tag:blogger.com,1999:blog-34323687.post5375969451428927320..comments2024-03-28T12:22:11.704+00:00Comments on Macro Man: Near term bottom or the pause that refreshes?Macro Manhttp://www.blogger.com/profile/12324967552369915949noreply@blogger.comBlogger75125tag:blogger.com,1999:blog-34323687.post-83180991870555555542015-02-15T02:51:48.470+00:002015-02-15T02:51:48.470+00:00@self-evident.org
Sub-zero YTM bonds happen becau...@self-evident.org<br /><br />Sub-zero YTM bonds happen because of scale issues, political issues and security issues.<br /><br />In the case of FRN, the largest denomination is only $100 which isn't enough for a night out in any global city. Take a look at the cash holdings at the different Fed branches and you will see the scale problem first-hand.<br /><br />We've seen the money stock multiply since 2008, but the growth in currency in circulation is not increasing at the same exponential rate right now. There simply are not enough FRNs to roll out of bills/notes/bonds into zero coupon, infinite maturity bonds (FRNs).<br /><br />The more credit that is originated, the more things bought with "deposit liabilities" experience price inflation.<br /><br />Lastly, security is a very real issue at all levels of society, but I would say it is asymmetrically so the more wealth one controls. These days you have $15/hr. bankers at deposit institutions with access to intimate depositor information.<br /><br />Asymmetric security risk is huge today.<br /><br />Political influence is also important to consider for your really heavy-hitters. 50 shades of financial bondage.Danhttp://www.nwzpaper.comnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-23992136029903478042015-02-13T09:00:57.679+00:002015-02-13T09:00:57.679+00:00Funny Money Does It Again
------------------------...Funny Money Does It Again<br />-------------------------<br /><br />FunnyMoney has his detractors (above), for sure, but Dax is up circa 3% in 24hrs (again). Nasdaq/Spoos are ready to make new all-time-highs (as I predicted a few days ago).<br /><br />I rest my case your honor.<br /><br />I think it's pretty clear that cycles & valuation analysis are not where it's at. Rather we're witnessing an unlimited CB bid that makes ZH sound conservative ;-)FunnyMoneynoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-47540555742269942802015-02-13T04:49:21.265+00:002015-02-13T04:49:21.265+00:00Re: Mark Chandler's commentary on why investor...Re: Mark Chandler's commentary on why investors would pay to loan funds<br /><br />Darn, I was hoping I would finally understand negative interest rates. But I do not feel like I learned anything new.<br /><br />Running through Chandler's list:<br /><br />"Passive bond fund managers who track an index; they seem to have little choice."<br /><br />So an investment 100% guaranteed to beat your index -- i.e., cash -- is unacceptable?<br /><br />"Investors who think deflation is going to deepen."<br /><br />Er, cash is a better deflation hedge than a negative-interest bond.<br /><br />"Investor who expect interest rates to fall further."<br /><br />Sure, you can always buy a worthless piece of paper for $100 and hope a greater fool will pay $110. But we are talking about an investment that is 100% guaranteed to lose value, so this is taking speculation to a whole new level. Is that it?<br /><br />"Investors expect currency appreciation, buying a bond denominated in that currency is one way to express that view."<br /><br />Holding that currency is an even better way to express that view, and in fact will outperform a negative-rate bond no matter what the currency does.<br /><br />"Related to this are investors that believe that there is a serious risk of a collapse of EMU ..."<br /><br />Related is that Euros will outperform negative-rate Euro bonds in every situation.<br /><br />"Some investors may find that buying a security with a slightly negative yield is preferable to deposit rate that could be more negative."<br /><br />How much does it cost to store physical currency? How does that compare to the cost of storing negative-rate bonds?<br /><br />Maybe I should be embarrassed by this, but I really do not understand why anyone would lend at negative interest, ever. No explanation I have read makes any sense to me at all.<br /><br />Would love to read a rebuttal.<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-22154961732841986292015-02-13T04:19:00.409+00:002015-02-13T04:19:00.409+00:00Yup, generally agree with every word of that, but ...Yup, generally agree with every word of that, but don't like US equities as much as Euro and EM on the idea of upcoming fund flow rotation out of US safe haven once Greece and Ukraine issues are "solved".Leftbacknoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-74788160443693957332015-02-12T23:56:00.050+00:002015-02-12T23:56:00.050+00:00LB, having had to manage capital for some of those...LB, having had to manage capital for some of those groups you are absolutely correct. Particularly for insurance companies, lower yields increase their liabilities, and force them to buy more bonds and reduce equity risk. Put another way, the "risk committees" force them to buy more of the expensive asset (bonds). Of course, regulations contribute to this problem. <br /><br />However, often this buying occurs at the maximum point of stress and can coincide with the low. <br /><br />I am a near term bear on bonds. Not because the US macro news flow is robust, but because it isn't robust enough for Dame Janet to lift off. Payrolls aside, the macro news flow might imply "more policy", not less. Perversly, that might support cyclical equities and Treasury yields higher. Skippynoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-15964412056808787122015-02-12T21:34:19.716+00:002015-02-12T21:34:19.716+00:00Sensible discussion by Marc Chandler - who buys bo...Sensible discussion by Marc Chandler - who buys bonds with negative rates and why?<br /><br /><a href="http://www.marctomarket.com/2015/02/still-fishing-for-limit.html" rel="nofollow"> Fishing for the Limit </a><br /><br />Some of us here would probably add: "tools" and "the pension fund risk management committee", aka "brown trousers brigade".<br /><br />Ugly day for USD longs, btw. Just sayin'....Leftbacknoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-64895576031334741502015-02-12T20:09:35.579+00:002015-02-12T20:09:35.579+00:00I have some gold, silver and copper miners, b/c th...I have some gold, silver and copper miners, b/c they were so cheap, but I am not a "gold guy" either. It's just an expression of my feelings about the USD and the fact that we will not see eternal disinflation under the current Fed regime.Leftbacknoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-54201249791177092652015-02-12T20:07:55.099+00:002015-02-12T20:07:55.099+00:00FT says:
I'm not sure you can base your GDX v...FT says:<br /><br />I'm not sure you can base your GDX valuation solely on a gold (revenues) and oil (costs) price comparison:<br /><br />1) a lot of miners are hedged for a spike in energy price; hence it will be a while before they benefit from the current diesel price<br /><br />2) there has been a bit of M&A in the sector with the buyers paying hefty prices which leads to my next point:<br /><br />3) a lot of miners are running low on cash with leveraged balance sheets after years of heavy investments in new mines...<br /><br />case in point ABX <br /><br />I think the precious metal complex can go much lower and will only bottom with the end of the bull in equities (or close to it). cf 2000/2001<br />There will be some false starts in the meantime like the one we had early this year.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-72736892796499479862015-02-12T20:06:46.651+00:002015-02-12T20:06:46.651+00:00Some of the miners and drillers probably did a gre...Some of the miners and drillers probably did a great job of hedging during the commodity dump. The ones that didn't? We will see evidence at some point, perhaps in M&A activity.Leftbacknoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-65712944219252799052015-02-12T19:59:52.606+00:002015-02-12T19:59:52.606+00:00Rio Tinto earnings today. Looks like miners can ad...Rio Tinto earnings today. Looks like miners can adequately survive even in this kind of environment with a "lets-just-dig-our-way-through-the-commodity-slump" strategy and some heavy capex cuts. <br /><br />Of course if everyone decides to increase vol, it might backfire at some point.<br /><br />http://www.reuters.com/article/2015/02/12/rio-tinto-results-idUSL4N0VM36M20150212hipperhttps://www.blogger.com/profile/10934536233703452719noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-13834410185903384282015-02-12T19:55:49.802+00:002015-02-12T19:55:49.802+00:00Thanks LB and Mr. T for your GDX thoughts. The im...Thanks LB and Mr. T for your GDX thoughts. The impending DXY strength that would come with a Fed rate hike started getting me worried, but then again, both oil and gold should come down with that. I'm thinking that the drop in oil has been so dramatic vs the price of GLD that I can hang in there a bit. <br /><br />-- Whammer Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-21945873888321818752015-02-12T19:49:21.199+00:002015-02-12T19:49:21.199+00:00I'm not saying rising dollar does not hurt pro...I'm not saying rising dollar does not hurt profitability, what I'm saying is that the DXY move has already baked in a raise, thus the argument that "the fed cant raise because it'll cause a DXY spike" seems off. If we are looking at rates going 300bp higher its a different story.<br /><br />If rates go up significantly it should have a negative impact on gold, but the beauty (for me at least) of the GDX trade is that it does not really need gold to rally. The last time GDX was at these prices, gold was around $800 with oil around the same as today. I don't think anyone is discounting anything based on Greece or Ukraine, so a calming there means nothing.<br /><br />I'm not a "gold guy" and am wrong frequently...<br /><br /><br /><br />Mr. Tnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-59121137333551764022015-02-12T19:11:55.192+00:002015-02-12T19:11:55.192+00:00@T,
Wouldn't the calming in Euroland and Fed&...@T,<br /><br />Wouldn't the calming in Euroland and Fed's raising rates (likely 1 or 2 quarters away) be negative for GDX?<br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-77800363779405652872015-02-12T19:11:23.035+00:002015-02-12T19:11:23.035+00:00"The cries that it'll cause further DXY a..."The cries that it'll cause further DXY appreciation to the point of killing corp profits are silly."<br /><br />Really?<br /><br />http://research.stlouisfed.org/fred2/graph/?g=10CfAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-92066975638783142082015-02-12T17:40:01.585+00:002015-02-12T17:40:01.585+00:00Its beginning to feel a lot like last year in EM F...Its beginning to feel a lot like last year in EM FX. Begining of year news flow and technicals lead to a sell off but then as the worst approaches, we slowly bounce. If spoo's and world wide equities keep driving the bus, perhaps we see a few month bounce..<br /><br />SPX has some still favorable seasonals so I am not pressing the contriarian button yet but I want to see how it does on new highs. Nasser (aka AAPL), looks OK. R2K in the zone as well, so far so good<br /><br />The easiest trade remains to just be long dax. abee crombiehttps://www.blogger.com/profile/13320039155613443039noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-54725720832102332902015-02-12T17:36:19.712+00:002015-02-12T17:36:19.712+00:00Anybody still like GDX?
I'm still in there. ...<i>Anybody still like GDX?</i><br /><br />I'm still in there. I don't know what "long term" means to you but I'm looking at a couple quarters for this to meaningfully work. A new low below $17 would force me to take a harder look at the thesis, but for now the tailwinds are still there - low fuel costs, stable(ish) gold prices, volatile fx, low rates.<br /><br />After filtering out the noise from Europe (and it is all noise), things are very calm. Frankly I can't imagine a more benign environment for the fed to begin raising rates. The cries that it'll cause further DXY appreciation to the point of killing corp profits are silly.<br /><br /><br />Mr. Tnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-52576728398062129092015-02-12T16:30:09.701+00:002015-02-12T16:30:09.701+00:00Long time reader, first time commenter. Thanks to ...Long time reader, first time commenter. Thanks to all for some great insights.<br /><br />I'm having trouble getting my head around Japan at the moment. Things seemed lined up squarely behind the equity market (except the economic data, though it's not like that always matters much), but the train is having trouble getting out of the station since the announcements at the end of Oct. <br /><br />Interested to hear thoughts. Purple Haznoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-17092298330426919342015-02-12T15:56:06.111+00:002015-02-12T15:56:06.111+00:00Anon 3.41
"Unsettled" may be your view ,...Anon 3.41<br />"Unsettled" may be your view ,but actually that does not describe most reactions. The latter are best summed up by the concept of risk adjusted :)checkmatehttps://www.blogger.com/profile/03688082792316894545noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-62591469984937450752015-02-12T15:54:05.842+00:002015-02-12T15:54:05.842+00:00I hear ya LB but just don't know on the euro....I hear ya LB but just don't know on the euro. <br /><br />Bad US macro data along with a bit better-than-expected EZ data might trigger a counter reaction for EURUSD but then again maybe MM is correct in saying that extension deals and kicking the bad sovereign debt can down the road just postpones the inevitable parity party a bit. A short term blip on improving EZ data needs to run for a bit longer, say like a quarter or two to prove something solid.<br /><br />I don't know how far the Euro narrative can run on mainly relying on the weakness of the US and beginning to believe that Fed might actually hike it a bit: if for no reason else than for their credibilities sake and just that they can claim to have room to "maneuver" the next time US gets hit by a recession, which is probably already steaming towards us, considering that this cycle has been going on already for 6 years. It's just really hard to think that they would actually sail right into the middle of the next storm with zero rates.<br /><br />But on the other hand CV also made a great point that Mr. Market might decide to run on the Euro narrative despite the long term structural problems. When the spooz already have such demanding earnings multiples and some currency headwinds coming their way, the narrative may well actually be chosen according to picking between a bad and even worse choice, this time the bad choice being the Euro equities. And if the EZ macro data actually could keep up it's run for a bit longer, that's probably enough for the narrative to take off and keep flying for a while for an unspecified amount of time, until something else happens along the way.<br /><br />Also adding in the QE beginning in less than a month (running through Sep '16), that should actually tip the scale to the Euro-narrative option. So actually agree with everything here. I'd just like to see a bit more Greek-o-drama to create a JBTFD-moment to take advantage of. Syriza looks really really tough and stubborn and with a bunch of different negotiating chips on the table they'll probably get what they want in the end.<br /><br />If the Germans wanted to get rid of Greece they'd already done it by now. The fact that there are negotiations tell that they actually don't, and that's probably because what would eventually happen with Spain and Italy.hipperhttps://www.blogger.com/profile/10934536233703452719noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-35082114662286071792015-02-12T15:41:06.497+00:002015-02-12T15:41:06.497+00:00Why are some so unsettled by FM comments? Why are some so unsettled by FM comments? Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-78437038930966233912015-02-12T15:31:54.246+00:002015-02-12T15:31:54.246+00:00Bluffing?
Exactly. Carney was Bluffer-in-Chief fo...Bluffing?<br /><br />Exactly. Carney was Bluffer-in-Chief for a while and then it was Janet's turn. Big business in the US has already signaled that King Dollar is hurting them.<br /><br />Bucky is on the canvas today. Prize-fighter that he is, I know he will get up for a few more haymakers, but that funny looking € guy is looking strong, and even ¥ seems to have drawn a line in the sand. Don't look down, Bucky, big retracements are ugly.Leftbacknoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-64957816264333254582015-02-12T15:21:56.629+00:002015-02-12T15:21:56.629+00:00I also don't see how Janet can raise rates...t...I also don't see how Janet can raise rates...the strong dollar is just beginning to hurt overseas sales, and mortgages (assuming non-Chinese bubbas still get those) should be getting more expensive, as will credit of all sorts. Somebody once equated that with liquidity..<br /><br />Add that to Lefty's remarks above, and throw in some Ukrainians and Greeks and Pootin...well after 7 or so years of this ZIRP and now NIRP, how can we not all be Swedish today?<br /><br />I think Janet is well and truly...well you know.Bruce in Tennesseenoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-65097806728665253162015-02-12T15:08:16.022+00:002015-02-12T15:08:16.022+00:00God, the whole planet is sated
http://imgur.com/9...God, the whole planet is sated<br /><br />http://imgur.com/958AgIX<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-26064752968547464062015-02-12T15:04:36.536+00:002015-02-12T15:04:36.536+00:00Drop it again baby...
Denmark's 2-year yield ...Drop it again baby...<br /><br />Denmark's 2-year yield dropping to -1.032%. Expecting another cut? Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-64480934227197813272015-02-12T15:02:51.816+00:002015-02-12T15:02:51.816+00:00BoE Carney:
Jan: "Rates may rise sooner than...BoE Carney: <br />Jan: "Rates may rise sooner than the market expects" Feb: Zero inflation, more rate cuts & QE on the way...<br /><br />yes, it's one big circle jerk<br /><br />https://www.youtube.com/watch?v=1RiJzV04UyEAnonymousnoreply@blogger.com