Friday's fun in financial scout camp started by looking in the bear story box and bringing out the old favourite of Deutsche Bank. Which promptly did what nearly every new disaster story has done this year, it recovered.
Sunday's flappy panic is over Brexit's article 50 being triggered by end of March 2017. Quite why it's such a sudden disaster I am not quite sure, because there was as much chance of the UK not Brexiting as there is of Morgan Freeman ever playing the bad guy.
But it's all good news for the panicky news feeds that will be peddling UK doom. Do you remember the children's playground, fast food song? The one that starts 'A Pizza Hut, a Pizza Hut..' which was the basis for this..
Well, with a bit of tweaking, we can create the market commentary anthem.
The Fast Markets song:-
(All together now!)
A Deutsche Bank (make a square in the air)
A Deutsche Bank
Brexit flappy panic (flap your arms like you're doing the headless chicken dance)
And a Deutsche Bank
A Deutsche Bank
A Deutsche Bank
Brexit flappy panic
And a Deutsche bank
Oil Prices! Oil Prices! (use two hands-make an "M" in the air, starting in the middle)
Brexit flappy panic
And a Deutsche bank
Oil Prices! Oil prices!
Brexit flappy panic
And a Deutsche bank
A China fix
A China fix
Italian banks
And a China fix
A China fix.
A China fix
Italian banks
And a Chinese fix
Greek bailouts! Greek bailouts!
Italian banks
and the ECB
Greek bailouts! Greek bailouts!
Italian banks
and the ECB
A hiking Fed
A hiking Fed
Falling productivity
and a hiking Fed
A hiking Fed
A hiking Fed.
Falling productivity
and a hiking Fed
High Yield! High Yield!
Falling productivity
And a hiking Fed
High Yield! High Yield!
Falling productivity
And a hiking Fed
A Donald Trump
A Donald Trump
A rising Right
And a Donald Trump
A Donald Trump
A Donald Trump
A rising Right
And a Donald Trump
A Putin! A Putin!
A rising Right
And a Donald Trump
A Putin! A Putin!
A rising right.
And a Donald Trump.
Risk Parity
Risk Parity
A massive spike in Vix
and risk parity
Risk Parity
Risk Parity
A massive spike in Vix
And risk parity
Stop losses! Stop losses!
A massive spike in Vix
And risk parity
Stop losses! Stop losses!
A massive spike in Vix
And risk parity
A rogue trader
A rogue trader
Whopping bank fine
And a rogue trader
A rogue trader
A rogue trader
Whopping bank fine
And a rogue trader
SEC ! SEC!
A whopping bank fine
And a rogue trader
SEC ! SEC!
A whopping bank fine
And a rogue trader
A BoJ
A BoJ
Failing Abenomics
And the JGBs
A BoJ
A BoJ
Failing Abenomics
And the JGBs
Gold Prices! Gold Prices!
Failing Abenomics
And the BoJ
Gold Prices! Gold Prices!
Failing Abenomics
And the BoJ
A CDS
A CDS
Spreads are widening
and a CDS
A CDS
A CDS
Spreads are widening
and a CDS
All Panic! All Panic!
I told you so
And I'm never wrong!
All Panic! All Panic!
I told you so
And I'm never wrong!
Friday, 30 September 2016
Sunday, 18 September 2016
Transferable skills - Football manager to bank CEO
Is being a world famous football manager so different from being the CEO of a world famous bank? Let's take a look.
Mourinho on today's match, Manchester United vs Watford (these were his actual words).
“I was completely aware that we were not the perfect team, that we had lots of players who are not end products and can make their own mistakes,” Mourinho said. “My only doubt was the way they can cope with the negative moments that come sooner or later. I feel that some individuals probably feel too much pressure and that responsibility.
“But from a collective point of view I only have good things to say about them. If you analyse our three defeats in the last week, we were always the best team in the second half. We didn’t start well today but then in the second half the players showed quality, intensity, desire, commitment and ambition. And we lost again in our best moment.
“I can split this into three factors: one is the referee’s crucial mistakes – that’s not in my control. Against Man City you know what happened in minute 55 [when Claudio Bravo made the challenge on Wayne Rooney], today you know what happened for the first goal, against Feyenoord you know that the goal was in an offside position, so we were punished by these mistakes and I can’t do anything.
“The third thing is what is in my hands, which is the improvement of the team,the improvement of individuals, trying to stop with the defensive mistakes. I knew that I had a task because, for example, the first Man City goal and this second goal today, you can find an incredible similarity.This is tactical but it is also a mental attitude. It’s something that you don’t go there and in a couple of weeks everything becomes perfect. So we have to improve, no doubt, individually and collectively. And that’s my job because lady luck you don’t control and referees mistakes you don’t control.”
Now if we transfer Mourinho from Manchester United to CEO of Deutsche Bank let's see how he gets on
Deutsche Bank vs the US
“I was completely aware that we were not the perfect team, that we had lots of traders who don’t know their products and can make their own mistakes,” Mourinho said. “My only doubt was the way they can cope with the negative moments that come sooner or later. I feel that some individuals probably feel too much pressure and that responsibility."
“But from a collective point of view I only have good things to say about them. If you analyse our three fines in the last years, we were always the best team later on. We didn’t start well but then in the later period the players showed integrity, intensity, desire, and commitment to clients. And we lost again in our best moment.
“I can split this into three factors: one is the regulator’s crucial mistakes – that’s not in my control. Against the DoJ you know what happened at the last minute [when Loretta Lynch made the challenge on our mortgage book], you know what happened for the first fine against FX, you know that the fine was for an offside fix, so we were punished by these mistakes and I can’t do anything.
“The third thing is what is in my hands, which is the improvement of the team, the improvement of individuals, trying to stop with the defensive mistakes. I knew that I had a task because, for example, the first fine for LIBOR and this RMBS today, you can find an incredible similarity. This is tactical but it is also a mental attitude. It’s something that you don’t go there and in a couple of years everything becomes perfect. So we have to improve, no doubt, individually and collectively. And that’s my job because lady luck you don’t control and regulators mistakes you don’t control.”
Spooky isn't it?
Mourinho on today's match, Manchester United vs Watford (these were his actual words).
“I was completely aware that we were not the perfect team, that we had lots of players who are not end products and can make their own mistakes,” Mourinho said. “My only doubt was the way they can cope with the negative moments that come sooner or later. I feel that some individuals probably feel too much pressure and that responsibility.
“But from a collective point of view I only have good things to say about them. If you analyse our three defeats in the last week, we were always the best team in the second half. We didn’t start well today but then in the second half the players showed quality, intensity, desire, commitment and ambition. And we lost again in our best moment.
“I can split this into three factors: one is the referee’s crucial mistakes – that’s not in my control. Against Man City you know what happened in minute 55 [when Claudio Bravo made the challenge on Wayne Rooney], today you know what happened for the first goal, against Feyenoord you know that the goal was in an offside position, so we were punished by these mistakes and I can’t do anything.
“The third thing is what is in my hands, which is the improvement of the team,the improvement of individuals, trying to stop with the defensive mistakes. I knew that I had a task because, for example, the first Man City goal and this second goal today, you can find an incredible similarity.This is tactical but it is also a mental attitude. It’s something that you don’t go there and in a couple of weeks everything becomes perfect. So we have to improve, no doubt, individually and collectively. And that’s my job because lady luck you don’t control and referees mistakes you don’t control.”
Now if we transfer Mourinho from Manchester United to CEO of Deutsche Bank let's see how he gets on
Deutsche Bank vs the US
“I was completely aware that we were not the perfect team, that we had lots of traders who don’t know their products and can make their own mistakes,” Mourinho said. “My only doubt was the way they can cope with the negative moments that come sooner or later. I feel that some individuals probably feel too much pressure and that responsibility."
“But from a collective point of view I only have good things to say about them. If you analyse our three fines in the last years, we were always the best team later on. We didn’t start well but then in the later period the players showed integrity, intensity, desire, and commitment to clients. And we lost again in our best moment.
“I can split this into three factors: one is the regulator’s crucial mistakes – that’s not in my control. Against the DoJ you know what happened at the last minute [when Loretta Lynch made the challenge on our mortgage book], you know what happened for the first fine against FX, you know that the fine was for an offside fix, so we were punished by these mistakes and I can’t do anything.
“The third thing is what is in my hands, which is the improvement of the team, the improvement of individuals, trying to stop with the defensive mistakes. I knew that I had a task because, for example, the first fine for LIBOR and this RMBS today, you can find an incredible similarity. This is tactical but it is also a mental attitude. It’s something that you don’t go there and in a couple of years everything becomes perfect. So we have to improve, no doubt, individually and collectively. And that’s my job because lady luck you don’t control and regulators mistakes you don’t control.”
Spooky isn't it?
Monday, 12 September 2016
Chemical brothers.
I was just plowing through the Sunday opening prices, that part of a Sunday evening where you watch FX open up first and try to garner a sense of how much emotion there is in the market before equity futures get going, but couldn’t really see much going on. I was wondering what to do with a couple of positions and what to initiate, if anything, but really couldn’t get a grasp on what to do and thought I was going to lose my mind. This feeling of confusion grew until I realised that the subliminal power of the Chemical Brothers track 'EML' was the cause as it emanated out of my laptop speakers. “I don’t know what to do, I'm going to lose my mind’. I don’t know why it’s taken me a year to find The Chemical Bros album ‘Born in the Echoes’ but the first two tracks are fantastic with 'Sometimes I feel so deserted’ an electric tonic to lethargy, borrowing a strong stylistic reference from Swedish House Mafia.
But enough of the background music, now for markets.
I was out playing on beaches on Friday so missed the dump and even now I’m not sure what caused it. I get the ECB, indeed I shorted BTPs during Draghi (again, oh widowmaker) but I don’t get the equity dump, it took 24hrs after Draghi spoke to get going which seems too long for it to be purely him causing the shake down.I know it’s September and I know that we all have cupboard loads of reasons to sell equities, those cupboards having been stacked full over the last 3 years, but why now and how far is the fall going to go?
There has been some messy stuff going on for a while. JGBs have backed up, Draghi has taken his foot off the accelerator, Brexit hasn’t induced a slowdown demanding global easing, US data is implying a slowdown and all the while, well for the last 2 years, we have had the soothsayers telling us doom is around the corner. Central bankers see themselves as financial environmentalists, guiding behaviour to preserve financial habitat. But they're killing financial diversity and masking environmental signs of trouble. Central Banks are not environmentalists, they are just the opiates of the economy - instead of treating disease, they just mask the symptoms whilst the disease gets worse. And not just opiates. Ecstasy to masses, MDMA to the banks, crack to the bond market, smack to the politicians and LSD to traditional economists who are having the weirdest trips seeing terrifying things from the future crawling up the walls of worry.
The central banks are the Chemical Brothers here and most of them are at the point of “I don’t know what to do, I’m going to lose my mind’.
In one of my posts from last week, I mentioned that volatility could go up without the underlying falling. I can see vol moving higher again, but I am a bit surprised to see a return of volatility already starting to stir up the ‘I don’t know what's happening, let’s blame risk parity’ brigade. Which has me believing that risk parity is not the game, though I am smirking at the funds who have sold vol as a hedge against no vol.
It is September and there are things one could hang a fall on retrospectively but I am not excited about this fall yet. Look at it this way, 50pts SPX may look a lot over two days but it's still only 50pts over 2 months. However, my key indicator as to how bad and how far this could run is if we see bonds AND equities dump. If I wake up and see both getting torched then I am out and running for cover. Deep cover as when bonds and equities fall we are in for a mess that hasn’t been seen in the past years that indicates confidence in CB policy is finally over and the financial world becomes a Hieronymus Bosch painting of fire, brimstone, helicopters, inflation, and worshipers of Zero Hedge (who have quite rightly blocked me on twitter - I wear it as a badge of honour).
It's midnight here in the UK now Sunday night, I’m going to go to bed and will be buying the European open, hopefully by then everyone will have bigged up a fall and Stop Loss City, New Zealand, will have had their pound of flesh, all Asian traders done what they think someone bigger than them has done (rather than think for themselves) and we have a lovely chance for a 9.30 am London reversal as Asia come out of their K-Hole, as the Chemical Brothers may say.
Positions -
Long oil, was great , now not so great as risk off.
Short BTPs. Going well since Thursday.
Long USDTRY, More good news in risk off environment.
Long Trump to win - I really wish I had bought because I want him to win rather than just believing he will, but it’s going my way, sadly.
Wednesday, 7 September 2016
The only iPhone review you ever need to read.
The only reason I am writing this is because apparently no one cares about anything else and a title like the one I've used should be pure SEO gold.
iPhone launches are like Non Farm Payroll releases. Everyone gets very excited about them but 24hrs later have moved on and are guessing what the next one will be.
Stereo speakers - Unless they produce 150db each, can be spaced 10ft apart and have 12+ inch bass units I don’t care.
The new camera has optical image stabilisation - Useful for the caffeine or 'morning after' DTs.
6 element lens with f/1.8 aperture. 60% faster than previous iPhones. The iPhone 7 has a single lens camera; the 7 Plus has a dual lens camera (wide angle and telephoto). telephoto - Useful, I guess, for wedding photographers.
iPhone 7 Plus: New 'portrait' effect on the camera to add depth of field to photo No Interest, not a selfie fan.
Water and dust resistant Excellent - caught up with Samsung
Longer battery life Good, but still would prefer replaceable and will still probably die after 2 years.
Comes in jet black, black, gold, silver, rose gold. I'm not a 14yr old girl.
Headphones will connect via the lightning port. A free set comes with the phone, plus an adaptor for traditional 3.5mm jack headphones - Backwards step. Buggered if you lose your adapter or headphones. Can’t borrow others. Go long Chinese copy adapter makers.
And AirPods - wireless headphones (with a microphone) that have infrared sensors that detect when they're in your ear and only play then. W1 chip connects the AirPods to your other Apple devices. The batteries last for 5 hours and the Airpods come with a charging case that holds 24 hours of charge. We tried this with Bluetooth headsets. No one can be bothered with devices that need separately charging and if you do use them you'll look like a dodgy limo driver. Drawer fodder, or more likely lost on first outing. San Francisco drains will be full of them. A wire stop you losing them.
A10 Fusion chip with a 64-bit four core CPU Should I be excited? Or even know what that means?
Storage: 32GB, 128GB, 256GB - A 256GB Micro SD card is about £140, how much is your upgrade?
Cost: $649 for the 7, $769 or £649 £769 in UK money. A lot for a better camera you can drop in your beer.
Summary - The only thing you need to know about the iPhone7 is that it will be an out-of-date lump of metal and glass within a year.
Will I buy one? No. But then I've never bought one.
Will it change the price of Apple Stock? Someone will pretend it will, but not in the long run.
iPhone launches are like Non Farm Payroll releases. Everyone gets very excited about them but 24hrs later have moved on and are guessing what the next one will be.
Stereo speakers - Unless they produce 150db each, can be spaced 10ft apart and have 12+ inch bass units I don’t care.
The new camera has optical image stabilisation - Useful for the caffeine or 'morning after' DTs.
iPhone 7 Plus: New 'portrait' effect on the camera to add depth of field to photo No Interest, not a selfie fan.
Water and dust resistant Excellent - caught up with Samsung
Longer battery life Good, but still would prefer replaceable and will still probably die after 2 years.
Comes in jet black, black, gold, silver, rose gold. I'm not a 14yr old girl.
Headphones will connect via the lightning port. A free set comes with the phone, plus an adaptor for traditional 3.5mm jack headphones - Backwards step. Buggered if you lose your adapter or headphones. Can’t borrow others. Go long Chinese copy adapter makers.
And AirPods - wireless headphones (with a microphone) that have infrared sensors that detect when they're in your ear and only play then. W1 chip connects the AirPods to your other Apple devices. The batteries last for 5 hours and the Airpods come with a charging case that holds 24 hours of charge. We tried this with Bluetooth headsets. No one can be bothered with devices that need separately charging and if you do use them you'll look like a dodgy limo driver. Drawer fodder, or more likely lost on first outing. San Francisco drains will be full of them. A wire stop you losing them.
A10 Fusion chip with a 64-bit four core CPU Should I be excited? Or even know what that means?
Storage: 32GB, 128GB, 256GB - A 256GB Micro SD card is about £140, how much is your upgrade?
Cost: $649 for the 7, $769 or £649 £769 in UK money. A lot for a better camera you can drop in your beer.
Summary - The only thing you need to know about the iPhone7 is that it will be an out-of-date lump of metal and glass within a year.
Will I buy one? No. But then I've never bought one.
Will it change the price of Apple Stock? Someone will pretend it will, but not in the long run.
Spread betting for the masses.
September is a remarkably shitty month for many. Not as shitty as November which has to be up there as one of the grimmest months of the year, but just the thought that you have 2 months of inexorable approach to November after returning from a summer holiday makes September shitty. And that’s without the run up to year end nonsense that will have kicked off with appraisals, KRAs, fawning, backstabbing and general Roman Senate behaviour that is booting off in the glass corner offices of Investment banks. Bonus allocations to management are being decided along with debate as to which tiny teaspoon to use for staff bonuses. Sorry folks, I feel for you. Sort of.
But I think you have to have been on the inside to be able to be on the outside to be able to look back in and be glad you are out. I say this because as my own sanguine attitude towards the glaring hypocrisies of city life (the way the regulator regulates and management manage) only grow, the world around me still appears to consider the wheelings and dealings of dealing in financial markets a holy grail to wealth, happiness, and, believe it or not, intellectual respect. Cough cough.
A wall of cash has pushed personal investment into higher risk products and taken the owners of that wealth down a rabbit hole of financial discovery that could have been penned by CS Lewis. Whilst banks cannot offer the simplest of products to their client base, without carrying out Know Your Client inquiries using anal probes, spread betting firms are happily engaging in providing sharp objects to financial 2-year-olds. The rise of the binary option as a punting tool has been remarkable. The ability to bet on financial markets via traditional institutions has been squashed yet the betting industry is stepping into its place. Very odd. And I still don't understand why any profits on a spread betting account are tax-free yet the same trade through a traditional market is taxed.
The tax advantage, the technical ability to replicate what to all intensive purposes looks like a professional dealing screen and the underperformance of cash in bank accounts is handing Joe Public all the tools to dress up as a professional city dealer and..... be taken to the cleaners.
The playing field just isn't flat. Spread betting companies may offer exceedingly good spreads in their shadow markets, but look at the funding costs and roll over charges and it all adds up to a tax on playing. The other fundamental truth is that Joe Public just isn't very good at trading either. The proof? The fact that most spread betting companies don't bother hedging any of their client business. Clients tend to lose. This could also be the reason that spread betting profits aren't taxed. Tax deductible losses would exceed taxable profits.
But the lure of the casino is huge. The pub bragging rights on making a buck on long Eur/Usd just seem so much better than saying you won it on roulette. But the overall odds for most punters are similar. With the rise of the punters comes the rise in the financial snake oil salesmen. The 'follow my foolproof way of trading (though if it's foolproof then why the heck am I telling you)' sites. Twitter is alive with promoted snake oil tweets. But there is money in it as I am afraid to say it, the easiest target market to take money off are the not the cleverest. It's depressing to realise that if you want to make a quick buck the the easiest way to do it is to leg over someone not as smart as you.
I can cope with trying to win by coming up with a trade before anyone else acts on it, but to suck folks into a casino of rigged tables seems a little harsh, especially when gambling has been banned at banks and institutions. And gambling it is. Binary options? How many real world exposures find binary options to be the natural hedge? Apart from as ahedge against the other binary options you already bought.
I passed a slot machine arcade in a coastal town in England last week and wondered how long it would be before all the various gambling machines within it would be replaced by dealing screens with betting on financial markets. Why not? A live stream of SPX index prices to bet on is much the same as the higher/lower electronic card games. In fact....
Yet there is a place for the high octane of risk taking that can be achieved using these facilities. I use them to adapt risk in longer-term underlying portfolios. In fast markets where liquidating underlying assets takes two or three days and involves larger spreads, then a spread betting account is a way to hedge.
But probably the greatest reason I use them is because I am finding that funds just aren't what they used to be. They are either so balanced they don't add any value, or they are so specialised they have passed the risk of asset class selection back to me. Or they are so hamstrung by their own risk metrics that anything fun gets chopped at bottoms or profits taken too early on rallies. And then there's the ultimate curse. You ride out an investment in a fund through thick and thin and just when the market is about to bottom the fund closes down because it isn't performing and hands you what's left of your money back - Looking at you Rennaisance Sub-Sahara and Rennaisance Africa.
I want a good old fashioned broad spectrum punting fund that has balls and is run by someone who is over 21 and doesn't have an ego. Or an algo. And understands politics as much as economics. And doesn't care what fund consultants think. Oh, and being right helps. Is that to mich to ask? Of course it is, but answers in the comments section please.
Yours, mine, I is a geezer dealer 'cos I've got a spread betting app on my phone.
-------
Stop Press! - Just out in the FT about spread better CMC markets.
CMC Markets shares slide 13% on worst day since IPO
I hope that wasn't my fault.
But I think you have to have been on the inside to be able to be on the outside to be able to look back in and be glad you are out. I say this because as my own sanguine attitude towards the glaring hypocrisies of city life (the way the regulator regulates and management manage) only grow, the world around me still appears to consider the wheelings and dealings of dealing in financial markets a holy grail to wealth, happiness, and, believe it or not, intellectual respect. Cough cough.
A wall of cash has pushed personal investment into higher risk products and taken the owners of that wealth down a rabbit hole of financial discovery that could have been penned by CS Lewis. Whilst banks cannot offer the simplest of products to their client base, without carrying out Know Your Client inquiries using anal probes, spread betting firms are happily engaging in providing sharp objects to financial 2-year-olds. The rise of the binary option as a punting tool has been remarkable. The ability to bet on financial markets via traditional institutions has been squashed yet the betting industry is stepping into its place. Very odd. And I still don't understand why any profits on a spread betting account are tax-free yet the same trade through a traditional market is taxed.
The tax advantage, the technical ability to replicate what to all intensive purposes looks like a professional dealing screen and the underperformance of cash in bank accounts is handing Joe Public all the tools to dress up as a professional city dealer and..... be taken to the cleaners.
The playing field just isn't flat. Spread betting companies may offer exceedingly good spreads in their shadow markets, but look at the funding costs and roll over charges and it all adds up to a tax on playing. The other fundamental truth is that Joe Public just isn't very good at trading either. The proof? The fact that most spread betting companies don't bother hedging any of their client business. Clients tend to lose. This could also be the reason that spread betting profits aren't taxed. Tax deductible losses would exceed taxable profits.
But the lure of the casino is huge. The pub bragging rights on making a buck on long Eur/Usd just seem so much better than saying you won it on roulette. But the overall odds for most punters are similar. With the rise of the punters comes the rise in the financial snake oil salesmen. The 'follow my foolproof way of trading (though if it's foolproof then why the heck am I telling you)' sites. Twitter is alive with promoted snake oil tweets. But there is money in it as I am afraid to say it, the easiest target market to take money off are the not the cleverest. It's depressing to realise that if you want to make a quick buck the the easiest way to do it is to leg over someone not as smart as you.
I can cope with trying to win by coming up with a trade before anyone else acts on it, but to suck folks into a casino of rigged tables seems a little harsh, especially when gambling has been banned at banks and institutions. And gambling it is. Binary options? How many real world exposures find binary options to be the natural hedge? Apart from as ahedge against the other binary options you already bought.
I passed a slot machine arcade in a coastal town in England last week and wondered how long it would be before all the various gambling machines within it would be replaced by dealing screens with betting on financial markets. Why not? A live stream of SPX index prices to bet on is much the same as the higher/lower electronic card games. In fact....
Emerging Markets. They all moved but you got the wrong one.
Short carry. It never drops more than you put in
Brighton Pier at 1.30pm on NFP day.
Binary Options - 7 ways to lose faster.
FOMC - It's always coming around but no winner.
The new precious metals dealing desk .
But probably the greatest reason I use them is because I am finding that funds just aren't what they used to be. They are either so balanced they don't add any value, or they are so specialised they have passed the risk of asset class selection back to me. Or they are so hamstrung by their own risk metrics that anything fun gets chopped at bottoms or profits taken too early on rallies. And then there's the ultimate curse. You ride out an investment in a fund through thick and thin and just when the market is about to bottom the fund closes down because it isn't performing and hands you what's left of your money back - Looking at you Rennaisance Sub-Sahara and Rennaisance Africa.
I want a good old fashioned broad spectrum punting fund that has balls and is run by someone who is over 21 and doesn't have an ego. Or an algo. And understands politics as much as economics. And doesn't care what fund consultants think. Oh, and being right helps. Is that to mich to ask? Of course it is, but answers in the comments section please.
Yours, mine, I is a geezer dealer 'cos I've got a spread betting app on my phone.
-------
Stop Press! - Just out in the FT about spread better CMC markets.
CMC Markets shares slide 13% on worst day since IPO
I hope that wasn't my fault.
Monday, 5 September 2016
Same old same old
It’s been a while since I wrote a post. I could pretend it was because I have been on holiday. It isn’t. It’s because I really haven’t felt there's been anything of note to change my view of the world. My last post was titled 'Wrong Wrong Wrong' and I do feel as though I could add one of my own long-running beliefs to that. The way the Turkish lira has gently strengthened has caught me on the wrong side.
However, I have a right right right with my expectation of an unwinding of Brexit hysteria. Carney’s 4th of August move was so predicted I put a bet on it not happening. A small loss but I still felt it worthwhile as his ability to do the unexpected, or rather not do the expected, has been magnificent. I thank him for his actions as they have reduced my mortgage costs by 25% (1% to 0.75%) but I can't help thinking he has reacted to his own induced panic rather than anything proven. Of course, anticipating is the job of the BoE but I am interested at how the reputation of BoE forecasts appears to have gone from ‘pretty lousy’ over the past few years, to 'God-like' over Brexit.
I have been waiting for August data to appear because there was no point protesting the validity of July’s PMI’s as the armageddon brigade were waving sharp objects and their eyes had turned sparkly blue (a Game of Thrones ref there). The recent rebound in the UK data, manufacturing and service PMI’s, employment, housing, even the low inflation so far, has driven the army of the dead back north of the wall. But their screams can still be heard in the distance.
The Stark warning that Winter is coming may yet be true. But an Indian summer is upon us now as now is not the winter of our discontent. Well not mine, anyway.
I haven’t been tick watching markets as I haven't been that engaged. It's a fine thing to step back and have a financial form of out of body experience, looking back down on the chatter as you float above it, wondering what the point of all that noise is. Nothing has really changed. The hunt for yield drives on, data comes out, people jump and shout but then get bored and everything mean reverts. NFPs are a class example. They are like a solar eclipse passing over the market. They cause excitement and even panic but all they really are is a big fade. And in the background, the SETI project of Fed watching grinds on. Yeeeeeaaaawn.
On irregular visits to Twitter, I note excitement every now and then as a stock index somewhere puts in a 0.nothing move lower. Which backs up the general theme of ‘most hated stock rally for ages’.
The low volatility environment has many saying that volatility compression through funds selling vol, to fund underperformance, will lead to a vol explosion. I can empathise with this but it doesn't mean there has to be a massive move in underlying. Implied volatility can do some mighty strange stuff all on its own. High vol is read to lead to market price falls and low vol is read to lead to high vol which leads to price falls. Did you notice a certain bias in reporting there?
We all talk about negative yields and how it's all part of the great plan to drive money into more productive parts of the economy, but with low volatility and making a basis point in financial markets harder and harder, I wryly wonder if crushing vol is a clever master plan to drive workers into more productive parts of the economy. There is an irony in fund managers and traders bemoaning the lack of yield when all they would have to do is leave and get a job in any other field. Margins in non-financial businesses are measured in 10s of percents rather than 0.01s.
We now have G20 upon us and the changing shape of real global political power is much more interesting than Fibonacci levels in weasel poo prices. The longer term concerns of a changing landscape with regards to international relationships has been judged by the markets as immaterial until they get an economic data point to react to. Even if Greece don't get another EU payment for a while, or Turkey raises the Hammer and Sickle over Ankara or China links their mainland to Los Angeles through geo-forming, no one will really care unless it is reflected through Fed policy speak or NFPs come out 100K +/- from expectations.
I am still fascinated by Turkey. I still see it as the keystone or lynchpin or even grenade pin, to the many many current issues. From what I gather (no names, no pack drill) subterranean diplomacy is a hive of activity. The Russians are in there like Flynn, and the Europeans are busy trying to repair the damage of late support. The EU did not see a coup coming and their response was disastrously delayed. They will now have to over compensate in acquiescence as they still need a refugee deal but are now negotiating with a stronger counterpart backed by their old foe. The coup has been a wake-up call not only to the West, but Erdogan himself who now owes his life to the Russians and despite an appearance of authority is fast learning some of the basics of governance needed to successfully run a country of multiple cultures. He is restructuring his advisors, both domestic and international and has a stronger hand than ever to play the Uzbek game of mix and match when it comes to international courtship.
I have been short of Turkish lira and intend to remain that way for a while as it will be a while before foreign direct investment has the confidence to return to counter their trade deficits. But play this right, which I feel he is, and Erdogan will be able to extort favors from all sides. Who will open the bidding?
It is still interesting to see that GBP/TRY is much lower than pre-Brexit which obviously proves that leaving the EU is judged much more serious than having a dictatorial purge, moving away from ever joining EU, cozying up to Russia and changing the shape of Western/ Middle East politics.
Trade ideas? Is one allowed to even hint at trade ideas in this regulated market? Oh, hang on, I'm not regulated. Or am I? Or was I? Or rather will I be? For if I will be, I could possibly be prosecuted for breaking rules when I wasn't and didn't have to abide by them. The Apple dilemma. Or FX dilemma. Politically motivated retrospective legal action is today's great game. I am sure that the next step is when the authorities go 'Minority Report' and start fining start-ups billions now for tax avoidance they may carry out in the future should they become hugely successful.
Of course, I can't advise you, but I can warn you that if you have the same positions as me, (long a bit of oil, long USDTRY, long Trump to win and short Eur/Gbp) then you may or may not lose or make money. Why am I long Trump? Because the odds had closed to 20% on smart people betting that stupid people won't be stupid. Which is stupid.
Apart from that, I have little idea, though it is becoming abundantly clear that though economics is all about predicting behaviour, economists are appalling at predicting behaviour at political tipping points.
However, I have a right right right with my expectation of an unwinding of Brexit hysteria. Carney’s 4th of August move was so predicted I put a bet on it not happening. A small loss but I still felt it worthwhile as his ability to do the unexpected, or rather not do the expected, has been magnificent. I thank him for his actions as they have reduced my mortgage costs by 25% (1% to 0.75%) but I can't help thinking he has reacted to his own induced panic rather than anything proven. Of course, anticipating is the job of the BoE but I am interested at how the reputation of BoE forecasts appears to have gone from ‘pretty lousy’ over the past few years, to 'God-like' over Brexit.
I have been waiting for August data to appear because there was no point protesting the validity of July’s PMI’s as the armageddon brigade were waving sharp objects and their eyes had turned sparkly blue (a Game of Thrones ref there). The recent rebound in the UK data, manufacturing and service PMI’s, employment, housing, even the low inflation so far, has driven the army of the dead back north of the wall. But their screams can still be heard in the distance.
The Stark warning that Winter is coming may yet be true. But an Indian summer is upon us now as now is not the winter of our discontent. Well not mine, anyway.
I haven’t been tick watching markets as I haven't been that engaged. It's a fine thing to step back and have a financial form of out of body experience, looking back down on the chatter as you float above it, wondering what the point of all that noise is. Nothing has really changed. The hunt for yield drives on, data comes out, people jump and shout but then get bored and everything mean reverts. NFPs are a class example. They are like a solar eclipse passing over the market. They cause excitement and even panic but all they really are is a big fade. And in the background, the SETI project of Fed watching grinds on. Yeeeeeaaaawn.
On irregular visits to Twitter, I note excitement every now and then as a stock index somewhere puts in a 0.nothing move lower. Which backs up the general theme of ‘most hated stock rally for ages’.
The low volatility environment has many saying that volatility compression through funds selling vol, to fund underperformance, will lead to a vol explosion. I can empathise with this but it doesn't mean there has to be a massive move in underlying. Implied volatility can do some mighty strange stuff all on its own. High vol is read to lead to market price falls and low vol is read to lead to high vol which leads to price falls. Did you notice a certain bias in reporting there?
We all talk about negative yields and how it's all part of the great plan to drive money into more productive parts of the economy, but with low volatility and making a basis point in financial markets harder and harder, I wryly wonder if crushing vol is a clever master plan to drive workers into more productive parts of the economy. There is an irony in fund managers and traders bemoaning the lack of yield when all they would have to do is leave and get a job in any other field. Margins in non-financial businesses are measured in 10s of percents rather than 0.01s.
We now have G20 upon us and the changing shape of real global political power is much more interesting than Fibonacci levels in weasel poo prices. The longer term concerns of a changing landscape with regards to international relationships has been judged by the markets as immaterial until they get an economic data point to react to. Even if Greece don't get another EU payment for a while, or Turkey raises the Hammer and Sickle over Ankara or China links their mainland to Los Angeles through geo-forming, no one will really care unless it is reflected through Fed policy speak or NFPs come out 100K +/- from expectations.
I am still fascinated by Turkey. I still see it as the keystone or lynchpin or even grenade pin, to the many many current issues. From what I gather (no names, no pack drill) subterranean diplomacy is a hive of activity. The Russians are in there like Flynn, and the Europeans are busy trying to repair the damage of late support. The EU did not see a coup coming and their response was disastrously delayed. They will now have to over compensate in acquiescence as they still need a refugee deal but are now negotiating with a stronger counterpart backed by their old foe. The coup has been a wake-up call not only to the West, but Erdogan himself who now owes his life to the Russians and despite an appearance of authority is fast learning some of the basics of governance needed to successfully run a country of multiple cultures. He is restructuring his advisors, both domestic and international and has a stronger hand than ever to play the Uzbek game of mix and match when it comes to international courtship.
I have been short of Turkish lira and intend to remain that way for a while as it will be a while before foreign direct investment has the confidence to return to counter their trade deficits. But play this right, which I feel he is, and Erdogan will be able to extort favors from all sides. Who will open the bidding?
It is still interesting to see that GBP/TRY is much lower than pre-Brexit which obviously proves that leaving the EU is judged much more serious than having a dictatorial purge, moving away from ever joining EU, cozying up to Russia and changing the shape of Western/ Middle East politics.
Trade ideas? Is one allowed to even hint at trade ideas in this regulated market? Oh, hang on, I'm not regulated. Or am I? Or was I? Or rather will I be? For if I will be, I could possibly be prosecuted for breaking rules when I wasn't and didn't have to abide by them. The Apple dilemma. Or FX dilemma. Politically motivated retrospective legal action is today's great game. I am sure that the next step is when the authorities go 'Minority Report' and start fining start-ups billions now for tax avoidance they may carry out in the future should they become hugely successful.
Of course, I can't advise you, but I can warn you that if you have the same positions as me, (long a bit of oil, long USDTRY, long Trump to win and short Eur/Gbp) then you may or may not lose or make money. Why am I long Trump? Because the odds had closed to 20% on smart people betting that stupid people won't be stupid. Which is stupid.
Apart from that, I have little idea, though it is becoming abundantly clear that though economics is all about predicting behaviour, economists are appalling at predicting behaviour at political tipping points.
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