes cash , that ugly, distasteful thing that nobody likes.ALnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-59758822104572807232016-05-13T22:22:39.692+01:002016-05-13T22:22:39.692+01:00To clarify, not a single person here - including m...To clarify, not a single person here - including me - or seemingly anywhere else of note is currently bullish on equities. Hmmm.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-66583973428988851242016-05-13T21:19:59.430+01:002016-05-13T21:19:59.430+01:00@washedup,
anon 7:22 here.
I just bet against s...@washedup,<br /><br />anon 7:22 here. <br /><br />I just bet against some vanilla REIT ETF with a higher portion of holdings on commercial side. I do not have any strong conviction right now. So put on tight stops on all my positions.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-30277018771202316852016-05-13T20:51:31.478+01:002016-05-13T20:51:31.478+01:00@LB,
I agree a lot with your view in general but ...@LB,<br /><br />I agree a lot with your view in general but on position I'm more short AUD due to seeing credit expansion coming to a halt (temporary) in China cycle. Chinese iron bar and coal futures have given up almost half of the early rally in the year. <br /><br />On Fed, less sure Yellen is willing/able to hike again bc US data doesn't really matter in the policy function. They know the rest of the world is so bad, and Yellen is determined to wait for inflation to overshoot, imho. <br /><br />Europe in a mess, so is Japan. The equities are in a clear bear market for these two regions. Can all-in CB in save them? Oh wait, helicopter money haven't been deployed yet. <br /><br /> <br /><br />Cityhunternoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-15106017440819406842016-05-13T20:43:33.624+01:002016-05-13T20:43:33.624+01:00"as a result I hope it all ends terribly.&quo..."as a result I hope it all ends terribly."<br /><br />It will; rest assured! But it takes time ... 2017 and 2018 are big rollover years. I think the "party" will begin towards the end of this year. <br /><br />Corporate bonds is a clear and massive bubble since 2008 ... last remaining sector to lever up. We have discussed the issues here ad nauseum; liquidity, default cycle, energy bonds leading the rest of the market etc etc. I am just waiting for a catalyst now, but it won't happen immediately. Remember, the ECB is ahead of events by actually buying this stuff before it blows up. They will puff up a massive bubble in EZ credit. <br /><br />In the end ... inflation needs to rise, and it will and then the CBs will be cocky and call victory. Then we have to worry. <br /><br />CVhttps://www.blogger.com/profile/16843402165210120665noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-6627719538233344762016-05-13T20:41:15.942+01:002016-05-13T20:41:15.942+01:00Johno - are you ready to buy here? If not (seeing ...Johno - are you ready to buy here? If not (seeing as you don't normally do indices) - what it would it take to get you there?Swiftienoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-45617075082599349932016-05-13T20:38:22.802+01:002016-05-13T20:38:22.802+01:00No bulls anywhere to be seen. Not even jbtfd last ...No bulls anywhere to be seen. Not even jbtfd last he was here. Why would there be? US large cap is pretty much the last equity thing in the world that isn't in a clear downtrend. And the Fed's going to have to hike (unless the market drops, which is the whole point); national accounts profits, which usually lead, are atrocious; and the world economy - see their markets - looks like it's going doown... And then there's politics... Sadly I am mostly long today.<br /><br />IG, though. Seriously. What an asset class. The Sharpe ratio of a boring US high-grade corporate bond portfolio over the last 7 years, it's what, 3? 5? 12? My god, it's spoos+blues wrapped up in a ball for you. I haven't had any this whole time, and as a result I hope it all ends terribly.<br /><br />So, accordingly... we're all worried about the risk parity explosion but that isn't going to happen. Not for a long time anyway. It's going to be an IG corp credit risk blowout instead. Washed's inflation spike will be short-lived because it causes poor Janet to Trichet-hike into Nico and BinT's recession and bear market. Buy the last few positive yielding sovereigns while you still can!<br /><br />Sounds plausible, doesn't it? But here's the key point. Is there anyone here willing to bet that anything even vaguely in that direction might start now? (Not Nico, he's short EuroStoxx; I'm only talking about the god here - greatest of markets, first in price discovery, obliterator of shorts, manipulator of central banks... the S and fucking P...) Really. Anybody?Swiftienoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-89197896997685288692016-05-13T20:18:02.283+01:002016-05-13T20:18:02.283+01:00From my phone ...
1) last year Dalio quantified bu...From my phone ...<br />1) last year Dalio quantified buybacks and M&A as about 80% of (net) buying of us stocks. No silver bullet, but very material. Also, I think it matters more at the aggregate supply of stock level than on a company-by-company basis.<br />2) HY may be driven by oil, but I would think the reach for yield is the bigger driver in IG. As for oil direction, all forecasts I see suggest H1's glut will be followed by near balance in H2. I'm neutral oil myself.<br />3) I don't have a strong view on timing of the profit cycle, but if the balance of outlooks is turning more positive, it's worth considering. Generally, I've seen more commentary lately suggesting the profit recession is ending. Oil stabilizing will help too.<br />4) I'm not so sure investor underweights are so small. Looking at last week's Flows and Liquidity piece by JP, they see global non-bank investor allocations to equities 2% points below the average since '99. Their measure of G4 pension and insurance fund allocations don't look especially high relative to history either. Not definitive data ... Just what I could dig up on my phone. I'd be curious what measures readers use to gauge positioning of real money.<br />I agree that if we get inflation all hell breaks lose!Johnonoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-13909747570270030582016-05-13T19:27:00.712+01:002016-05-13T19:27:00.712+01:00@anon 7:22 - do you include mREITs in your short t...@anon 7:22 - do you include mREITs in your short thesis, or just vanilla? I hold the former and would be interested in your thoughts..washedupnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-30366809199763553322016-05-13T19:22:54.935+01:002016-05-13T19:22:54.935+01:00@LB, I mostly agreed with you and hold similar pos...@LB, I mostly agreed with you and hold similar positions. The difference is that I hold some short REIT ETF positions and plan to add some shorts. My choice of ETF has a large portion of commercial REITs and just tested the all time high, which I believed are due to a deep correction. <br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-51260333183594996102016-05-13T19:19:38.895+01:002016-05-13T19:19:38.895+01:00@johno - on your 4 observations - some thoughts:
...@johno - on your 4 observations - some thoughts:<br /><br />1) buybacks - is this such a silver bullet? AAPL has one of the strongest buybacks ever designed, but its been trading like crap and down 30% from the highs.<br /><br /><br />2) These days the IG market is driven almost entirely by crude - if you think the crude rally is real, sustainable, and on to the pre 2014 regime then you would be entirely correct - I know at least one hammock dweller who disagrees with you!<br /><br />3) Do you really think the profit cycle is troughing? The best case I can come up with is a top plateau or stagnation for a few quarters - sales will grow more or less in line with nominal GDP, or 1-2%, and every thing I look at points to rising cost pressures on wages (unless we get a recession in the US, in which case sales would drop) - none of the drivers behind the productivity bust seem cyclical to me - I would argue the heavy lifting on equities has to come from multiple expansion and not profits - not saying that can't or won't happen, but to me that would be the bet.<br /><br />4) Of all your points this is the one I agree with the most - I see smart money generally worried and nervous. Its not been a good idea to stay short for anything more than a few moons, obviously. Maybe this is a strong enough force to produce new highs, we will see. Just bear in mind we are talking about a market where max long means 99.9% people are long and max short means 98% are long. Equity selloffs are always about liquidation and never about shorts pressing.<br /><br />To me the thesis is pretty simple - you get inflation, its all over - till then its a range trade. <br /><br />washedupnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-84327255746426439982016-05-13T18:02:00.313+01:002016-05-13T18:02:00.313+01:00It's been a frustrating week. Here's a sum...It's been a frustrating week. Here's a summary of what LB is doing, or thinks he will be doing (feel free to insert your own commentary regarding where his head may or may not be located).<br /><br />We are in cash. Tons and tons of it. Other than a core portfolio [some REITs and other dividend payers], we are all cash. The central thesis here is that there is no easy money to be made, and that there is no longer any value whatsoever in stocks or bonds anywhere, only risk. USD can rally quite a lot from here (whether or not Dame Janet appears to want to leave the punch bowl on the table or remove it), even if only on incremental seasonal moves to produce firmer US economic and inflation data, and at some point soon this isn't going to be good for stocks or bonds. So we are long dollars (UUP), and short EURUSD. At some point we might also get long JPY for a trade, especially if we suspect the world is about to end for equities. We do see a much stronger (4-5%) USD by the July-September period, and perhaps even earlier.<br /><br />We are short CADUSD, and added to this yesterday. Markets can be manipulated for a while via leverage and magic tricks like making some supply disappear by putting it on containers, but eventually in the absence of demand, all commodity markets revert to fundamentals. This may not happen tomorrow, but seasonal weakness dictates that crude oil prices will likely soften again by July. When this actually happens, it will drag CAD down with it. We also have some USO puts that reflect a view that oil can easily fall 20% from here. A 50-61.8% retracement of the move takes WTI back to the range of $35-40.<br /><br />We are neutral equities right here, but we wouldn't be surprised to awake one day to a surging USD and JPY, and a large drop in risk assets leading to a waterfall-like event similar to or worse than January's decline. Again, we do have some IWM puts that reflect the non-zero possibility of a 10-20% drop this summer. We agree with others that we likely see one more slow low volume grind higher (days, weeks, a month?) before the bottom starts to drop out of the market. If a drop in equities does occur, a June/July hike might actually be a symbolic Buy The News event and terminate the selling pressure.<br /><br />Bonds and GBP are difficult here, and perhaps best left alone... nevertheless, we have some TLT puts for a short term trade, and we also own a few HYG puts that reflect a view that we will see another sizable move (5-10%) down in energy credits when the present bounce ends.<br /><br />Nobody knows what the trigger event is going to be for this market (China, OPEC, Fedspeak), but it is coiled for a major move. A look at the long term chart for IWM makes it easier to see what the direction of the move is most likely to be.Leftbackhttps://www.blogger.com/profile/07728096415928915882noreply@blogger.com