tag:blogger.com,1999:blog-34323687.post2823764259517700024..comments2024-03-29T09:24:42.731+00:00Comments on Macro Man: Putting it in perspectiveMacro Manhttp://www.blogger.com/profile/12324967552369915949noreply@blogger.comBlogger70125tag:blogger.com,1999:blog-34323687.post-86394066833475707472016-03-07T06:03:46.078+00:002016-03-07T06:03:46.078+00:00Canuk, here in NZ the multiple Chinese bidders ag...Canuk, here in NZ the multiple Chinese bidders against each other for property has stopped (combination of KYC bank acc and inland revenue number now required for property purchase and perhaps tighter control of capital leaving China). In Aussie especially Sydney property is at eye watering high prices and I read that in China primary city apartments are on a rip... maybe money cant get out so goes into Chinese property....<br /><br /><br /><br />NZ Diary farmers have a technical breakeven of about $5.20 nz per kg of milk solids and the current forcast for this coming year is about $4.25. I wonder how long they will be allowed to capitalise losses before there is an issue....<br /><br />Meanwhile in NZ tourism is going gang busters, perhaps because of our perceived safe distance from world hotspots?<br /><br />http://www.bloomberg.com/news/articles/2016-03-06/australia-s-banks-face-rising-bad-debt-charges-as-mining-fades<br /><br />Yet the NZD is 0.6766 as the algo's chase their tails.... I have been working in front office (non trading) for about 20 years, I have never seen the participants so doubtful of their own industry and whats about to happen next. <br /><br /><br /><br /><br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-82213634328390940042016-03-07T04:35:01.038+00:002016-03-07T04:35:01.038+00:00@MM: I'm not the expert, but my understanding...@MM: I'm not the expert, but my understanding is that it is a combination of concern about their resource exposure, and a higher reliance upon wholesale funding markets versus global peers. Spreads have come in over the past couple of weeks, I would note. Last week saw some bank issuance to take advantage of better market tone. Canuck Bankernoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-35634734474617411702016-03-07T03:27:30.816+00:002016-03-07T03:27:30.816+00:00@ CB, thanks for sharing your (here at least) rela...@ CB, thanks for sharing your (here at least) relatively unique perspective. Out of curiosity, to your last point- what's caused the increase in bank funding costs in Canada?Macro Manhttps://www.blogger.com/profile/12324967552369915949noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-82891830452614644652016-03-07T03:11:42.477+00:002016-03-07T03:11:42.477+00:00Thanks Pol.
@Washed: I am a corporate banker for...Thanks Pol.<br /><br />@Washed: I am a corporate banker for largest of large caps, if you want to situate my perspective. "Whole thing" and "Emperor" are references to markets generally, with the implicit support of the CBs being the unspoken behind the curtain puppet master. I don't mean that in a ZH conspiratorial way... only that having swelled balance sheets by trillions, they have (IMHO) massively distorted markets to the point where we don't even know what "natural", undistorted markets even look like anymore. <br /><br />In terms of ground truth, here are a few direct observations:<br /><br />1. On Canadian banks. Direct exposure to energy sector is probably understated, but not potentially fatal to any of the Canadian banks. I'm much, much more worried about the impact of the massive real estate bubbles in Vancouver and Toronto. These markets have been in rally mode since the 1990s. The average Joe here could easily substitute for the average American in 2006, with the iron clad belief that "housing never goes down." It truly is an example of those ignorant of history being doomed to repeat it. House prices have gone up by multiples, but incomes have been stagnant, if not falling. Leverage levels are higher than in the US prior to their RE crash in 2008. The smugness of anyone who works in real estate, construction or related areas is nauseating. I can only imagine that it is the same in Australia. How much longer can this go on?! <br /><br />2. CAD. See point #1 above about the real estate market. Changes in RE are going to have an equal or bigger impact on the economy than the resource sector. The Canadian private sector has only 3 pillars: mining, energy and real estate/construction. (Everything else has been acquired by global multinationals. Note that these three sectors are the only ones that can't be picked up and carried away.) So, if we don't expect resources to recover in any meaningful way, there remains the possibility of substantial downside in Canadian GDP (and accordingly rates, and the CAD), if the residential RE market cracks. I am bearish on the CAD at these levels. <br /><br />3. Canadian equity markets are very, very slow. Here we are heavily resource focused, and the junior space is trading in the basement. Boutique investment banks dominated the junior space, and almost all of them have be shuttered. That is an indicator of something in the resource space. 2016 is looking worse that 2015. <br /><br />4. Notwithstanding the importance of China in driving resource economics, it is astonishing how little everyone here knows about China. It is a black hole that, when everyone is happy clappy (to quote LB) is the justification for why trees will grow to the sky. "Don't worry, there will always be a huge demand for commodities because of the 1.5B people in China need them..." That is the full extent of folks' understanding. The sadest part is that I live across the tracks from a substantial collection of $10MM+ houses built by people who pumped and dumped junior resource names for the last decade and have made multi-generational wealth based on selling this story. <br /><br />5. Banking generally: Bank funding costs have increased substantially. For Canadian banks, I would say that the net costs of making corporate loans has doubled over the past few months. The loan market has not had a corresponding price adjustment. I suppose that it is just a matter of time, but right now, a lot of the loan book is underwater. <br /><br />That is all that I can think of right now. Canuck Bankernoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-50189604526248342742016-03-07T03:08:58.947+00:002016-03-07T03:08:58.947+00:00Anecdotes: Smaller energy co.s are under stress. P...Anecdotes: Smaller energy co.s are under stress. Ppl are getting laid off in oil services. Singapore retail is suffering, increasing vacant units in malls, where there used to be none. Resi rentals are down. Real estate transactions are down. HK prime retail rental down sharply. China capital goods demand down sharply. Phil ofw remittances are down and workers in the ME are not getting contracts renewed.cowboynoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-77454651177052345282016-03-06T23:55:52.854+00:002016-03-06T23:55:52.854+00:00@canuck - "If all we are doing is trying to g...@canuck - "If all we are doing is trying to guess what everyone else is going to do, sooner or later, the whole thing has to fall apart, once someone notices that the Emperor really has no clothes."<br /><br />with all due respect, your commentary would hold a lot more meaning if you specified what 'the whole thing' is, and who 'the Emperor' is.<br /><br />any interesting observations from the world of banking on how 2016 is shaping up vs last year? which sector do you specialize in?<br /><br />thx for ur thts. washedupnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-26865145483359097332016-03-06T22:41:11.191+00:002016-03-06T22:41:11.191+00:00Canuck.
Bingo. Correlation is circular intraspec...Canuck. <br /><br />Bingo. Correlation is circular intraspective naval gazing when it is all within the cell membrane of the financial product organism. But beyond discussing which asset is leading which, I agree that the real world is what should be driving it. . To that point I refer back to my suncreme solar output ref above. These things are not driven by each other but by a greater external force. And how do we or are we meant to watch what is going on in the real world? Economic data and statistics from all sorts of strange sources are the telescopes of the finanical astronomers, but the problem with them is that they, like astronomical telescopes, only give us signals in selective wavelengths (those that each economic stat is tuned to) and even then the signal is old as it originated lightyears away. <br /><br />One thing we havent had for a while on this board are the anecdotal, on the street, what your dinner party non financial mates are talking about, type nuggets. <br /><br />Canuck, your input is most welcome if you wish to further eloborate on what you are seeing out there please do share <br /><br />Once again .. well put and thanks <br />Pol <br />Polemichttps://www.blogger.com/profile/05985506596290073453noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-77382527337265395702016-03-06T22:00:37.499+00:002016-03-06T22:00:37.499+00:00I'm a banker, not an professional runner of mo...I'm a banker, not an professional runner of money. But I want to share a thought, as an external, and somewhat detached observer. <br /><br />I'm surprised by the degree to which commentary on boards like this have been self referential. It seems to me that market participants have become one big circular reference. SPX being driven by oil; oil being driven by SPX, as an example. Which is the cause and which is the result appears to depend on which market participant you ask. <br /><br />The quants calculate correlation after correlation, the vast majority of which are inter-financial market dependencies. My guess is that financial metrics are easy to measure, which is why they drive the markets, at least in the short term.<br /><br />But has anyone stepped away from their monitor, and perhaps took a stroll in the real world for a while to see what is happening there? In the long term, what happens in the real world dictates the fate of capital markets. I get the feeling that a lot of market participants can't grasp this basic truth. Not sure whether it is their vanity that causes them to place themselves (and finance) at the centre of the universe, or ignorance of reality caused by too much time in front of a computer. Financial markets can facilitate commerce, but they are not commerce in and of themselves. <br /><br />It is a lack of understanding of what is happening in the real world that is causing these massive swings in the market. Momentum chasing is becoming more and more amplified, as peoples' understanding of what is happening in the real world becomes weaker and weaker. Market participants basically have no confidence in anything. I suppose what I am really saying is that markets are becoming detached from fundamentals. Is it just me, or is this detachment getting worse from what we have seen historically? Regardless, this is very unhealthy for markets themselves. <br /><br />So, what are swings in the Yen, or the Yuan or the price of oil or HY spreads or SPX levels really telling us? These are just polls of a very highly concentrated bunch of group thinking money managers. Someone said it recently on these boards: markets are extremely poor predictors of the future. If all we are doing is trying to guess what everyone else is going to do, sooner or later, the whole thing has to fall apart, once someone notices that the Emperor really has no clothes. <br /><br />I know that you guys (and gals) are pros and read this to make money. Not sure how you can monetize my conjecture, but wanted to offer it up regardless. Incidentally, MM, this is one of the most intelligent commentaries on markets that I have found on the web, and thank you and all of the regular contributors for making it possible. <br />Canuck Bankernoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-60130850746645981482016-03-06T16:59:29.618+00:002016-03-06T16:59:29.618+00:00Ratio of insider buying to the SPX...
http://img...Ratio of insider buying to the SPX...<br /><br /><br />http://imgur.com/QUKJJopAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-4824889339580465302016-03-06T16:56:13.680+00:002016-03-06T16:56:13.680+00:00The last VIX death cross was on 11-16-2007...guess...The last VIX death cross was on 11-16-2007...guess what just happened<br /><br /><br />http://imgur.com/4XhG0Pb<br /><br />Source link: http://www.cboeoptionshub.com/2016/03/05/vix-death-cross-update/Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-4720934138753276592016-03-06T16:37:24.337+00:002016-03-06T16:37:24.337+00:00Anon 6:53 AM
Never meant the post on bounces to b...Anon 6:53 AM<br /><br />Never meant the post on bounces to be analogous. There are many different reasons for this bear market ( which will resume shortly ), but mainly, it is that global trade prices/volumes are rolling over. You have to go back to the 1870s and 1930s to understand what is happening right now.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-51286017281576057362016-03-06T06:53:05.154+00:002016-03-06T06:53:05.154+00:00We had a bubble with euphoria in 2000, which we do...We had a bubble with euphoria in 2000, which we do noy have now. So is 2000 A good comparison even ? Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-81150653065359399232016-03-06T03:15:37.386+00:002016-03-06T03:15:37.386+00:00Anon 12:10 AM "Anyone who thinks equities are...Anon 12:10 AM "Anyone who thinks equities are not going higher is clearly blind."<br /><br />Go back to the crash of 2000-2002<br /><br />5 significant bounces<br /><br />8.4%<br />18.7%<br />21.2%<br />20.7<br />20.3%<br /><br />SP500 is now up 9% from the February 11 low.<br /><br />We are in a bear market and this is merely a bounce.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-3629139441366401462016-03-06T03:03:06.533+00:002016-03-06T03:03:06.533+00:00The road to hell...the Fed will march in lock step...The road to hell...the Fed will march in lock step to BOJ and ECB actions. ECB will now lower their negative interest rates even more. Japan will follow with something of similar magnitude. China must react and either let the float the yuan or sharply devalue. Fed will follow with a neutral bias, then an easing bias and finally easing. If China floats the yuan. it won't be too long before the Fed reacts with negative interest rates.<br /><br /><br />“People of privilege will always risk their complete destruction rather than surrender any material part of their advantage.” – John Kenneth Galbraith – The Age of UncertaintyAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-76895735328614313962016-03-05T16:07:18.097+00:002016-03-05T16:07:18.097+00:00Pol, and others, what do you think of the yen cle...Pol, and others, what do you think of the yen clearly shunning CB efforts to do more non conventional intervention. Seems to me that yen risk is perhaps a canary....also I noticed the yen started strengthening before the equity bear in 2007. Any thoughts if fx had it early the last time and might have it early again. <br /><br />On commodities, while <30 oil is probably too low, going above 50 or 60 is likely to induce US supply. And other base commodities, especially steel and iron ore have absurd amount of excess capacity. They might be cheap and due for a good bounce but this isn't the start of a new cycle for a long long time. Copper is more interesting, apparently supply shocks in 2017-2018 ...Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-10150975776242962762016-03-05T14:48:47.849+00:002016-03-05T14:48:47.849+00:00Yes, washed, it was possible, and my point is that...Yes, washed, it was possible, and my point is that it didn't lead to the end of the world as we know it because rates are still severely abnormally low, so rate increases basically mean very little...<br /><br />Productivity?<br /><br />http://acrossthecurve.com/?p=25082<br /><br />Explaining the Decline in Productivity<br /><br />"A trio of economists from the Federal Reserve and the International Monetary Fund think they have the answer and it’s not particularly pretty. They argue in a new paper that the down-shift in productivity is for real. It’s not a mirage of mis-measurement by government statisticians unable to keep up with rapidly changing technology.<br /><br />To show how important that conclusion is, the paper’s authors cite one telling statistic. U.S. gross domestic product would have been about $3 trillion higher in real, inflation-adjusted terms in 2015 if productivity hadn’t slowed over the last decade."<br /><br />..I am still pondering what this means for the US if this continues....Bruce in Tennesseenoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-87142737937165456722016-03-05T13:58:39.755+00:002016-03-05T13:58:39.755+00:00BinT - no disagreement on real economy impacts, bu...BinT - no disagreement on real economy impacts, but would like to point out that in Q4 there was a sizable camp that believed the Fed wouldn't even be able to logistically manage a 25 bps increase because the mechanism had broken down and reverse repos would be an abject failure, leading to turbulence of various sorts - ironically we have gotten oodles of turbulence, but its had nothing to do with the NY Feds management of the rate regime. <br />My point is that the 25 bps increase at least proved that a 25 bps increase was possible.washedupnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-20273095433767090712016-03-05T13:16:14.068+00:002016-03-05T13:16:14.068+00:00Well, with the fed meeting coming up later this mo...Well, with the fed meeting coming up later this month, I think I've learned one thing. What was the result of the quarter point tightening? You got it, boys. <br /><br />D. Absolutely nothing.<br /><br />Yes, after all the gnashing of teeth and the pulling of heir, what did we observe? The dollar went up, the dollar went down. Interest rates didn't do a whole lot, but have trended lower, and now trending back up. China didn't fall off into the ocean, nor did they get rid of their messes. Etc.<br /><br />The reason of course, is that we are at the absolute lower bound of rates, so a small increase is sound and fury signifying nothing. If the fed tightens this month another quarter point, what will the result be? You got it...gnashing of teeth, pulling of hair...but economically, absolutely nothing. Rates are too damn low for tinkering around zero to mean anything...<br /><br />2 cnets..<br /><br />Bruce in Tennesseenoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-21924827198312038172016-03-05T12:30:51.374+00:002016-03-05T12:30:51.374+00:00I don t think fx vol in itself should be taken as ...I don t think fx vol in itself should be taken as an indicator to equity future. It's responding in parallel to the same overriding macro factors that drive everything else. <br /><br />Eg sun cream sales don't drive solar panel output. They both depend on the sun coming out. Polemichttps://www.blogger.com/profile/05985506596290073453noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-61917253926309342542016-03-05T12:07:17.705+00:002016-03-05T12:07:17.705+00:00Direction in specific pairs would in general signa...Direction in specific pairs would in general signal risk on. But what is your time frame - d/w/m/q/y? <br />What I meant by environment was longer term, ie quarterly/yearly. <br />If we're in a fundamental shift to a new higher vol FX environment (in the longer term sense quarterly / yearly) I don't think it would be an unalloyed equity bullish environment. <br />DXY is still in the 2015 range, but looks like it's gonna break the upside sooner rather than later. May? <br />DXY 2013 - 2016 Mar http://imgur.com/gallery/wOwa4Yi<br />Don't think continued USD strength is eq friendly at all. Continued pressure on CNY and US exporters among other things. <br />That's how it looks to me now but I could be wrong and DXY could break downwards (QE4 anyone?) or range (Fed on hold?) cowboynoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-34178671393099061312016-03-05T08:19:19.219+00:002016-03-05T08:19:19.219+00:00cowboy, I would say a fall in: JPY, CHF and USD wi...cowboy, I would say a fall in: JPY, CHF and USD with a corresponding rise in: GBP, AUD, NZD, CAD etc looks pretty much like a risk-on environment in FX.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-14199340053865092572016-03-05T07:40:34.017+00:002016-03-05T07:40:34.017+00:00FWIW, one of my relatives runs a yellow iron impor...FWIW, one of my relatives runs a yellow iron import business in China, and in the last few weeks after Chinese new year when demand is traditionally the highest, business has been very lukewarm (i.e. no pickup compared to past year or 2) so if there is renewed commods demand it isnt coming out of China construction sector.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-16574356923558599882016-03-05T06:52:18.196+00:002016-03-05T06:52:18.196+00:00Anon at 6:23, I think gwtf is go with the flow.......Anon at 6:23, I think gwtf is go with the flow....Whammernoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-31478220683676608622016-03-05T06:23:14.849+00:002016-03-05T06:23:14.849+00:00what is gwtf lolwhat is gwtf lolAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-9605652004683844832016-03-05T02:50:42.259+00:002016-03-05T02:50:42.259+00:00Going higher till they don't. Multiple uncerta...Going higher till they don't. Multiple uncertainties remain:<br />CNY, oil prices, HY, fed rates, USD direction, Brexit, US election noise etc.<br />Mkts have gone from panic to complacency (?)<br />I think the current rally in risk will run out of steam at some point and turn down again, similar to price action fr late Aug to Jan.<br />Massive rally? Bear market rallies are among the sharpest. And I don't see how high FX vols translate into a risk on environment, I would think the opposite. <br />I think we see a break of SPX 1800 this year. <br />I could be wrong of course (have been many times before =D) so will neither btfd nor stfr, but rather gwtfcowboynoreply@blogger.com