tag:blogger.com,1999:blog-34323687.post5098236611874610576..comments2024-03-29T15:07:48.008+00:00Comments on Macro Man: EMFX And USD, The World's Newest Petro CurrencyMacro Manhttp://www.blogger.com/profile/12324967552369915949noreply@blogger.comBlogger61125tag:blogger.com,1999:blog-34323687.post-15422883948540876542017-11-06T19:24:18.357+00:002017-11-06T19:24:18.357+00:00Fair comment, IPA, but distribution can continue f...Fair comment, IPA, but distribution can continue for months or years. Spotting this while happening is a valid exercise, and is no less valid despite one's talent for timing the Dump. We all know when the Pump happens (futures market overnight and into the close)...<br /><br />5s are back below 2.00%. Remember that massive short positioning in 5s? Yield curve flatter again. 2s10s 70 bps. 5s30s 81 bps. There are those (including pseudonymous blog proprietors) who like to mock, or at least question the relevance of, my YC obsession. Fair enough, but this is one of the more reliable economic growth indicators out there, but the slowdown follows with a delay of course. It's an early warning mechanism and it's free. Just use your eyes.<br /><br />Now, if we were the Fed and we wanted to unload Ts from the balance sheet at the moment, what would we want to do? Unload at the front end, at which point the banks have to come in and buy those offerings, and stay mostly steady at the long end, so as not to send mortgage rates into hyperspace. For that reason, we think of balance sheet unwind as another Operation Twist.<br /><br />HY spreads are a bit wider today. Keep an eye on that, EM credit (cough: China) and HY are frequently the sparks that light the bonfire. Now consider the fact that this bonfire has been spiked with accelerants (short vol and vol selling clown community). The fact that most people refuse to see that a bloody great big dry woodpile exists next to a stockpile of TNT is a bit alarming. <br /><br />Penny for the Guy, Guv'nor?Leftbackhttps://www.blogger.com/profile/07728096415928915882noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-5528099867614769862017-11-06T16:43:23.563+00:002017-11-06T16:43:23.563+00:00@LB, I swear every time Nasdaq makes a new high Sv...@LB, I swear every time Nasdaq makes a new high Sven is on CNBC telling everyone the same ole distribution story. I am not trying to discredit the guy but Peter cries wolf buy so many times before you shove him into the garbage bin, charts or no charts. Again, no disrespect at all.<br /><br />The oil and gas stocks are on fire today. What, everyone suddenly discovered the hidden gems? I ain't complaining. The train left the station, broke the f*ck down, came back to the station for a repair, passengers disbanded, and then it left unannounced pretty much empty. Catch up trade takes on a totally different meaning. @amps is gonna eat me alive on that term ;)<br /><br />Year end targets stay the same for me: OIH - $30, XOP - $40, XLE - $75, WTI - $60.IPAhttps://www.blogger.com/profile/14823892667440934141noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-82407314358414655182017-11-06T15:14:36.950+00:002017-11-06T15:14:36.950+00:00Just a quick observation on JPY, Shane. If I am no...Just a quick observation on JPY, Shane. If I am not mistaken, today might prove to be a reversal candle - as you point out, in the face of BoJ jawboning. When something starts to rebound in the face of the news, aligned with technical support levels, it is almost always a noteworthy event and often marks a turn. <br /><br />We bought some upside exposure in JPY today, added a little to the vol trade. Yes, the Ghost of Mean Reversion will visit vol sellers (like Jacob Marley visited Ebenezer Scrooge) perhaps as soon as this Holiday season. <br /><br />Technical momentum indicators have turned bullish for TLT. Just sayin'..... long bond, volatility, yen. The Yield Curve as well as the USD already suspects that the tax bill will be stalled or defeated. Equities (small caps) will get the message eventually.<br /><br />Northman Trader had an interesting analysis this week on how the last few weeks have been full of Distribution Days. Someone is selling, very quietly, in the mornings, and it isn't tiny punters. A foreign central bank? Remember the SNB has been loaded to the gills with US equities. We only get to see changes in CB holdings long after the fact. This market will have a very very narrow exit corridor, especially once the fire starts in the crowded theatre.<br /><br />Leftbackhttps://www.blogger.com/profile/07728096415928915882noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-15327047701583645022017-11-06T08:35:13.400+00:002017-11-06T08:35:13.400+00:00@IPA I’m not letting that position off the hook un...@IPA I’m not letting that position off the hook until China is full up on Nat Gas...Finally treating me right that trade. Man I fucked it up earlier though. Bad habits resurfacing temporarily...anyways did anyone happen to scope the live cattle futures last week? An unexpected home run for the DOT. Just curious if anyone else put the trade on. @amp are you out in Sydney grinding? I don’t know how to do the calculations of your willy wag tail in correspondence to the depth of snakes hate out in Sydney. Sounds like it’s a drag. <br />@IPA dude I love willy worm caterpillars. Wooly bear willies where your from, huh? I dig it...I couldn’t help from thinking that your farmers tale might be a candle chart reference, but I’m not sure. Those dam webs they could spin were just stupid strong. Little brown midsection equals savage winter, got it bro. Saudis palace intrigues abound...sudden deaths and frozen accounts...this surely will rouse a bit of the artist formerly known as VOL, right....Gamma can ya hear me??? Or it could be another boring record breaking day through the close...strange world we live in.sdot54https://www.blogger.com/profile/15849714548471331301noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-75344218902701434262017-11-06T04:05:16.395+00:002017-11-06T04:05:16.395+00:00@Eastern Suburbs. Put that one down to experience....@Eastern Suburbs. Put that one down to experience. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-82437279223253028642017-11-06T03:40:04.973+00:002017-11-06T03:40:04.973+00:00@IPA@Shane Ole farmer's tale - I'd like a ...@IPA@Shane Ole farmer's tale - I'd like a dollar for every willy wag tail for the degree of their tale wagging in correspondence to the depth of hate for me in every snake in Eastern Suburbs, Sydney. (you'd know if you ever ran with them) Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-90156422991573515962017-11-06T03:26:23.736+00:002017-11-06T03:26:23.736+00:00@Shane, something fun and interesting. Please don&...@Shane, something fun and interesting. Please don't assume I completely lost my mind. But... I am seeing a lot of wooly bear caterpillars crawling across my property from north to south and the ones I collected are almost all entirely black with very narrow brown band in the middle. Decent sample size, I got seventeen of them. Ole farmer's tale - if the body is mostly black with very little brown in the middle it means a very cold winter is coming, especially if they are crawling towards the south. Hold on to that nat gas position ;)IPAhttps://www.blogger.com/profile/14823892667440934141noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-87094771810582002652017-11-06T00:26:09.657+00:002017-11-06T00:26:09.657+00:00@LB Check out the BOJ minutes. “Members of this co...@LB Check out the BOJ minutes. “Members of this committee would not hesitate to intervene if the appreciation of the Yen persists thus hurting the economy.” JPY outlook doesn’t seem hopeful, but I could be mistaken. My point in my dollar thesis is it’s a basic supply and demand issue. Everyone wants dollars, problem is there isn’t enough dollars in the world to meet demand (a credit/debt based economy) while the US fed sells the balance sheet they will suck in dollars from around the globe. The rest of the world is still rocking QE for at least another year. That is flow of capital will bbe headed to the US regardless of Trump’s struggle to pass bills. A little patience and luck...domestic policy bears fruit adding to the US terms of trade. I’ve been wrong before. I’d invest in the Nikkei because it’s actually tracking the Yen (frequently) as opposed to exhibiting a negative correlation. (TOPICS)Anyways That’s prolly a good bet...sdot54https://www.blogger.com/profile/15849714548471331301noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-80877367997211362432017-11-05T23:36:53.442+00:002017-11-05T23:36:53.442+00:00@IPA,
I'm going to make sure every dollar of ...@IPA,<br /><br />I'm going to make sure every dollar of that liquidity pours down the drain of " I'm not coming back" with anything on top. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-68615652399949462052017-11-05T23:27:36.612+00:002017-11-05T23:27:36.612+00:00@IPA, "Ok, I better keep my mouth shut."...@IPA, "Ok, I better keep my mouth shut."<br /><br />I will do nothing of the sort. The flow of liquidity coming down the pipe from above is so obvious it is sickening. These people think they can buy off your soul. I'd rather do time than make them money. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-16662514462579068402017-11-05T14:50:13.318+00:002017-11-05T14:50:13.318+00:00MbS takes a leaf out of Putin's book.
Maybe ...MbS takes a leaf out of Putin's book. <br /><br />Maybe All-Wally was locked up for secretly mining Bitcoin while criticizing it? Lol... Dimon better watch out. We may have a "corruption purge" of our own here. Ok, I better keep my mouth shut.<br /><br />Political power struggle in times of tighter supply. Is this what's been driving the oil price higher? Speaking of Putin, election coming up in March. That production cut extension is looking like a done deal.<br /><br />I don't know what CNBC will do for ratings w/out All-Wally. I guess they gotta go heavy on Buffett now. The man is getting ole...<br /><br />In any case, @LB, should we add #9 to your list above? Avoid USD.IPAhttps://www.blogger.com/profile/14823892667440934141noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-35912783307190340502017-11-05T13:17:09.541+00:002017-11-05T13:17:09.541+00:00On USDJPY, nothing goes in one direction forever. ...On USDJPY, nothing goes in one direction forever. There are some indications that the US may stumble a little in the next few weeks and months, tax bill may not pass, jobs growth isn't gangbusters, and the one hike that is coming in Dec has long ago been priced in. Some indications of technical support for JPY - we might see a reversal in that trade for a month or two.<br /><br />The new leadership in Riyadh apparently believes in getting their retaliation in first. Nothing like a coup against likely architects of a coup before you actually come to power.<br /><br />Bad day for Prince All-Wally of the House of Saud. It is so delightfully medieval over there. Lock them up in the Tower, star chamber type courts, beheadings and so on. Nice place to drill, but you wouldn't want to visit… ;-)<br /><br />Hope All-Wally wasn't selling vol and buying spooz. Wonder what else he has been up to? Money laundering covers a lot of bases. His holdings are going to get whacked on Monday morning. Hello C, TWTR, AAPL…. <br /><br />The new Crown Prince seems nice. I mean, we wouldn't want to mess with him.Leftbackhttps://www.blogger.com/profile/07728096415928915882noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-20995371675840335682017-11-04T11:07:15.042+00:002017-11-04T11:07:15.042+00:00I see you now. I see you now. sdot54https://www.blogger.com/profile/15849714548471331301noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-91333225259317394452017-11-04T10:40:18.954+00:002017-11-04T10:40:18.954+00:00"@amp U can’t ever tell what your talking abo..."@amp U can’t ever tell what your talking about."<br /><br />@Shane, I'm going back to finding winners alone. That's what got me here. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-49439795303094502292017-11-04T10:05:00.862+00:002017-11-04T10:05:00.862+00:00Shit my bad, I can never tell what your talking ab...Shit my bad, I can never tell what your talking about is what I meant...sdot54https://www.blogger.com/profile/15849714548471331301noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-13192345286083514142017-11-04T10:02:58.292+00:002017-11-04T10:02:58.292+00:00Long Vol @LB hell yes. Dude, that will be a fun tr...Long Vol @LB hell yes. Dude, that will be a fun trip. I agree on VOL, long end of the curve, long dollars, long commodities, etc. I see your reasoning with the JPY. However pitted against the dollar I have different views bro. Otherwise I agree w/ya. @amp U can’t ever tell what your talking about...maybe I’m out of the loop? Getting to my point, I think I know what u mean regarding Asian money in western markets, but any way u could elaborate what you were thinking? sdot54https://www.blogger.com/profile/15849714548471331301noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-12280428861843772262017-11-04T09:53:17.525+00:002017-11-04T09:53:17.525+00:00Hey, LB. I forgot.
Yeeeeeeeaaaaahhhhhhhhhhhhh!Hey, LB. I forgot.<br /><br />Yeeeeeeeaaaaahhhhhhhhhhhhh!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-57160795193583318712017-11-04T05:15:46.026+00:002017-11-04T05:15:46.026+00:00LB, let's get it done in the markets. Sydney i...LB, let's get it done in the markets. Sydney is a no go zone for gambling stocks, period. Turkey and South Venezuela are a no go zone for gambling stocks, period. Let's move into the structure of Western capital markets and their reliance of Asian liquidity. I told ya, being me does have some benefits. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-5809726756819938942017-11-04T02:29:35.018+00:002017-11-04T02:29:35.018+00:00@LB,
I agree with you on long bond and VOL. But U...@LB,<br /><br />I agree with you on long bond and VOL. But USDJPY looks like to break out to the upside. This is purely from the technical point of view. zjhttps://www.blogger.com/profile/00471708200800450178noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-28652492825624605872017-11-03T20:36:54.851+00:002017-11-03T20:36:54.851+00:00Thanks for the comments, checkmate.
The yield cur...Thanks for the comments, checkmate.<br /><br />The yield curve continues to flatten unrelentingly, in a remarkable stealth trade that few have highlighted. 2s10s 72bp, 5s30s 82bp at the end of this week. The technical and sentiment indicators for the long bond have flipped slightly positive at the same time as the long end has outperformed. There is another 5% upside in TLT at least before that trade becomes a bit extended. The initial (dec 2016-july 2017) swing trade in TLT was our main money-maker this year, another one would be welcome.<br /><br />VIX briefly dipped below 9 today. Remarkable stuff, especially in light of the FOMC officially kicking off the downsizing of its balance sheet in Oct. Small caps lagged today, usually that adds to mild bearishness [on occasions when we express that idea].<br /><br />We are betting on a surge in vol during Dec and Jan, but it might start sooner so we have divided our bets through Q4 into Q1. High yield is already looking weak, and the long-awaited "blockbuster" jobs number failed to materialize, even as the traditional Q1 showdown beckons. A decent Q4 is priced into the markets here, as is another 25bp rate hike.<br /><br />Once again we are pondering that most loathsome of trades... long yen [and long vol]. JPY bottomed out around this level mid-July, and a rise in JPY led the increase in volatility in August. The usual pattern is volatility in FX, then credit, finally equities.<br /><br />We like JPY, the long bond and volatility. That more or less guarantees torrents of abuse and rotten fruit, doesn't it?Leftbackhttps://www.blogger.com/profile/07728096415928915882noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-45968564598329228612017-11-03T15:17:44.867+00:002017-11-03T15:17:44.867+00:00Good call with Turkey. The only worse performing c...Good call with Turkey. The only worse performing currency this year is Qatar's. I know last night they upped the inflation assumption to 10%???? It's getting hot over there. Not sure where we stand with Brazil...hoping they stabilize, but not counting on it. You guys paid attention to the CEE area yet? Eastern Europe is fascinating right nowsdot54https://www.blogger.com/profile/15849714548471331301noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-13654327146423162312017-11-03T14:22:31.930+00:002017-11-03T14:22:31.930+00:00Stopped out of my small -USDTRY on the ugly inflat...Stopped out of my small -USDTRY on the ugly inflation data. Ah well. Took profits in both CAD and NZD. USD impressive today, snapping right back from the AHE #. And we haven't seen any "coast is clear / Taylor tail risk is cut" buying in EM. Interesting ...<br /><br />I also wonder whether Brazil is ripe for a change of view. Pension reform before the election now looking quite unlikely and Lula and another populist are the leading choices. Still, hard to see things getting out-of-hand in the currency, given how much the current account has improved and the steady FDI (very different from Turkey).<br /><br />Have a nice weekend, all. And Shawn, thanks again for your reply on Mexico.<br /><br />johnohttps://www.blogger.com/profile/11356400378252164259noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-70311630177227750082017-11-02T18:39:52.080+00:002017-11-02T18:39:52.080+00:00Thanks Shawn, much appreciated. Those sound like r...Thanks Shawn, much appreciated. Those sound like reasonable odds. I was looking at 9M 17.00 digital puts, for example, offered at just under 10%. Looking at that joint probability (not to mention the possibility of recession/EM deterioration), it doesn't seem like there's as much vig as I thought on first look.johnohttps://www.blogger.com/profile/11356400378252164259noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-67188080032164548052017-11-02T18:07:16.606+00:002017-11-02T18:07:16.606+00:00@Johno, previously I had thought Trump didn't ...@Johno, previously I had thought Trump didn't have the incentives to ax NAFTA outright. Now I'm not so sure. I think the odds of a successful and business-friendly renegotiation of NAFTA is relatively poor, like 30-40%. At the last round the US negotiating team went out of their way to put non-starters on the table (sunset clause, US content rules, etc.). I think they've been given orders to crush the bilateral trade deficit and there isn't much good for Mexico that can come from that. And as time goes on Trump needs a victory, or at least to look strong and decisive in doing something. And kicking Mexico plays well with both his base and union democrats in the midwest that won him the election. <br /><br />Regarding AMLO, anything can happen between now and July 2018, but my base case is still that he will win (call it 50-60% if you want a number). Personally, I don't see how he gets less than 30-35% of the vote he got in the last two elections given the local, regional and global anti-establishment sentiment. Some say the split in the left between AMLO and the PRD will eat into his vote, and there is an independent candidate I think could come out of nowhere to win some votes (Ferriz). But the establishment parties are such a disaster I don't think they can convince people they can hose the sleaze off the corrupt system. <br /><br />So just for fun, the joint probability (although they aren't independent events) is 35% (NAFTA 2.0) x 45% (AMLO loses, and not to a crackpot) equals, I dunno, lets say 15%? <br />EM Inflationistahttps://www.blogger.com/profile/13376753485910252234noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-59944639310684760242017-11-02T13:02:02.733+00:002017-11-02T13:02:02.733+00:00BOE, we'll talk slowly using a deep voice ,use...BOE, we'll talk slowly using a deep voice ,use words that sound useful ,but are unintelligible , back it up with a 100 page report that will put you to sleep by page 5, this way you know we are worth our large salary cheques. Frankly, they could just have turned up said 'got to do the minimum 25bps because we'd be embarrassed if we didn't , but the good news is we won't be doing it again any time soon'. 'This is your invitation to kick sterling in the goolies and buy up anything that will get you a real return'. On a plus note they probably just ensured my next quarter is going to be better than my last.checkmatehttps://www.blogger.com/profile/03688082792316894545noreply@blogger.com