tag:blogger.com,1999:blog-34323687.post1481484793613489491..comments2024-03-29T09:24:42.731+00:00Comments on Macro Man: Angels and devilsMacro Manhttp://www.blogger.com/profile/12324967552369915949noreply@blogger.comBlogger39125tag:blogger.com,1999:blog-34323687.post-43397766296223995382016-11-14T03:41:04.447+00:002016-11-14T03:41:04.447+00:00the baltic dry index shot up after trump go in! WO...the baltic dry index shot up after trump go in! WOW, see here==> http://www.bit.ly/2f7gaUw<br /><br />That means sector rotation could be a good opporunity for HUGE profits. Chiphttps://www.blogger.com/profile/10339102233804859884noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-34594411195580571412016-11-13T22:51:42.998+00:002016-11-13T22:51:42.998+00:00"Re higher yields driving a sell-off in equit..."Re higher yields driving a sell-off in equities, I see a paradox. The selloff in bonds could first drive money into the stock market and prices higher. After that re-positioning is done, however, I can see your scenario playing out, especially as buyback support fades due to higher rates. Let's also remember Trump is talking about a massive repatriation scheme which could drive some more buyback activity (interestingly, I've read that most of the overseas cash companies have is in dollars, so the flow back to the US wouldn't be as supportive of USD as some may think)."<br /><br />Hmm, fair enough Johno. The reason I worry about higher rates, in general, is that non-financials have levered up hugely in this cycle. A lot of these "quality" names will get really hammered as borrowing costs rise. Also, I fear that it could spark a liquidity crisis in corporate bonds, as also discussed here. The repatriation of cash would be a one-off, and I have to say that the marginal return on "putting it to work" now, so late in the cycle, with a cyclically very tight supply curve ... I don't really see much other than higher yields, inflation and the traditional "late-cycle" expensive M&A.CVhttps://www.blogger.com/profile/16843402165210120665noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-32222016566696246572016-11-13T11:54:10.930+00:002016-11-13T11:54:10.930+00:00I think we're going to return to "normalc...I think we're going to return to "normalcy" and bonds and stocks are going to start trading more or less as they should without interventions.<br /><br />Macroeconomic situation is improving and I think we could very likely be at the beginning of a more robust growth cycle, accompanied by higher inflation and rates.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-49036857166798496662016-11-13T11:31:46.750+00:002016-11-13T11:31:46.750+00:00@abee - no major disagreements, but will make two ...@abee - no major disagreements, but will make two observations:<br /><br />1. The "people" you refer to, have lost a lot of money in bonds, gold, and STUB portfolios in the last 2-3 months, but we are only now getting to the point where the majority of the punters in those are barely breakeven YTD - so the fun, as it were, is just beginning. <br />2. I am really not sure there needs to be a catalyst for anything, these markets are increasingly all about positioning - the bond selloff was already halfway deep from the highs with clinton a lock, so clearly positioning trumps everything else, and boy were there signs that it was crowded. I think we need to see clear signs that the pendulum has swung hard the other way with everyone screaming 'inflation' - id give it a few more weeks for stepping in - frankly in the larger scheme of things, a correction in equities may come to be seen as a small price to pay for keeping a bid under bonds. washedupnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-75157894237010043852016-11-13T02:58:33.394+00:002016-11-13T02:58:33.394+00:00The problem with the bearish sentiment on US equit...The problem with the bearish sentiment on US equities seen here (and I echo) is that the damned US stock market is in a secular bull market most likely. So timing is very hard. If the narrative is repatriation and stimulus which the broad index moves and at the stock level seem to be suggesting then you likely need a trigger (sharp reversal?) to nullify that narrative or enough time to pass before its priced in and you can fade....in the meantime US equities can grind higher (not sure how much though) and suck the life out of a short trade. The Bond market needs to push the envelop here, IMO, and while I can agree with Gundlach longer term, shorter term I like LB thoughts, as ppl probably step in here soon, just bc there is still so much cash and you dont really have ppl scared of higher rates, IMO. They are still living in never land, and if shit hits the fan its a good hedge. <br />So conclusion, watching and waiting..<br /><br />What I do think could get the market jittery is if the same damn thing with Brexit and Trump happens in Italy, though frankly I'm not close to the situation, so just assuming its still likely the opposition party is running on a platform of anti EU. But if thats the case, then maybe someone wakes up and realizes the emperor has no clothes. <br /><br />Oh and still very bullish bitcoin abee crombiehttps://www.blogger.com/profile/13320039155613443039noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-43406491064151521442016-11-12T22:10:08.790+00:002016-11-12T22:10:08.790+00:00What if US went 15% corp tax with a once of lower ...What if US went 15% corp tax with a once of lower rate with a conditionality attached that repatriation was invested in an infrastructure bond?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-64226737747200039252016-11-12T20:25:25.464+00:002016-11-12T20:25:25.464+00:00washed: Thank you for highlighting the implication...washed: Thank you for highlighting the implications of the high denomination crackdown in India. I missed that.<br /><br />CV: Re higher yields driving a sell-off in equities, I see a paradox. The selloff in bonds could first drive money into the stock market and prices higher. After that re-positioning is done, however, I can see your scenario playing out, especially as buyback support fades due to higher rates. Let's also remember Trump is talking about a massive repatriation scheme which could drive some more buyback activity (interestingly, I've read that most of the overseas cash companies have is in dollars, so the flow back to the US wouldn't be as supportive of USD as some may think). And finally, yes, I thought it was pretty hilarious that zerohedge readers' favored candidate sparked a further stock market rally and demolished their pet rock (gold).johnonoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-53094256185512861252016-11-12T17:44:37.109+00:002016-11-12T17:44:37.109+00:00Back after a 3 week trip to India visiting family ...Back after a 3 week trip to India visiting family and friends - some observations:<br /><br />1. The property market in India is headed for quite the comeuppance in the short run with the high denomination crackdown,- while the sudden realization that one's recently withdrawn cash has no value can be a little unsettling for short term visitors, one has to agree with the step from a long term perspective. That said, the number of multi-million commercial and retail transactions where a lorry drives up with the buyers untaxed money in Rs 1000 notes is quite material. Given how critical the property market is to consumer sentiment and spending in India, not to mention the shadow taxation increase this represents, I doubt India sees 4% plus growth for the next couple years, which is borderline recessionary. I do think India govvies are a buy across the board because this is bullish the rupee and quite deflationary. <br /><br />2. Now that that's out of the way, the debate in the US over whether Trump will re-ignite old fashioned supply side and infrastructure based growth is frankly silly - by all means trade away and giddily buy construction stocks if you are so inclined, but the fact is, nothing from the old economy can stimulate growth in the US - that train from the 1950's is so far away from the station its not even a blip - in this paper shuffling economy, the asset valuation impact from a 150 bps interest rate increase far, far outweigh the puny 1.6 multiplier (as someone had suggested) on $300 Bn spent repairing bridges in Minnesota and the like.<br /><br />3. It's very simple here - if bonds don't pick themselves up soon, I highly doubt that a 6 year stock market rally which has primarily been about low rates forever suddenly gets to pick a new 'inflationary growth' narrative without some pretty big pipers to pay first. The moves we are seeing in the market last few days are big, and for us volatility fiends, welcome, but something tells me they are way more about short term positioning than a cool calculated reaction to changed fundamentals - I plan to sit on my hands for a couple weeks, let options expiration carry a few more punters out, and then lay in to risky asset shorts. Unlike the chicken feed swings we have been seeing since 2014, I finally feel like the bond markets have set some dominoes in motion that equities, in their usual drugged up mind expanding mode don't quite realize yet.<br /><br />Oh, and also, its great to be back - the next time you complain about things on the ground stateside, just remember schools just had to be closed in India's capital for 3 days because the air outside was literally unbreathable. Not exactly a one off either.washedupnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-27338976151838272632016-11-12T17:39:41.426+00:002016-11-12T17:39:41.426+00:00A survey of 114 global fund managers on Wednesday ...A survey of 114 global fund managers on Wednesday by Bank of America Merrill Lynch Global Research found that most of these professional investors thought Mr. Trump would probably soon reach an agreement to repatriate some of the American corporate money stashed overseas and increase spending on those infrastructure projects. Most said they didn’t expect to reduce risk in their portfolios by raising cash. The single most attractive option for the group was to invest in the S.&P. 500.<br /><br />http://www.nytimes.com/2016/11/13/your-money/the-trump-stock-rally-calamity-averted-with-a-little-charm.htmlAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-2221788569356840512016-11-12T17:31:22.686+00:002016-11-12T17:31:22.686+00:00More from Gundlach: While the bond bull market en...More from Gundlach: While the bond bull market ended in 2012, he turned “maximum negative” on bonds on July 6, two days before the 10-year Treasury yield hit a multidecade closing low of 1.366%. He predicted shortly thereafter that the 10-year yield would top 2% by year end. He has been selling bonds and buying TIPS, which he calls “my favorite investment as of two months ago.”Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-49649851750293357452016-11-12T17:28:43.661+00:002016-11-12T17:28:43.661+00:00The above was from: "Gundlach: Bond Yields C...The above was from: "Gundlach: Bond Yields Could Hit 6% in Five Years" in this weekend's Barron's<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-5282997873135113562016-11-12T17:26:48.637+00:002016-11-12T17:26:48.637+00:00After last week’s rapid run-up, Jeffrey Gundlach w...After last week’s rapid run-up, Jeffrey Gundlach won’t rule out “a tradable rally in the bond market before year end. But the longer-term trend likely is higher. The idea that inflation and interest rates can never go up is a very tired narrative, born of years of stability in both."<br /><br />Trump’s pro-business agenda is inherently “unfriendly” to bonds, Gundlach says, as it could to lead to stronger economic growth and renewed inflation. Gundlach expects President-elect Trump to “amp up the deficit” to pay for infrastructure projects and other programs. That could produce an inflation rate of 3% and nominal growth of 4% to 6% in gross domestic product. “If nominal GDP pushes toward 4%, 5%, or even 6%, there is no way you are going to get bond yields to stay below 2%,” he says.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-30446363332151088372016-11-12T17:25:31.054+00:002016-11-12T17:25:31.054+00:00Financials are trading on the steeper yield curve ...Financials are trading on the steeper yield curve (perhaps temporary) and hopes of deregulation (by no means a sure thing). We think that the XLF will be an excellent fade soon, perhaps within a week or two.<br /><br />Jim Bianco echoes some of the thoughts expressed here by LB and others regarding the "Trump Reflation Trade" and the huge moves we have seen in rates:<br /><br />http://www.fuw.ch/article/the-markets-are-trading-schizophrenically/<br /><br />LB has a shopping list ready in income-producing vehicles, and may start buying as early as Monday. We do agree with abee that when the markets lose interest in the leading stocks one should be cautious. As CV points out, it is getting very late indeed.Leftbackhttps://www.blogger.com/profile/07728096415928915882noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-83241878674399200472016-11-12T16:21:52.135+00:002016-11-12T16:21:52.135+00:00Cv, i echo your comments. You do have to be open m...Cv, i echo your comments. You do have to be open minded, which i am given the scale of the moves, but to me this just smells of big time rotation in equity sector trades. For us to really rally what is going to be the leadership in equities. In 2013 we had a big pe expansion but stocks were much cheape than they are currently and almost everything was working, especially value. That seems to be the play book market is using now. But im very cautious of a reversal in fiancials. Meanwhile the seculsr growth names are getting dumped along with staples. Remeber those were the only thing holding the market up last year. When all of the former leaders start selling off, you should pay attention. <br /><br />Anyways lets see. Im loaded full of financials in my long term accounts so not really complaining. abee crombiehttps://www.blogger.com/profile/13320039155613443039noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-82900243259878226852016-11-12T14:54:04.432+00:002016-11-12T14:54:04.432+00:00As I head back to the UK from the USA. My first tr...As I head back to the UK from the USA. My first trip here in nigh on 40years I would say go long healthcare. Without wishing to give offence,which means I am going to, this country is the outright winner in the obesity stakes. Real eye opener despite having read about the issue. Demographic timebomb of weight related disease. Nowhere else in my global travels have I encountered anything remotely approaching this level of health issue.checkmatehttps://www.blogger.com/profile/03688082792316894545noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-74302354875761975652016-11-12T12:47:19.792+00:002016-11-12T12:47:19.792+00:00"That, boys and girls, is freaking insane.&qu..."That, boys and girls, is freaking insane."<br /><br />Indeed, bonkers. All macro data suggests we're very late cycle here. I think Anon @ 9.02 AM will be disappointed. If you look at U.S. equities and blow out the chart, momentum has been stalling for a while. I am not in the 666 camp ... that's silly. <br /><br />But, things are getting shaky. My reason is simple. I always thought that a more sustained sell-off would be driven by higher yields. There is no way that this, inherently overlevered, market can survive this "vector" in rates for long. <br /><br />The "Trump reflation" story obviously challenges this view, and I am open to the idea that it takes over. We always have to be open to the idea that we get things wrong :). But my firm recommendation here is not to chase. If you have a shopping list; it will get cheaper. The funniest thing here is that last week's have thrown the Zero Hedgers out on their arse ... they got their anti-establishment candidate, and the market is going up. What is their play now? <br /><br />Finally, I really struggle with the idea investors look at all this massive political uncertainty, i.e. the questioning of fundamental institutions such as NATO, free trade, the EU and the EZ, and conclude that risk assets are a buy. Where do you hide from all this now? Maybe that is the silver lining here. I am increasingly coming to the conclusion that Mr. Market is about to show these wardens of the "new political" winds a little bit of humility. They can do whatever they want, but don't expect financial markets just to play along with it. <br /><br />The timing of this, though, is really difficult. I fully concede that if you look beyond the massive volatility last week ... sector rotation, stock picking continues to quietly rise as the key strategy. Risk parity is out, active management is in again. Maybe that change is more fundamental as MM has been musing about recently. We will see. CVhttps://www.blogger.com/profile/16843402165210120665noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-75340927158854905422016-11-12T12:26:39.400+00:002016-11-12T12:26:39.400+00:00Are you Harry Dent?Are you Harry Dent?Bruce in Tennesseenoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-36495164298907980282016-11-12T09:02:06.588+00:002016-11-12T09:02:06.588+00:00Stocks are clearly in the start of a massive bull ...Stocks are clearly in the start of a massive bull market. People here saying they are over-priced are obviously wrong, just as the "experts" were wrong on all of the election calls. I expect US equity markets to double in the next year or so.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-65731295433112595742016-11-12T03:46:58.534+00:002016-11-12T03:46:58.534+00:00Wasn't it at the start of the year whenever on...Wasn't it at the start of the year whenever only talked about the horrible state of Brazil. Although Mexico doesn't have a rouge president to impeach still feels kinda familiar. Getting cheap on pppabee crombiehttps://www.blogger.com/profile/13320039155613443039noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-75642428739676737852016-11-12T03:42:44.003+00:002016-11-12T03:42:44.003+00:00I've been away from the screen, family stuff, ...I've been away from the screen, family stuff, so just saw some charts. Wow. Like mr t says, some big moves. <br /><br />Just a quick thought on equities. I very much doubt ppl are going to crowd into Bac or all the other pro growth trades. Financials suck. They are not in a good secular trend. Ok they can re rate but for how long. You crowd into and chase trending secular companies,Like a lot of the tech names. Too me this last moves looks very much like a late stage move, though the sectors are rate sensitive, which typically is an early move in a cycle. So nothing is 100%. But I doubt rates can go much higher without really hurting equities, unless there is real strong growth coming. Still not seeing that, especially for corporations. ..but maybe I'm wrong. Would think transports would be up much more if growth was coming.<br /><br />and don't get me started on em fx... abee crombiehttps://www.blogger.com/profile/13320039155613443039noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-90037652505155487252016-11-11T23:22:34.731+00:002016-11-11T23:22:34.731+00:00russell 2k futures up a solid 14.5% from the post-...russell 2k futures up a solid 14.5% from the post-election lows - in <b>3 days</b>! That, boys and girls, is freaking insane.Mr. Tnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-26017408578784746622016-11-11T21:29:57.378+00:002016-11-11T21:29:57.378+00:00"As a summary of the times we live in I am ha..."As a summary of the times we live in I am happy to be closer to the checkout than the entrance."<br /><br />Now now Checkmate, stick around please ;). <br /><br />"Trump's authority to back out of trade deals varies from deal to deal, but NAFTA's terms are very weak and allow him to do whatever the heck he wants. So I have no temptation to fade MXN's move. My guess is it has further to go. MXN is in trouble for so many reasons."<br /><br />I agree with this Jonho. If Trump is looking for an easy victory to serve to the hounds this is an easy one. Still, we need to gauge exactly what kind of cabinet he gets, and how the house and senate ends up on these issues. A lot of assumptions at the moment! But Mexico is definitely in a spot of bother here. CVhttps://www.blogger.com/profile/16843402165210120665noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-36852604035775356822016-11-11T21:21:52.368+00:002016-11-11T21:21:52.368+00:00Let it be recorded for posterity that at this pivo...Let it be recorded for posterity that at this pivotal time in history we lost Leonard Cohen and gained a Trump. The who shock was clearly overwhelming. As a summary of the times we live in I am happy to be closer to the checkout than the entrance. checkmatehttps://www.blogger.com/profile/03688082792316894545noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-82046465832283256732016-11-11T20:33:03.081+00:002016-11-11T20:33:03.081+00:00Nice eurodollar butterfly trade, MM.
Thoughts ......Nice eurodollar butterfly trade, MM.<br /><br />Thoughts ... Trump means Congress will approve fiscal spending before and not after any recession, so that eliminates some recession risk which admittedly was seen high anyway. Trump also means lower taxes with some demand effects. Infrastructure spending will likely be way lower than Trump's campaign promise and probably won't materialize until later next year. It does put money into the hands of people who will spend it (construction workers, for instance) and create inflation (unlike trickle down monetary stimulus). Enforcement of immigration laws maybe puts some upward pressure on wage inflation too. Expect deregulation, which should boost business sentiment and drilling activity. Assuming no big mistakes on trade, I'd think we get inflation and some pickup in real growth, and that seems to square with the roughly 1/3 real rates and 2/3 implied inflation breakdown of the backup in yields since the election. It was interesting listening to Druckenmiller the other day. Very bearish global rates, but what surprised me most was his belief in the Laffer Curve, and his pointing out that it worked in the 80s and the reason we had deficits was defense. A very cursory glance at the #s suggests this interpretation may not be as ludicrous as I'd have assumed. Still, I'm skeptical deregulation and low taxes can offset the secular headwinds of demographics and indebtedness, and the fiscal spending impulse will fade after a couple years leaving bare our low growth situation. All to say, I think the move in rates is justified, but I'm not inclined to chase.<br /><br />Trump's authority to back out of trade deals varies from deal to deal, but NAFTA's terms are very weak and allow him to do whatever the heck he wants. So I have no temptation to fade MXN's move. My guess is it has further to go. MXN is in trouble for so many reasons. Not sure what to do in EM generally. There are the high yielders that are selling off because of the bond sell-off. Maybe that's a fade soon. And then there are the generally low-yielding FX intervenors who have been put on Treasury's watch list. Like KRW and TWD. The market is selling these, but if Trump pressures them to cutback intervention, doesn't that argue for stronger currencies given their persistent current account surpluses? Someone please set me straight on this. And then there's China. I thought they'd let the currency resume devaluation against the CFETS basket after a Hillary win, but CNY's floor against the basket has held steady (maybe that's because of increased sensitivity due to Trump or maybe the real event driving intervention decisions are these leadership appointments in '17). The crazy thing about Trump's claims against China are that the PBOC is actually holding up the currency ... so maybe Trump will just negotiate for lower Chinese tariffs on US goods/services?<br /><br />As for my own book, I'm still bullish USD (echoes of the USD under Reagan, and the place to be if China slows). Shorted gold. The SNB seems to have abandoned the soft floor in EURCHF at 1.08 and I'm short that (if there's someone to clobber with tariffs it's them, I'll add). And if bond and commodity markets are at all right, world inflation is getting a boost. What currency benefits from just a bit more inflation? SEK. And might the Riksbank think twice about FX intervention now? Sure. So EURSEK seems a decent short too.<br />johnonoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-41092026871496747122016-11-11T19:32:42.795+00:002016-11-11T19:32:42.795+00:00Howdy - long time away for me.
Thanks to MM as al...Howdy - long time away for me.<br /><br />Thanks to MM as always for his thoughtful and timely posts. The comments section is still fantastic.<br /><br />I held onto my REITs far too long and am not selling now. I've started accumulating shorts across EM, R2K and the S&P.<br /><br />One really important thing to consider, the blue half of the country is experiencing various stages of depression. I've personally seen people crying and seeking comfort in person, online, etc. This group of people has driven the economy in the past 8 years. IMHO. their depression over Trump's election will directly reduce their enthusiasm and confidence over spending Whether it is discretionary travel, electronics or buying a house - it will all drop. Their 8 party, instead of going another 8 years has been shut down. <br /><br />I think the market under-appreciates the blues of the Blues.<br /><br />MrBeachnoreply@blogger.com