Re-posting this from the comments section in the previous post. I've taken a libertarian approach to the comments, but we're implementing a zero tolerance policy from here on out.
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Ok listen up Buy Stocks and the rest of you: per IPA's point above, I've spent precious time going through this comment thread and deleting anything that is 1) aggressive towards other users, 2) vulgar, INCLUDING using curse words with asterisks, 3) just generally disrespectful, or anything you wouldn't say in good nature if we were all shooting the breeze about markets over pints in a pub.
I'm going to give you my Dad speech here--I thought you were old enough to handle the responsibility of an open forum but you've proven me wrong. I'm going to wield the ax accordingly for the foreseeable future.
If you want to blast people, go to zerohedge. The people that come to this blog are here *because* they don't want to be a part of that.
For me, I contribute to this blog *because* of the discourse in the comments section with bright people. I wouldn't spend the time writing this stuff if I were just shouting into a canyon. Please show a little respect to me and the others in this forum by keeping it respectful.
While I think "twin deficits" have taken over from rate spreads as the USD driver, I'm reluctant to chase here. Re EUR: SPD referendum Feb 20-Mar 2 and reasonable people are saying the SPD-CDU deal will get voted down. Italian elections Mar 4. Re JPY: BoJ nominations in the next couple weeks and it looks increasingly likely an extreme dove will get a deputy post, like Wakatabe or Honda, which could give USDJPY a boost. That said, it's interesting that amidst the risk selloff, USDJPY riskies didn't move more. Players buying options with barriers lower down? Not sure (given the regime change) I'd have much confidence picking levels for such barriers.
ReplyDeleteAnyhow, there are binary risks in EUR and JPY the next couple weeks, so I'd be surprised if players pile into these against USD (though that's less of an argument for guys taking off stale long USDJPY positions). But then markets like surprises! I also note that Treasury should be rebuilding its cash balances the next weeks too, which some have argued matters spot (probably for more xccy, IMO).
Normally I don't say much about the "gurus" (it's always best to assume that even the smartest guy is just "some guy" when thinking about trades, in my experience), but Dalio's short European equities bet getting some attention. I remarked the other day about the Nikkei not being so "cheap" if earnings were adjusted for FX at PPP. Suppose one could make similar argument for apparent cheapness in Europe? Probably not his thesis, but curious.
Treasury custody holdings data out later today will be interesting. Earlier this year, reserve managers seemed to be trimming Treasuries, but the past weeks have seen a strong uptick in holdings. Re bonds, also interesting to note that the past months the Japanese have been peeling off their holdings while buying EZ bonds (adjusted for xccy basis, greater pickup in bunds).
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ReplyDeleteThe internet is fascinating because it is a window into the deep recesses of people's minds. It literally is pure thoughts written on the web. Unadulterated and unregulated, anonymity and the lack of rules and self regulation brings out the 'Lord of the Flies' side of human nature. Not pretty, but interesting though. Understand it and you could get elected.
ReplyDeleteLong time lurker. Just wanted to add my 2p to say this is a great decision. There is so much quality in posts and 90% of comments (thus far) that I come back here regularly. Keep it up!
ReplyDeleteThanks Shawn. Sadly every so often this sort of thing is required, I'm afraid. (And when I have time to lurk I have already been trying to clean up the trash a bit ) Keep up the great work!
ReplyDeleteDalio is like, totally copying my book
ReplyDeleteThere would seem no reason here for US punters to be long Europe. EURUSD is overbought and so are STOXX. The easy money, as they say, has all been made. Dalio might be right.
ReplyDeleteIt's too early to call a reversal in the USTs and DX fire sale trend, but that's the way we are positioned. EURUSD certainly looks to be putting in a reversal candle around the area of the big figure of 1,2500, and we will be watching TLT for a clear reversal too. The dollar and the long bond are hand in hand here, we'll see if foreign investors fancy USD and Treasuries at these yields, or if they prefer JPY and JGBs, LOL. Once again, the short positioning in USTs, and longs in EURUSD are fairly extreme.
Buy Stocks and I agreed on one thing, which was that this week was going to be sell vol and buy Spoos. One segment of the market envisages more vol selling, another sees a retest of the recent lows as inevitable. We're on the second bus.
Tough spot in FX here. With the resilience they showed to an equity cluster bomb, I see no reason to change my positive view on EMFX, although I'm moving some deck chairs around at this point.
ReplyDeletevol still in the recovery process. it will settle at a level between where it is now and 9. just looking at the chart and doing some amateurish technical analysis notes that there was a subtle uptick in the range of the vix from 10ish to 11.5ish. plenty of air beneath current levels as more time goes by without a panicky re-run.
Yesterday I went to an investment conference where the keynote speaker was Jim Paulsen, the ex-Wells guy that is often on CNBC. The speech could have been titled with the old Charlie Prince line, "so long as the music is playing, you have to dance." More on that later.
One potential outcome he submitted was the potential for well, not a lot. Can equities just chop, maybe move down modestly, and allow profits/valuations to catch up while perpetuating the low-vol environment?
https://fred.stlouisfed.org/graph/?g=fu8S
ReplyDeleteDoes anyone know whether this graph depicts current "cash on the sidelines"? Or, is there another interpretation?
cash on the sidelines in the banks' excess reserves. short answer is "sort of". Notable is has stopped growing and bank credit growth is ticking higher.
ReplyDelete"M2 Money Stock includes a broader set of financial assets held principally by households. M2 consists of M1 plus: (1) savings deposits (which include money market deposit accounts, or MMDAs); (2) small-denomination time deposits (time deposits in amounts of less than $100,000); and (3) balances in retail money market mutual funds (MMMFs). Seasonally adjusted M2 is computed by summing savings deposits, small-denomination time deposits, and retail MMMFs, each seasonally adjusted separately, and adding this result to seasonally adjusted M1."
ReplyDeleteThanks Shawn for the reply. I assume you read this "legend", but just in case ....
Looks to me like we are seeing a brexitty type re-run. Loads of risk for the EUR next 10 days
ReplyDeletebut market will squeeze going into the events. How the events play SPD or Italy...not sure
but EURJPY higher looks decent RR here.
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