Friday, 28 October 2016

Positional retrospective

It’s been a tense few weeks in Polemic Towers with market positions being whipped all over the place and it has taken a strong nerve to weather through but today it finally looks as though my positions are paying off so it's worth having a look at them again.

Long USDJPY - instigated at the end of September after the markets had decided to buy yen post BoJ when perhaps it should have been selling as described here Happy to run this.

Long USDTRY- Long since the coup after the initial pull back to 2.96 area. My core beliefs that Turkey is in trouble re regional positioning and FDI flows vs trade deficits is unchanged. Seeing it break up through the post coup highs to now trade around 3.12 looks like we are finally on the move. That 'CB may not cut' move from 3.10 to 3.06 was indeed just a buying opportunity.

Short BTPs - Short since the ECB in September and going well in the run up to Italian referendum and a general rally in global bond yields. the 50yr BTP auction appears to have been a watershed moment for them. I go along with the general concern that bond markets are the nuclear waste of monetary policy and their toxic legacy is not easily disposed of.

Long Oil - Its had a good run and is now languishing around the 50 area and I am not so sure about another up leg but I am still biased for higher as no one really seems to believe that OPEC can get it’s act together. Whilst developed markets demand may be substituted with renewables I can’t forget the exploding global population in the poorer countries who as they emerge from abject poverty are going to be buying a moped, cultivator, generator or old car before they get wired up to a renewables grid. Oil burning is still the first step out of poverty.

Now the messy bit - Long GBP via EUR and USD. EURGBP is onside and less of a worry than the cable part which has been whipping around like a cow’s tail in a fly infestation. I am one of those flies trying to hang on to longs but it is hurting. I am spending far too much time watching price action and  willing to cut sub 1.2050. 1.2250 has been behaving as a very difficult area to break and some of the short-term price action on any approach had that feel of ‘someone is working a lot to go over time at that level’ feel to it.

Short FTSE - It’s been correlating well inversely to GBP, which was the original plan to be short it and long GBP, but it’s now underperforming the GBP moves looking weaker on its own. Which can be read a couple of ways. First, its global equity weakness coming through in general not helped by bonds are looking iffy (higher bond yields, higher borrowing costs for highly leveraged debt etc). OR and this is confirmation bias at it’s best in my brain, It's showing that the belief in GBP weakness is fading otherwise everyone would be buying FTSE, No actually, I don’t think I can bend that one to fully fit.

Meanwhile in commodities, though I haven’t been talking about them, some buried deep long-term structural positions are heavily weighted towards commodities, mostly through producer stocks. Rio has done well and the rapid rally in coal prices has caught a lot of folks out as coal had been pretty much written off as having any use in the new energy world. But Chinese stockpiling must have breathed new life into the east coast of Australia to the point that the AGDF ( Aussie Goes Down forever) trade may be worth playing against. Copper has been pretty much range bound and though I tried buying bounces 6 notes ago it won’t be on my radar until it breaks properly. Supply side seems to be driving price more than demand. But overall I am happy to run long commodity position sin the deep dark recesses of guy bottom drawer trades.

Trump to win bets. I'm very happy to let them expire worthless, and hope that they do, but still think that prices may well rise during the election themselves which ill give an opportunity to sell

What next?  The only thing tempting me is Short Vegemite vs long Marmite. The spread spread. It encapsulates stupid UK politicians, Long Aud, Short GBP and a long Unilever vs Tesco. And I prefer marmite.

So that’s it. Watching and waiting and wondering.


Anonymous said...

Nobody is talking about the Bovril substitution trade.

Polemic said...

Yes anon, I gather there is some meat in that trade

Asian Trader said...

Hearing from Chicago floor that the feeder cattle in the stockyards aren't keen on it.

Polemic said...

Herd from Chicago not keen on it either. I guess if you boil it down it's the yeast of their problems.

Anonymous said...

LOL v good !