tag:blogger.com,1999:blog-34323687.post7750140600093298981..comments2024-03-28T12:22:11.704+00:00Comments on Macro Man: Brexit pricing precedents: an empirical studyMacro Manhttp://www.blogger.com/profile/12324967552369915949noreply@blogger.comBlogger40125tag:blogger.com,1999:blog-34323687.post-50226965755605667742016-06-15T12:29:02.854+01:002016-06-15T12:29:02.854+01:00this is from Pictet on EU banks: just passing i...this is from Pictet on EU banks: just passing it on. I don't know much about them<br /><br />All in all, the current environment of<br />protracted ‘low-flation’ and the<br />Japanese precedent suggest caution<br />when it comes to European banks’<br />near-term prospects. There is a real<br />possibility that we will have low<br />interest rates for some time, putting<br />continual pressure on banks’ margins<br />and causing their earnings estimates<br />to decline even further, reinforcing<br />investors' concerns about<br />profitability. This suggests cautious<br />positioning in the banking sector,<br />avoiding most names with mid-single<br />digit ROEs, which may be value<br />traps. The more attractive banks are<br />the quality names or winners in their<br />respective areas that display aboveaverage<br />profitability and strong<br />balance sheets and that can pay out<br />attractive recurring dividends. Lloyds<br />Banking Group, BNP Paribas and<br />Intesa Sanpaolo might fit into this<br />category. At the sector level and after<br />a long period of underperformance<br />for banks which has left them trading<br />at low multiples relative to history,<br />we also believe investors should<br />stand ready to jump in if and when<br />inflation expectations shift higher.hennerhttps://www.blogger.com/profile/15381506750678483901noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-21929964165136614822016-06-15T07:52:26.157+01:002016-06-15T07:52:26.157+01:00Nico,
do you have some more color regarding Intes...Nico,<br /><br />do you have some more color regarding Intesa? Viewed from the outside they look like the relatively cleanest dirty shirt (which is a rather low hurdle but still). How can they play the accounting game even more reckless?Eddienoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-88777974909459173412016-06-15T07:50:56.532+01:002016-06-15T07:50:56.532+01:00That vol excess was expressing itself interestingl...That vol excess was expressing itself interestingly through the binaries last night where june 30th on touch 1.3600s in cable were at about 60% whilst Leave in bookies was at 35%. Ok, there is usd risk in there and you coukd get a ' touch n go' in the run up that looked arbable.Polemichttps://www.blogger.com/profile/05985506596290073453noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-62197066716354602472016-06-15T07:42:17.906+01:002016-06-15T07:42:17.906+01:00That vol excess was expressing itself interestingl...That vol excess was expressing itself interestingly through the binaries last night where june 30th on touch 1.3600s in cable were at about 60% whilst Leave in bookies was at 35%. Ok, there is usd risk in there and you coukd get a ' touch n go' in the run up that looked arbable.Polemichttps://www.blogger.com/profile/05985506596290073453noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-49718271363904100142016-06-15T02:31:51.391+01:002016-06-15T02:31:51.391+01:00Msci says no and Yuan fixing. Oops.Msci says no and Yuan fixing. Oops.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-9303682573149817722016-06-15T02:26:15.513+01:002016-06-15T02:26:15.513+01:00Was anyone here actually around for the 1985 low i...Was anyone here actually around for the 1985 low in cable? Amusingly, that was the very moment when LB left Britain for the US, and with the exchange rate close to parity at LHR, he didn't get many greenbacks for his pounds. Luckily, LB only had £100 in his pocket and a job offer, so the event was relatively painless. Still, another drop like that to $1.10 for Betty would be bloody painful for a whole lot of punters, one assumes, not to mention triggering a nasty little (self-correcting) bout of stagflation??Leftbackhttps://www.blogger.com/profile/07728096415928915882noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-39442752912862548992016-06-15T01:52:54.744+01:002016-06-15T01:52:54.744+01:00Carney likes to do nothing and just jawbone the po...Carney likes to do nothing and just jawbone the pound lower. If there is Brexit, he will not have to do anything.<br /><br />Dame Janet wishes that she could do the same, but may be boxed in. It is possible that an unwind of reflation trades will lift the dollar and cool overheated speculation in the US without any Fed action and bail her out.<br /><br />FX specialist reviews the other currency, the black liquid one that drives all inflation data, and finds it breaking down:<br /><br />http://www.marctomarket.com/2016/06/great-graphic-oil-flirts-with-four.html<br /><br />Pol, cable is close to its GFC 2008 lows here, one wonders if we are close to Brexit being priced in or if a much older low might be visited in the event of such a result? Like many others here we are sorely tempted to have a punt on long sterling, in the hope of the electorate eventually rejecting the more irrational and xenophobic arguments for leaving the EU. Still, as you point out, there are other drivers for USD to rally, so it might be best to sit it out and wait for the FTSE to present a raft of juicy divvy buying opportunities. We have hardly ever invested as much as 5p in the assets of our native land (due to the whole lot being inordinately over-valued, especially in USD terms) so it would be pleasing to finally own a piece of Albion.Leftbackhttps://www.blogger.com/profile/07728096415928915882noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-56633387135703872812016-06-15T00:36:28.423+01:002016-06-15T00:36:28.423+01:00And as for Carney and rates on brexit? If there is...And as for Carney and rates on brexit? If there is a growth shock then rate cut rather than a hike in response to FX led inflation, Wrong inflation, just tell the Japaese. Polemichttps://www.blogger.com/profile/05985506596290073453noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-78950149391761137062016-06-15T00:34:16.127+01:002016-06-15T00:34:16.127+01:00Going South .. agree with your logic and yes, the ...Going South .. agree with your logic and yes, the global non UK Based, but UK listed, co.s are the first steal after any brexit panic. <br />Unravelling brexit moves from more worrying mkt chills is the game now. Global contagion from brexit economically is going to be light if EU stays its course. If the world does fall apart because 99% of the world's population refused to trade with 1% of the population, then I'd blame the 99%. But it won't.<br /><br />re gundlach. Hardly a new theme and eminently untradable over a one year period as has been prove over the last six one year periods.Polemichttps://www.blogger.com/profile/05985506596290073453noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-30438590999270709912016-06-14T23:01:45.354+01:002016-06-14T23:01:45.354+01:00DoubleLine's Gundlach says 'central banks ...DoubleLine's Gundlach says 'central banks are losing control' <br /><br />http://reut.rs/28CEnsS Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-64559960166792137472016-06-14T22:49:17.800+01:002016-06-14T22:49:17.800+01:00@johno/abee - if european banks had good balance s...@johno/abee - if european banks had good balance sheets and a willingness to lend, why, pray, would the ECB have to cut them out to increase credit to businesses via the corporate bond purchase program? With Loan demand static, basically BoJ and ECB are fighting their banking sectors for market share, under the assumption that if it weren't for these stodgy nitwits, EU would be a skip and a jump away from meeting their dogmatic targets.washedupnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-53840467487887576782016-06-14T22:21:41.077+01:002016-06-14T22:21:41.077+01:00(Long time reader but first time poster here)
I&#...(Long time reader but first time poster here)<br /><br />I'm also following UK equities with interest, and a bit of puzzlement. Many of them are essentially international companies, with most of their revenue from abroad. Therefore _in theory_ surely they should be more robust to Brexit than the currency... so when GBPUSD falls, the sterling prices of large international companies should rise to offset some of the loss.<br /><br />Clearly this effect doesn't seem to be in play at the moment, as we're swept up in general uncertainty and risk off. However once the dust settles, then at some point I'd expect many UK shares to start looking very cheap to international investors. The question is at what point to switch from GBP currency (I still hold some, though I got out of most of it a week ago) to industrials, pharmaceuticals, miners, etc...GoingSouthnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-1297622731244191262016-06-14T21:56:35.843+01:002016-06-14T21:56:35.843+01:00Re: cable vol, the implied daily move for the 24th...Re: cable vol, the implied daily move for the 24th is north of 8%, so way more than 934 pips.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-57288120056760142162016-06-14T21:46:29.678+01:002016-06-14T21:46:29.678+01:00Intesa solid?
there is no solid accounting on whi...Intesa solid?<br /><br />there is no solid accounting on which to wager anything<br /><br />meanwhile in the world :<br /><br />http://www.bloomberg.com/news/articles/2016-06-14/kirchner-official-caught-burying-millions-in-argentine-convent<br /><br />coming across news like that is truly the worst part of our job, worse than the worst trading loss. Corruption. Greedy corporate. Greedy politicians. Everywhere. AmenNicohttps://www.blogger.com/profile/06532015745155347229noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-1128359828746455142016-06-14T21:38:39.380+01:002016-06-14T21:38:39.380+01:00LB, just curious on your thoughts on banks, have y...LB, just curious on your thoughts on banks, have you taken the time to dig into any individual numbers or is everything a macro / interest rate call. <br /><br />I dont pretend to be a banking expert but over the past several months the few times I have looked at individual names like Intesa or Llyods, they seemed to be very solid and I wager they will find a way to make some money, unlike say DB or CS which are iBanks and have their own issues abee crombiehttps://www.blogger.com/profile/13320039155613443039noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-28532631139228582652016-06-14T21:03:34.075+01:002016-06-14T21:03:34.075+01:00Looks like we may get a pause in selling as we awa...Looks like we may get a pause in selling as we await Dame Janet and the Dots tomorrow. We took some profits in our IWM options position yesterday afternoon and we are awaiting our next opportunity. We are still short EURUSD and long USDCAD.Leftbackhttps://www.blogger.com/profile/07728096415928915882noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-39288494663519150932016-06-14T20:46:25.709+01:002016-06-14T20:46:25.709+01:00Some excellent points made here by LB concerning t...Some excellent points made here by LB concerning the European banks. When rates were positive and the yield curve steeper, there was some hope that they could repair their balance sheets with profits. But with the ECB cutting rates to negative and extending QE out the curve, the banks can't recapitalize themselves and there isn't the political will in the EU to recapitalize with state funds. Seeing banks heading for the brick wall, will markets force the issue? Can they, given the ECB's policy options/willingness to provide liquidity? Or do we have to wait for the next recession?<br /><br />It seems the ECB may have corned itself. I recall Gundlach saying recently that the next major event for markets would be when the ECB and BoJ gave up the experiment of negative rates. Maybe. Perhaps a European banking crisis could force them to.<br /><br />I was early taking off my GBP short Friday. I didn't want to have a position through the weekend polls, thinking they could start swinging to Remain now. Wrong.<br /><br />Oil is tricky, especially with all these unplanned outages. I mean, who knows what Nigerian production is going to be three months from now? (my guess is it'll be low, since corruption greased production and Buhari is attacking it, but what do I really know?). John Dizard observed in the previous weekend's FT that a lot of oil is going into floating storage despite the flat curve. I wonder, who is taking all that outright oil exposure? If I were China and I didn't have enough onshore storage built but wanted to take advantage of low prices, wouldn't I go out and contract tankers to store oil until I was finished building them? Perhaps that explains some of it.<br /><br />Interesting reversal in USTs today. Maybe just position-squaring ahead of the Fed.johnonoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-69642327925169014622016-06-14T20:33:46.498+01:002016-06-14T20:33:46.498+01:00Spot on, CV. It's confirmed by 'officials ...Spot on, CV. It's confirmed by 'officials with knowledge' http://uk.reuters.com/article/uk-britain-eu-ecb-idUKKCN0Z01NQ<br /><br />Love to see more and more crazy the bond market goes!Cityhunternoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-34681672028258698772016-06-14T18:30:21.951+01:002016-06-14T18:30:21.951+01:00"Many JBTFDers and Risk Forever fans are look..."Many JBTFDers and Risk Forever fans are looking forward to FOMC fellatio as usual tomorrow, but they may be disappointed."<br /><br />Yep, that is my take too. Spoos were due a little weakness anyway. Europe, including the U.K., looks ugly all day long, but I think it is important to keep the big picture in mind here. Many U.K. equities, and I am not referring to energy and financials, were cheap going into this scare, and they could get really, really cheap if this gets silly. I have dry powder on stand-by. <br /><br />As for swap-lines etc. Oh yes. Rest assured that liquidity will flow easily if Brexit happens. I think the CBs, for all the criticism they get, now know how to prevent solvent institutions from suddenly being taken out. Of course, if said institutions are INsolvent ... well ;). <br /><br />For the record; I also think the ECB would cut rates if Brexit happened (QE extension already baked in here, right?). EURGBP would go to the moon. But all the action will be at the BOE. The knee-jerk reaction will be to cut ... but can Carney do it ... i.e. what happens to front-end gilts. That is the key. <br /><br />A fair scenario, I think, is also that if the U.K. leaves, the EU will offer a second deal. If that is rejected ... Germany will throw its toys out of the pram. CVhttps://www.blogger.com/profile/16843402165210120665noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-72960879115730046172016-06-14T16:46:40.490+01:002016-06-14T16:46:40.490+01:00LB didn't see this when it first appeared but ...LB didn't see this when it first appeared but it is a reasonable statement of our current trading/investment thesis. It's interesting that this guy also chose long UUP, short IWM as the basis for his summer trading, but we can promise you that we are not in fact this guy:<br /><br />http://www.marketwatch.com/story/5-reasons-the-dollar-will-get-stronger-2016-05-19<br /><br />With regard to the dollar, we said a while ago that the dollar can rise this summer IRRESPECTIVE OF THE FED'S ACTIONS, and that an unwind of the reflation trades would have just the same effect as a rate hike.<br /><br />Draghi is now pledging to do whatever is necessary to maintain liquidity in the case of Brexit. How many bazookas can any one man keep stuffed down his pants? Even Super Mario has limits, surely?<br /><br />@nonrandomwalker: Yes to swap lines. We will see them used extensively in the next few weeks, I think. LIBOR/OIS is creeping up. There are some real problems out there and someone has been swimming without their trunks on, for sure.<br /><br />The oil/gold ratio had been gliding higher but that's reversed smartly in the last week or so. We doubt very much whether recent leveraged oil longs have the stomach for a nice overnight plunge, and we suspect that it isn't very far away.<br /><br />Spoos have dipped below the 50 day, so that will act as resistance for the time being. Many JBTFDers and Risk Forever fans are looking forward to FOMC fellatio as usual tomorrow, but they may be disappointed. The Lady may be in no mood.Leftbackhttps://www.blogger.com/profile/07728096415928915882noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-65781574177006656232016-06-14T16:14:43.944+01:002016-06-14T16:14:43.944+01:00JBTFD & Risk Forever - what are you're tho...JBTFD & Risk Forever - what are you're thoughts from here? Genuine interest, from the other side. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-40039323549200266972016-06-14T15:47:31.158+01:002016-06-14T15:47:31.158+01:00French OATS not happy today. WHat's up there?French OATS not happy today. WHat's up there?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-4090209682507385952016-06-14T15:37:12.252+01:002016-06-14T15:37:12.252+01:00Indeed Lefty...seems there is some stress in fundi...Indeed Lefty...seems there is some stress in funding, although that can always be fixed by a swap line, right? (decide for yourself)<br />I smile at how much ink is devoted to Brexit when in reality it is a sideshow, it is one of those triggers (if they leave) that bank sales can put in their morning pieces as why markets are selling off like crazy, when in reality dynamics have been there for the past 6-8 months. Wait until a positive outcome in the referendum, decent relief rally in risk, fed being dovish and eq market slowly bleed lower...probably weeks away. Not looking for supernovas...nonrandomwalkerhttps://www.blogger.com/profile/17344465567895883633noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-78589232123951736142016-06-14T15:28:00.917+01:002016-06-14T15:28:00.917+01:00USDCNY will blow past 6.60 if Leave wins and the e...USDCNY will blow past 6.60 if Leave wins and the euro slides.LZhttps://www.blogger.com/profile/05082516166181943903noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-33053768312116760182016-06-14T15:07:53.901+01:002016-06-14T15:07:53.901+01:00Abee, there is no reason at all to buy EU or Japan...Abee, there is no reason at all to buy EU or Japanese banks. They are losing money. The basis of all modern banking is borrowing short and lending long, and the yield curve is what makes it work. Japan and Germany have no yield at 10y. <br /><br />I rest my case. Watch DB share price. Watch it every day. At some point there will have to be a rescue, but things will have to get a lot lot worse before that happens. For sure they will be forced to dilute and raise capital at some point. If DB has been a large scale vol seller, then things could get very very bad indeed. Also keep half an eye on Italian banks. One or more of them is going to go, and then we will have to see how the domino effects are managed.<br /><br />Btw, you should also watch out for banks giving up their broker-dealer status and exiting the market for their own national govies (Japan and Europe), as that has the potential to wreak havoc with liquidity in even the deepest of markets.<br /><br />Things are a lot more f*cked than people realize. We are not at ZIRP/NIRP in all these countries for no reason. Just as in the US in 2007-08, we are going to see Dead Banks Walking.<br /><br />Boog, with Brexit risk dead ahead, all CBs are going to go out of their way to avoid precipitating extra FX vol. A big move by the BoJ would boost the dollar and Euro but that's the last thing CBs want just at the moment, one would imagine.Leftbackhttps://www.blogger.com/profile/07728096415928915882noreply@blogger.com