Monday, 14 November 2016

Positional update. Closing down sale.

I don't know if it's the weather, a streaming cold or my disdain at the bipartisan rantings everywhere that have me pretty depressed today. I have been lucky in the markets but I am getting to that point where  I can't outguess what everyone else is trying to outguess. Because guessing is a lot of what it is. Uncertainty is what we have, not certainty.  Yet much of the market is trading as though the future is certain.

My only conviction is that the path for bonds has finally cracked. It won't be a straight line path so there is still room for pain, but Trump has nudged them over an edge they were already standing perilously close to. How that pans out for everything else though is dubious. A controlled slide, as part of a reflation adjustment, is one thing, but my fear is that this goes all rather nasty in a hurry and acts like a cluster bomb in the market triggering unpredictable secondary explosions all over the place.

But, for now, as I am cold, shivery, annoyed and generally in a confused and foul mood I am shutting things down.

Update on the last 'positional' post ->


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 http://polemics-pains.blogspot.co.uk/2016/10/yen-bomb.html. Happy to run this. CLOSED IT. +6.5% is enough, for now, it's getting mainstream.

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. http://polemics-pains.blogspot.co.uk/2016/07/turkey-they-think-its-all-over-it.html  CLOSED IT. 

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. RUNNING FOR A LITTLE LONGER, BONDS ARE BUST, BUT LEFT TIGHT TRAILING STOPS NOW.

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 its 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.
RUNNING IT, could hurt and looks rubbish, but oil always does before it turns. 


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. CLOSED IT. Bored and it's priced for Trump. Will look for dips to rebuy but will depend upon news at the time.

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. CLOSED IT.

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. STILL LONG IN THE DEPTHS OF THE PORTFOLIO but after the recent run its become more lottery than pure conviction. I'll close the drawer and ignore it all. 

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 DON'T NEED TO TELL YOU WHAT HAPPENED TO THESE.


So that’s it. I'm going to vanish off to wild and windy solitude for a few days to regain my soul. 

Pol 

PS.. As a parting lottery ticket I have shorted dow at 18907 and put a stop at 18985. Pure lottery and I won't take a look until I'm back. 

3 comments:

Skr said...

Well done Pól. You know spending it is nearly as much fun as making it. Get yourself off to a nice hot climate for a week. Try a few hot toddys for the cold in the mean time.

Andy R said...

Another great read, get well soon. Delighted the Trump bets came in, wasn't brave enough myself, even the night before when gold started dumping on the expectation of another Clinton Whitehouse. Agree on oil, plenty of upside and regardless of supply side fun and games once a limited-supply commodity has been up at those dizzy heights above $100, it is easier to see it close to that again in the next couple of years. I am involuntarily very long GBPEUR owing to an investment pre-Brexit vote - have crapped myself for four months, now finally feeling that the EURO mask is slipping. Happy hols.

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