tag:blogger.com,1999:blog-34323687.post6422134435528006408..comments2024-03-29T12:26:35.581+00:00Comments on Macro Man: The aftermathMacro Manhttp://www.blogger.com/profile/12324967552369915949noreply@blogger.comBlogger39125tag:blogger.com,1999:blog-34323687.post-7991393422180826762016-03-13T13:58:19.998+00:002016-03-13T13:58:19.998+00:00Also I love Grantham style but he totally messed m...Also I love Grantham style but he totally messed me up on commodities in recent years. Was pounding the table saying iron ore was surely more than a bubble ( new regime ) in like 2013 when in fact he is supposed to be a professional bubble spotter and missed it, when it was pretty easy to spot, ( hindsight obviously ) if u looked on the ground. abee crombiehttps://www.blogger.com/profile/13320039155613443039noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-63023016715112435322016-03-13T13:49:09.128+00:002016-03-13T13:49:09.128+00:00Also I love Grantham style but he totally messed m...Also I love Grantham style but he totally messed me up on commodities in recent years. Was pounding the table saying iron ore was surely more than a bubble ( new regime ) in like 2013 when in fact he is supposed to be a professional bubble spotter and missed it, when it was pretty easy to spot, ( hindsight obviously ) if u looked on the ground. abee crombiehttps://www.blogger.com/profile/13320039155613443039noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-57937849710215773582016-03-13T13:44:30.368+00:002016-03-13T13:44:30.368+00:00On ev's, check out Tony seba, either on YouTub...On ev's, check out Tony seba, either on YouTube or here. <br /><br />http://mountaintownnews.net/2015/08/20/tony-sebas-startling-view-of-market-disruptions/<br /><br />Maybe he is a little optimistic but when bmw says all cars will have some electric engine ( hybrid ) in near future, end result on oil consumption isn't good. abee crombiehttps://www.blogger.com/profile/13320039155613443039noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-90328886101308094072016-03-13T13:41:11.337+00:002016-03-13T13:41:11.337+00:00On ev's, check out Tony seba, either on YouTub...On ev's, check out Tony seba, either on YouTube or here. <br /><br />http://mountaintownnews.net/2015/08/20/tony-sebas-startling-view-of-market-disruptions/<br /><br />Maybe he is a little optimistic but when bmw says all cars will have some electric engine ( hybrid ) in near future, end result on oil consumption isn't good. abee crombiehttps://www.blogger.com/profile/13320039155613443039noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-54715039657536609782016-03-12T16:04:12.056+00:002016-03-12T16:04:12.056+00:00@anon 2:45 - by that logic anything done by any ce...@anon 2:45 - by that logic anything done by any central bank that loosens monetary policy is some kind of a 'bail out' - duh - was anyone sitting back thinking CB's would rather have the banking system edge closer to destruction, than to kick the can down the road and hope human progress outpaces the credit cycle? So why the conspiracy theory?<br /><br />@anon 10:12 yes I don't think commodity equities have finally bottomed for this cycle, primarily because upstream oil producers dominate the indexes and they are still overvalued - I am turning cautiously optimistic on refiners and natural gas at these levels though, but they are a small part of the equation. washedupnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-71670383760181224182016-03-12T14:45:41.271+00:002016-03-12T14:45:41.271+00:00Anyone want to comment on Yra Harris' idea tha...Anyone want to comment on Yra Harris' idea that managing non-recognition of problem loans, i.e., avoiding bank insolvencies, explains a lot of what ECB did? Then stimulus etc. is just public relations cover, b'cuz banks with large NPL balances are, naturally, unable to see a decent loan anywhere (except among those who don't need to borrow). <br /><br />http://yragharris.com/2016/03/10/pistol/#more-3031Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-88923844792352408412016-03-12T13:48:38.678+00:002016-03-12T13:48:38.678+00:00http://www.marketwatch.com/story/why-the-fed-shoul...http://www.marketwatch.com/story/why-the-fed-should-stun-wall-street-with-a-rate-hike-2016-03-11<br /><br />...reading through the comments, I am sure most here realize there is an almost complete disconnect with equities markets and the global economy. When you look back to 2007, and realize what has been done to heal the markets, this is prominent...of the big 4 global economic entities, and I mean the US, the EU as a whole, China, and Japan, 3 of the 4 are using methods to increase stimulus to economies that won't keep running by themselves. Again, this is after 8 or so years, so the grade would have to be D or lower on what has been tried...<br /><br />The point? I would be cautious this week...if the Fed has determined to raise rates, things could get ugly quickly if a tantrum ensues. And yet, of course, where we are right now, a raise of .25% means little or nothing. At these levels, rate increases are like trying to move a stopped train...very little velocity or change when the first steps are taken...<br /><br />(jstfr?)<br /><br />2 cnets..<br /><br />Bruce in Tennesseenoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-73271136325067089962016-03-12T13:34:31.385+00:002016-03-12T13:34:31.385+00:00Anon 10:01, Grantham is like Hussman, I don't ...Anon 10:01, Grantham is like Hussman, I don't think it helps for macro timing. Grantham seems to have checked out in terms of even getting his newsletter out by the next quarter. His views on oil, fracking, the housing bubble in Canada/Australia/NZ have not been correct to date. <br /><br />Abee: thanks for sharing the article, very interesting read. Agree with shorting S&P, 2020 might be early though. I am very tempted to short AUD.USD at these levels but not sure how far this dollar correction will go. <br /><br />Canuck Banker: agree with your sentiments, unfortunately, there is the short term before the long term. In the short term, things could go up for another few weeks. <br /><br />Washed: the system effects of euro weakness have definitely been negative via the effects on China. Although it may weaken worldwide growth, I think the Europeans and Japanese still assess it as net growth positive for them. With the Chinese recently reaffirming their soft peg to the dollar, the Europeans and Japanese may have more incentive to try to weaken further before the Chinese do. It drags on the teat of U.S growth, but with the U.S fine still, why not? I think the Europeans and Japanese are more worried about the decline in industrial production than oil price/inflation effects. It seems they are in a long game of 3 way prisoners dilemma with the Chinese. <br /><br />Unfortunately, the markets have not cooperated with the FX effect in the last 3 months. It will be interesting to see if the Japanese redouble their efforts next week. In a slowing world, without a crisis, competitive devaluation still seems to make logical sense (G20 rhetoric aside). In a crisis, collaboration makes more sense, but there is no crisis to motivate collaboration currently. <br /><br />It will be interesting to see if the euro QE mechanism will work without the exchange rate movement. I am not sure risk markets will believe QE pixie dust is effective for long without the exchange rate effect, which is the only clearly concrete part of it. <br /> <br />Boogernoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-74162064113642463502016-03-12T10:12:48.394+00:002016-03-12T10:12:48.394+00:00Washed: Re your comment on the mega "short sq...Washed: Re your comment on the mega "short squeeze", does this imply you see as still in a longer term downtrend/bear ? <br /><br />Anon 1001 - "FED hikes will have to come though to balance things or else equity markets will go berzerk to upside."<br /><br />Remembered reading GMO's note where Grantham stated that this dip wasnt the "big" one as we are missing the euphoria. If we do go berzerk upside through CB moves, that will fit their narrative and timeline of bigger trouble a year or 2 down the line.<br /><br /><br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-34502312219933019522016-03-12T10:01:58.925+00:002016-03-12T10:01:58.925+00:00"The exchange rate channel was viewed as also..."The exchange rate channel was viewed as also playing an important role in the transmission of the monetary policy measures to the broader economy. It was noted that more recently, however, this channel had weakened owing in particular to the depreciation of the currencies of emerging market economies. "<br /><br />Tha is from the ECB minutes of the previous meeting. It is clear from this & their actions they have shifted policy. The currency wars are over for now. FED hikes will have to come though to balance things or else equity markets will go berzerk to upside.<br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-61395427178983839102016-03-12T09:40:06.419+00:002016-03-12T09:40:06.419+00:00Re EVs & renewables, yes, but... a secular shi...Re EVs & renewables, yes, but... a secular shift is afoot, the script being "things take longer to happen than you think they will, and then they happen faster than you thought they could". Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-1113337089375104802016-03-12T09:31:37.433+00:002016-03-12T09:31:37.433+00:00canuck/abee XOM/CVX always outperform in distresse...canuck/abee XOM/CVX always outperform in distressed environments because of L/S - no I don't think the credit cycle is over what's happening here is a continuing short squeeze, but it's a lot more powerful than anything we have seen in the last couple of years, and arguably still gaining momentum, because for the first time credit is leading it and not diverging from it. Could this all fall apart next week? Of course - we will see.<br /><br />Canuck re: oil prices and equity values, low oil prices were bad and now that its heading higher that's bad too? C'mon - if you are counting inventory data and talking about China slowing down thats yesterday's news - as for ECB being irrelevant to oil, if tomorrow a CB came and announced they would buy oil futures because inflation was too low and oil was the only reason (not far from the truth by the way) , you don't think that would matter in a market where a $2 BN purchase (50k lots) is usually enough to move it $2-3? Even a very small probability adjustment in the financial world trumps anything in the physical world.<br /><br />$30-50 oil is in my opinion commodity goldilocks after the dust settles, people adjust their recency bias that oil is 'crashing', and cost structures get rationalized. I daresay that could be the new long term trading range just like it was for, um, 10 years before everyone's Grandma came to hear of GSCI. I wouldn't worry about inflation from commodity base effects (although I am on record as saying there will be plenty from other sources) unless we cross $50, which I consider very very unlikely. <br /><br />Welcome to the 90's - here is a playlist to jog your memory:<br />https://www.youtube.com/playlist?list=PLWsC2QS0CG39P6H3aK6xBXx1SW2L0klmdwashedupnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-17048862420622054432016-03-12T05:08:09.232+00:002016-03-12T05:08:09.232+00:00"Electric cars are coming". 2014 US elec..."Electric cars are coming". 2014 US electricity generated was 39% coal, 27% natural gas, 19% nuclear, 6% hydro, 1.7% biomass, 4.4% wind .4% solar <br />There's really no such thing as an "electric" car. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-82376928359715093452016-03-12T04:36:47.171+00:002016-03-12T04:36:47.171+00:00Guys I didn't endorse that dz commentary, just...Guys I didn't endorse that dz commentary, just thought it was useful to share. Call him a kool aid drinker or anti zh, for sure but he's made some good calls and brings an interesting viewpoint. <br /><br />He's going to debate Jim grant on Monetary policy in April. If anyone here is going I'd love to get some notes. <br /><br />It hard to be bearish at $40 oil but Exxon or chevron only down slightly from 2014 highs seems a little odd. Maybe I'm late to the game or maybe supply is gonna fall off a cliff in 2017 but oil is done in my view. $60 maybe. Saudi Arabia is pumping like mad bc they know it. Electric cars are coming.. Over investment, free money and constant productivity improvement mean lower break evens. But still lots of room from current prices to 50 or 60 but I don't see this as a demand led bull like in the previous 10 years. <br /><br />Mr t. Commodity bonds already up a lot. Distressed guys buy when yields are double digits. But they aren't there anymore, more like high singles. For sure a good carry but a lot less marginal buyers, imo..I find it hard to believe that if the credit cycle did turn last year, that feb 2015 was it and now we are going back. Chk, only announced restructuring, not much pain anywhere else. If commodity prices rally it won't be much of a restructuring at all. Doesn't this feel a little like after bear sterns went bust. Hey banks are ok, party on. <br /><br />abee crombiehttps://www.blogger.com/profile/13320039155613443039noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-65121797148952938452016-03-12T02:30:15.898+00:002016-03-12T02:30:15.898+00:00I suggest that the ECB is largely irrelevant to co...I suggest that the ECB is largely irrelevant to commodities. What is happening in China is what will make or break commodities. Do you they need more real stuff, like oil, coal, iron ore, copper etc, to build more ghost cities, or not? Getting the Europeans to have an extra espresso or spend a few euros more on the premium weiner schnitzel isn't going to move the needle on commodities. So the real question is whether the rumors about equitizing NPLs in China are true, and if so, what is the consequence.<br /><br />Notwithstanding my doubts about commodity inflation, if we look at the relation between commodities and equities, I can't see how commodity price escalation can be good for equities at this juncture. If prices rise, rates will have to as well to counter inflation. Since relatively high equity multiples are largely a consequence of free money from central banks, taking away that liquidity shrinks the multiples and causes equities to go down.<br /><br />If commodities don't inflate, it means that the global economy is contracting, and so will earnings. Shares would go down, but for the additional liquidity that would flow from central banks. But should we not doubt the efficacy of that route? BinT raises a good question about how much longer markets can expect central bank flimflamery to have an impact when we have spent the last 8 years waiting, to no avail. <br /><br />BTW, I had the first oil relate insolvency in my portfolio this week. Lots more in the hopper, so how anyone can expect the situation in the real world to have somehow stabilized escapes me.Canuck Bankernoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-8469944344838269782016-03-11T23:07:44.097+00:002016-03-11T23:07:44.097+00:00So US breakevens are in crazy rally mode. We'...So US breakevens are in crazy rally mode. We've got many commodities pushing well off their bottoms - oil is up 50%, iron, even some of the softs are doing better. Stocks are pushing higher, led by commodity producers. Forget the anchoring bias of where they were, if you were just fitting over a 2 month horizon I think most people would be inclined to say inflation is rising, in real terms, with little help from FX. When CPI in the US starts printing north of 2%, the whole risk-off theme of the fed being out of bullets to fight deflation could look downright insane. What if the fed starts looking right - that the commodity decline was temporarily lowering inflation and thats done? Everyone hates this rally, particularly in the commodity space. I'm not so sure. Wouldn't be the first time I get tricked into buying a bear market rally, but thats what I'm doing. A debt swap here, an equity issuance there, and those bonds trading at .50 are gonna look real cheap - as silly as the bunds at 162. This has to be one of the biggest disconnects out there now - sovereigns with solidly negative yields with commodity price inflation? Explain to me again how Japan for example is going to not pass on higher input costs?<br /><br />I'm not a chart guy, but isnt 'GLEN LN' putting in the picture perfect double bottom?<br /><br />long all parts of the capital structure in commodities, short neg yielding bonds.<br />Mr. Tnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-1905325832995528192016-03-11T22:25:25.158+00:002016-03-11T22:25:25.158+00:00@abee
So... Paying negative interest on reserves ...@abee<br /><br />So... Paying negative interest on reserves (i.e. taking money from banks and destroying it) weakens your currency, but letting them borrow at negative rates (i.e. printing money and handing it to them) or printing an extra 20B/month and buying IG bonds (!) does not weaken your currency? Have I got that right?<br /><br />If I am the only person who thinks that sounds crazy, then I must be the crazy one. Could someone please elaborate?EschewObfuscationnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-66307542539647370472016-03-11T22:04:59.971+00:002016-03-11T22:04:59.971+00:00Abee: Interesting article. I am not convinced the ...Abee: Interesting article. I am not convinced the BOJ or ECB do not want a lower exchange rate as an important mechanism. <br /><br />Also, I am not so sure Draghi kicked an own goal on purpose. I tend to think they probably in a panic similar to BOJ. If eur.usd settles in 1.1-1.2 range then this may not be good for industrial production in Europe. <br /><br />Something has definitely changed in terms of FX sentiment to Japanese/Euro easing though. The last 3 times the FX market has gone against the wishes of BOJ/ECB. The BOJ meeting, one could chalk up to the market being freaked out by the Kuroda change of turn. The ECB meeting before the last one you could chalk down to disappointment and poor expectations management. The recent ECB announcement is clear though - they delivered, but the market decided to rip based on a remark by Draghi that at other times would have been relatively innoculous. <br /><br />Boogernoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-75794523283210798312016-03-11T21:48:57.260+00:002016-03-11T21:48:57.260+00:00Abee, that note reads like a post from a bullish z...Abee, that note reads like a post from a bullish zero-hedge site. Rife with conspiracy theory.<br /><br />I have a tough time drawing the long winding line from any of these monetary policy actions to the incomes of those people who have a high propensity to consume out of incremental income. Don't we have to assume that companies and asset owners are going to take this stimulus and physically invest? Without, what do actually get out of these policies? The impact on asset prices can be nullified rather quickly.<br /><br />That being said, I get the short-run impact on asset prices. But, if there is no real economy effect, shouldn't we expect the long-run effect on asset returns to be nil?ABnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-54833562110101335512016-03-11T20:44:05.248+00:002016-03-11T20:44:05.248+00:00Y even a gentlemans agreement ? Y not annouce it o...Y even a gentlemans agreement ? Y not annouce it openly ? I would have thoughT an open annoucement would make the coordination more powerful. Y keep mum ?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-68603904011560912132016-03-11T20:31:45.355+00:002016-03-11T20:31:45.355+00:00Some serious quality analysis today here, Pols blo...Some serious quality analysis today here, Pols blog and the comments here. I am grateful. Discount all price action from the last 3 months. It's like a cloud has been lifted in Europe, and I was a bear. These coming weeks will tell a lot.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-25210531944241035342016-03-11T19:20:03.762+00:002016-03-11T19:20:03.762+00:00Ironically, Zervos is probably the guy that most f...Ironically, Zervos is probably the guy that most fits BinT's caricature of a Kool-aid drinker. Macro Manhttps://www.blogger.com/profile/12324967552369915949noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-45319504259477701422016-03-11T19:16:09.298+00:002016-03-11T19:16:09.298+00:00abee - thx for that - I couldn't agree more - ...abee - thx for that - I couldn't agree more - I would just make one minor change, replacing<br /><br />'this was all part of a gentlemen's agreement back at the G20 meeting' with<br /><br />'this was all part of an agreement struck at a gentlemen's club back at the G20 meeting' <br /><br />if only I had some images to go with that story…..washedupnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-25314138484201227342016-03-11T19:08:47.364+00:002016-03-11T19:08:47.364+00:00What Mario did yesterday was to engineer a credit ...What Mario did yesterday was to engineer a credit easing without a currency devaluation. And my suspicion is that this was all part of a gentlemen's agreement back at the G20 meeting. Here was what I think happened in Shanghai. The BoJ and ECB proclaimed that they were both going to ease aggressively in March. The PBOC then said, well if you drive the EUR to parity and JPY to 130 with deeper negative rates we will break the USD peg. And that's when everyone said, ooohhh not so fast. It was surely well understood by all participants that the August and January CNY moves had destroyed all the hard reflationary work the ECB and BoJ had done since Q4 2014. And a full break in the CNY peg would bring a further nasty and unwieldy tightening in global financial conditions (i.e. our 1998 argument). No one wanted that! Also, it was no doubt widely understood by all those involved that the Chinese (with the peg in place) could not take a significant strengthening in the DXY given their domestic debt and growth situation. So the players in this very complex currency war game all sat down and came up with a simple agreement. The ECB and BoJ would focus purely on the DOMESTIC credit easing channel. They would not use these highly powerful negative rates (and forward guidance) to lower risk free real rates, and in turn weaken their currencies. Further, the Fed likely gave assurances that it would not remove accommodation too quickly via rate rises. That would also keep the DXY in check and give the Chinese time to use fiscal policy and structural reforms to manage the unwind of their debt bubble. All that said, I can imagine the Fed is thinking long and hard about ways to focus less on rate rises and more on a domestic credit tightening if conditions warrant further accommodation removal. The exchange rate externalities which arise from using rates may simply be too problematic given the delicate bilateral "detente" structure between the PBOC and FOMC. That is certainly some food for further thought. <br /><br />In any case, the easiest way to confirm this G20 currency peace agreement theory will be to watch the BoJ next week. If they ramp ETF purchases and look to set up funding structures which DIRECTLY support portfolio balance moves into riskier assets, while at the same time playing down the future use of negative rates, then "it's a bingo" as Christoph Waltz would say! I cannot wait to find out happens next week. In the mean time I think the market will need to digest this very large change in ECB (and possibly all central bank) policy. If there truly is a currency peace agreement in place, all market correlation patterns between currencies, rates and equites will need to change. This could create some very "spiky" flows in the coming weeks as many systematic algorithms begin to break. Good luck trading. <br />abee crombiehttps://www.blogger.com/profile/13320039155613443039noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-67533805166276478842016-03-11T19:08:15.300+00:002016-03-11T19:08:15.300+00:00From DZ. Interesting thoughts on ECB
The decision...From DZ. Interesting thoughts on ECB<br /><br />The decision by the ECB yesterday represents a sharp change in the usage of extraordinary monetary policies during the post crisis era. Mario delivered aggressively on all easing measures related to the DOMESTIC credit channel. He upped QE purchases by a larger than expected 20b/month. He introduced the purchase of non-financial IG corporate bonds. And he set up refinancing facilities which will allow financial institutions to secure long term funding for European securities at rates as low as -40bps. Mario went "full bazooka" on the DIRECT QE led portfolio balance channel. These policies will DIRECTLY ignite domestic credit formation in the Eurozone. Further, they will DIRECTLY force a portfolio movement out of risk-free/IG assets into higher risk assets. And of course, this is what we all hope will spark animal spirits, business investment, job creation, real returns on capital, and a real business cycle upswing in the Eurozone. <br /><br />What was missing in Mario's new policy directive was the traditional usage of risk free real rates as a driver of further easing. Of course he did take the depo rate down by -10bps, but at the same time he crushed forward guidance in the press conference. And it was the latter which created all the confusion (ie the 4 figure rise in EURUSD). Basically, Mario declared that the ECB was done with using the INDIRECT rate channel as a way to spur credit formation, investment growth and portfolio balance effects. The question of course is - "why did he do that?". <br /><br />Let me say up front that I do not think it has anything to do with the effectiveness of further moves into negative territory for short term rates. These moves are highly effective. They lower real rates, spur investment and consumption, and most importantly weaken the currency. But it is this latter effect which has been so troublesome for all central bankers. It is what has been at the heart of the "currency war" debate since the Fed started using rates and forward guidance back in 2008. When using the interest rate channel to drive a credit easing you end up stealing growth from your trading partners via the currency. And that in turn creates a lot of negative externalities.<br />abee crombiehttps://www.blogger.com/profile/13320039155613443039noreply@blogger.com