• Tag Archives BOJ
  • Global Stocks Rise Amid Unexpected ECB “Trial Balloon”; Dollar Flat Ahead Of Fed Minutes

    European markets continued their risk-on mood in early trading for the third day, rising to the highest in over a week and rallying from the open led by mining stocks as industrial metals spike higher after zinc forwards hit highest level since 2007, lifting copper and nickel. The EUR sold off sharply, boosting local bond and risk prices after the previously discussed Reuters “trial balloon” report that Draghi’s speech at Jackson Hole would not announce the start of the ECB’s taper. The EURUSD has found support at yesterdays session low. Bunds have rallied in tandem before gilts drag core fixed income markets lower after U. K. wages data surprises to the upside. Early EUR/JPY push higher through 130.00 supports USD/JPY to come within range of 111.00.
    In Asia, Japan’s JGB curve was mildly steeper after the BOJ continued to reduce its purchases of 5-to-10-yr JGBs; the move was consistent with the BOJ’s desire to cut back whenever markets stabilize, according to Takenobu Nakashima, strategist at Nomura Securities Co. in Tokyo. The yen is little changed after rising just shy of 111 overnight. The S. Korean Kospi is back from holiday with gains; The PBOC weakened daily yuan fixing; injects a net 180 billion yuan with reverse repos; the Hang Seng index rose 0.9%, while the Shanghai Composite closed -0.2% lower. Dalian iron ore declines one percent. Japan’s Topix index closed little changed. South Korea’s Kospi index rose 0.6 percent, reopening after a holiday. The Hang Seng Index added 0.8 percent in Hong Kong, while the Shanghai Composite Index fell 0.2 percent. Australia’s S&P/ASX 200 Index advanced 0.5 percent. Singapore’s Straits Times Index was Asia’s worst performer on Wednesday, falling as much as 1.1 percent, as banks and interest-rate sensitive stocks dropped.
    The Stoxx Europe 600 Index rose 0.7%, the highest in a week. The MSCI All-Country World Index increased 0.3%. The U. K.’s FTSE 100 Index gained 0.6%. Germany’s DAX Index jumped 0.8% to the highest in more than a week. Futures on the S&P 500 Index climbed 0.2% to the highest in a week. Global markets are finally settling down after a tumultuous few days spurred by heightened tensions between the U. S. and North Korea. Miners and construction companies led the way as every sector of the Stoxx Europe 600 advanced as core bonds across the region declined. Crude gained for the first time in three days after industry data was said to show U. S. inventories tumbled 9.2 million barrels last week.

    This post was published at Zero Hedge on Aug 16, 2017.


  • “Mystery” Central Bank Buyer Revealed: SNB Now Owns A Record $84 Billion In US Stocks

    In the second quarter of the year, one in which unlike in Q1 fund flows showed a persistent and perplexing outflow from US stocks and into European and Emerging Markets, a trading desk rumor emerged that even as institutional traders dumped stocks and retail investors piled into ETFs, a “mystery” central bank was quietly bidding up risk assets by aggressively buying stocks. And no, it was not the BOJ: the Japanese Central Bank’s interventions in the stock market are familiar to all by now, and for the most part the BOJ keeps its interventions local, mostly propping up Japanese stocks, whether the Nikkei 225 or the Topix.
    The answer was revealed this morning when the hedge fund known as the “Swiss National Bank” posted its latest 13-F holdings. What it showed is that, as rumored, the Swiss National Bank had gone on another aggressive buying spree in the second quarter, and following its record purchases in the first quarter, the central bank boosted its total equity holdings to an all time high $84.3 billion, up 5% or $4.1 billion from the $80.4 billion at the end of the first quarter.

    This post was published at Zero Hedge on Aug 9, 2017.


  • “We May Be Very Close To The Turning Point”: Selloff Blamed On This Note From JPM’s Marko Kolanovic

    While nobody knows what catalyzed for the sharp selloff over the last hour, with Citi blaming it on Acrophobia, or fear of heights, saying that “US equities opened at record highs, key levels were being approached in fixed income while USD enjoyed a bid across the board… However since then, it looks like markets have gotten a small case of cold feet”, Bloomberg had a different idea, when it observed that stocks erased gains around 12:30 p.m. as S&P 500 fell 0.5% over 60 minutes to low of 2,469.51. It notes that the “weakness occurred as traders circulated a note by JPMorgan quant strategist Marko Kolanovic that cautioned investors on the risks of record-low volatility in the equity market.”
    In his latest note, reposted below, Kolanovic, aka the JPM quant “Gandalf” popularized on this website over the past two years writes that “volatility near or at record lows by a handful of measures should ‘give pause to equity managers,’ and that ‘low volatility would not be a problem if not for strategies that increase leverage when volatility declines.’
    “In what is akin to the law of ‘communicating vessels,’ once inflows in bonds stop, funds are likely to start leaving other risky assets as well, including equities. The FOMC statement yesterday alleviated immediate fears – normalization of balance sheet will start ‘relatively soon,’ but only if ‘the economy evolves broadly as anticipated.’ This reasonably dovish stance pushes this market risk out for a few weeks (the next ECB meeting is Sep 7th, Fed Sep 20th, BoJ Sep 21st). This gives volatility sellers and other levered investors a limited window to position for a seasonal pickup in volatility and central bank catalysts in September.”
    For the TL/DR crowed, picking up on an article posted here two days ago in which MS explained what would happen if VIX went “bananas“, Kolanovic writes that “strategies that boost leverage when volatility declines, such as option hedging, CTAs and risk-parity, share similar features with the dynamic ‘portfolio insurance’ of 1987,’ which ‘creates a ‘stop-loss order’ that gets larger in size and closer to the current market price as volatility gets lower.’ Additionally, growth in short-vol strategies suppresses both implied and realized volatility, and with volatility at all-time lows ‘we may be very close to the turning point.’

    This post was published at Zero Hedge on Jul 27, 2017.


  • When Will The ECB Run Out Of German Bunds To Buy: Here Is The Math

    Speaking earlier on Monday, ECB governing council member Ewald Nowotny said that despite growing market concerns, the ECB “sees no need to set a timetable to end bond buying” adding that “the question is not when but how to continue. That will depend on the economic projections for 2018, which we will have in the fall […] It’s not about an abrupt halt, but about registering that we are no longer confronted by such an acute crisis as we were when we implemented the measures. I consider it wise to step off the gas slowly.”
    In other words, just like all other central bank pronouncements, this too was meant to instill confidence in the economy. There is just one problem: the question which Nowotny tried so hard to ignore is precisely the one that matters as we most recently explained in “Both ECB And BOJ Are Just Months Away From Running Out Of Bonds To Buy.” The question is even more relevant considering it has been the ECB’s purchases of corporate (and government) bonds that has led to a record drop in European credit spreads as we showed yesterday.

    This post was published at Zero Hedge on Jul 25, 2017.


  • BoJ Keeps Rates Unchanged, Postpones 2% Inflation Deadline

    The Bank of Japan kept its monetary stimulus program unchanged even as it pushed back the projected timing for reaching 2 percent inflation for a sixth time.
    The downgraded price outlook will raise more questions about the sustainability of the BOJ’s stimulus at time when other major central banks are turning toward normalizing their monetary policy. The European Central Bank, which is said to examine options for winding down quantitative easing, concludes its own governing council meeting later on Thursday.
    By again delaying the timing for hitting its price goal, the BOJ acknowledged the need to continue easing for at least several more years, probably beyond 2020 because of a sales-tax increase scheduled for late 2019, said Hiromichi Shirakawa, chief Japan economist at Credit Suisse Group AG and a former BOJ official.
    “Going forward, there will be even more attention on the sustainability of the stimulus from market participants and lawmakers,” Shirawaka said.
    BOJ Governor Haruhiko Kuroda said it was regrettable the central bank needed to push back its inflation goal again, saying it hadn’t intentionally made its forecasts too optimistic. He noted that central banks in the U.S. and Europe had also overestimated inflation.

    This post was published at bloomberg


  • Why the Gold Price Could Continue Beyond Today’s 4-Week High

    This is a syndicated repost courtesy of Money Morning – We Make Investing Profitable. To view original, click here. Reposted with permission.
    Over the last week, the gold price has bounced back above the $1,200 threshold. With the metal currently trading at $1,251, it’s set to post a weekly gain of 1.7%. The price of gold’s rally this week to its highest level since June 23 came mostly on the back of comments from Mario Draghi, president of the European Central Bank (ECB). Draghi said during the bank’s policy meeting on Thursday that the ECB had not yet formalized plans to roll back monetary policy stimulus.
    The Bank of Japan (BoJ) also said its inflation expectations were not meeting targets, with the current 1.1% inflation rate below the previous forecast of 1.4%. The BoJ noted that a dovish monetary policy would persist for some time.
    And that echoed what U. S. Federal Reserve Chair Janet Yellen said in her Congressional testimony last week, when she admitted the global inflation slowdown could call for an ‘adjustment’ to the Fed’s policy.

    This post was published at Wall Street Examiner by Peter Krauth ‘ July 21, 2017.


  • The Elephant in the Room: Debt

    It’s the elephant in the room; the guest no one wants to talk to – debt! Total global debt is estimated to be about $217 trillion and some believe it could be as high as $230 trillion. In 2008, when the global financial system almost collapsed global debt stood at roughly $142 trillion. The growth since then has been astounding. Instead of the world de-leveraging, the world has instead leveraged up. While global debt has been growing at about 5% annually, global nominal GDP has been averaging only about 3% annually (all measured in US$). World debt to GDP is estimated at about 325% (that is all debt – governments, corporations, individuals). In some countries such as the United Kingdom, it exceeds 600%. It has taken upwards of $4 in new debt to purchase $1 of GDP since the 2008 financial crisis. Many have studied and reported on the massive growth of debt including McKinsey & Company http://www.mickinsey.com, the International Monetary Fund (IMF) http://www.imf.org, and the World Bank http://www.worldbank.org.
    So how did we get here? The 2008 financial crisis threatened to bring down the entire global financial structure. The authorities (central banks) responded in probably the only way they could. They effectively bailed out the system by lowering interest rates to zero (or lower), flooding the system with money, and bailing out the financial system (with taxpayers’ money).
    It was during this period that saw the monetary base in the US and the Federal Reserve’s balance sheet explode from $800 billion to over $4 trillion in a matter of a few years. They flooded the system with money through a process known as quantitative easing (QE). All central banks especially the Fed, the BOJ and the ECB and the Treasuries of the respective countries did the same. It was the biggest bailout in history. As an example, the US national debt exploded from $10.4 trillion in 2008 to $19.9 trillion today. It wasn’t just the US though as the entire world went on a debt binge, thanks primarily to low interest rates that persist today.

    This post was published at GoldSeek on Friday, 21 July 2017.


  • World Stocks Hit Record High For 10th Consecutive Day In “No-Vol Nirvana”

    The relentless risk levitation continued overnight, as global shares extended their stretch of consecutive record highs on Thursday for a 10th day after a cautious BOJ lifted Asian stocks to a decade high with a dovish announcement that offered no surprises, while pushing back Kuroda’s 2% inflation target to 2020, the 6th consecutive delay. With all eyes on the ECB in just over an hour, US equity futures are in the green, following solid gains around the globe. European stocks extended their biggest gain in a week while Asian equities maintained their rally. Microsoft, Blackstone, Philip Morris and Ebay are among companies reporting earnings. Initial jobless claims data due.
    Traders – so mostly algos – are riding a global risk “high” in stocks as Asia’s and then Europe’s early 0.4 percent gains ensured MSCI’s 47-country All World index was up for a 10th straight session. This is the longest winning streak in global stocks since February 2015 and shows little sign of fatigue even as bond yields edged modestly higher again. The Stoxx Europe 600 Index rose 0.3 percent as of 9:53 a.m. in London. The U. K.’s FTSE 100 Index rose 0.5 percent to near the highest in a month. The MSCI Emerging Market Index fell 0.1 percent, the first retreat in almost two weeks. The VIX index closed below 10 for a record fifth consecutive day. Appropriately, Bloomberg dubbed the move a “no-vol” nirvana, in which stocks and bonds keep rallying as volatility evaporates.

    This post was published at Zero Hedge on Jul 20, 2017.


  • Gradually… And Then Suddenly

    What do socialism and modern monetary policy have in common? Magical thinking. For both, it’s true on the giddy years up, and it’s true on the sad years down.
    If you’ve been reading my notes immediately before and after the June Fed meeting (‘Tell My Horse’ and ‘Post-Fed Follow-up’), you know that I think we now have a sea change in what the Fed is focused on and what their default course of action is going to be. Rather than looking for reasons to ease up on monetary policy and be more accommodative, the Fed and the ECB (and even the BOJ in their own weird way) are now looking for reasons to tighten up on monetary policy and be more restrictive. As Jamie Dimon said the other day, the tide that’s been coming in for eight years is now starting to go out. Caveat emptor.
    The question, then, isn’t whether the barge of monetary policy has turned around and embarked on a tightening course – it has – the question is how fast that barge is going to move AND whether or not the market pays more attention to the actual barge movements than what the barge captain says. I promise you that the barge captains of both the Fed and the ECB believe they can tighten and taper without killing the market so long as they jawbone this constantly. This is the Common Knowledge Game in action, this is the Missionary Effect, this is Communication Policy … this is everything that I’ve been writing about in Epsilon Theory over the past four years! And as we saw with the market’s euphoric reaction to Yellen’s prepared remarks for her Humphrey-Hawkins testimony last Wednesday, which were presented as oh-so dovish when they really weren’t, this jawboning strategy could absolutely work. It WILL absolutely work unless and until we get undeniably ‘hot’ inflation numbers – particularly wage inflation numbers – from the real world.
    So what’s up with that? How can we have wage inflation running at a fairly puny 2.5% (Chart 1 below) when the unemployment rate is a crazy low 4.3% (Chart 2 below) and other indicators, like the NFIB’s survey of ‘Small Business Job Openings Hard to Fill’ (Chart 3 below) are similarly screaming for higher wages?

    This post was published at Zero Hedge on Jul 19, 2017.


  • Global Stocks Hit Record High, Set For Longest Winning Streak Since 2015

    In what has been a less exciting session than the previous two, the euro retraced some recent gains as traders grew concerned they may have overestimated the ECB’s hawkish bias ahead of Thursday’s rate decision; in turn the dollar edged higher after the collapse of the GOP healthcare bill sent it to the lowest since September on Tuesday.
    Not even Citi could infuse any excitement in the overnight session, which its called “Purgatorial”:
    Markets are more or less flat so far today as we face a temporary dearth of data and speakers. USD remains weak, but there has been no real excuse to continue selling yet. The ECB and the BoJ are both up tomorrow and any potential moves may be linked to pre-positioning/squaring rather than anything that today may offer us…
    There is little of note this afternoon that could tickle the fancy of even the most excitable FX watcher – We are staring into the abyss… and DoE inventories are staring right back. As oil is flat so far today, that print could provoke a small twitch. Elsewhere, we get US housing starts and Canadian manufacturing shipments…
    In Dante’s inferno, Purgatorio immediately precedes Paradiso. Fingers’ firmly crossed.

    This post was published at Zero Hedge on Jul 19, 2017.


  • FX Week Ahead Preview: Is it “End Of Days” For The Greenback

    FX Week Ahead, courtesy of Rajan Dhall from fxdaily.co.uk
    Coming off the back of another bad week for the USD, we look to a barren period for the data schedule in the US, so markets will have to determine whether to extend this weakness based on the evidence so far.
    Friday’s hit on US rates was more a function of the softer retail sales data than the inflation read, where the core year on year was unchanged at 1.7% as forecast. However, with seasonal factors supportive of a pick up in consumer spending in June, there was little improvement on the weak May readings in retail, and USD sellers were back in with force. The greenback ended the week on its lows across the board, but this was tempered to a degree against the JPY and CHF.
    Even though the JPY is still seen to be a little undervalued at current levels vs the USD, the consistent BoJ policy to keep the key 10yr JGB rate near/at zero is underpinning the spot rate to a degree, but this also depends on whether the global risk tone can be maintained. Despite the backdrop of tensions over North Korea, as well as the ever present risk of president Trump sparking a trade war (with anyone), equities continue to grind higher with their Teflon (Kevlar) coated armour, so the carry trades will naturally follow. On this note, watch out for the China GDP numbers Sunday night and any material drop from the annualised growth rate of 6.9% from Q1 – Q2 forecast at 6.8% and risk sentiment would easily stomach that.

    This post was published at Zero Hedge on Jul 16, 2017.


  • Jobs and Inflation: Gradually and Then Suddenly

    The Fed and the ECB believe they can tighten and taper without killing the market so long as they jawbone this constantly.
    If you’ve been reading my notes immediately before and after the June Fed meeting (‘Tell My Horse’ and ‘Post-Fed Follow-up’), you know that I think we now have a sea change in what the Fed is focused on and what their default course of action is going to be. Rather than looking for reasons to ease up on monetary policy and be more accommodative, the Fed and the ECB (and even the BOJ in their own weird way) are now looking for reasons to tighten up on monetary policy and be more restrictive. As Jamie Dimon said the other day, the tide that’s been coming in for eight years is now starting to go out. Caveat emptor.
    The question, then, isn’t whether the barge of monetary policy has turned around and embarked on a tightening course – it has – the question is how fast that barge is going to move AND whether or not the market pays more attention to the actual barge movements than what the barge captain says. I promise you that the barge captains of both the Fed and the ECB believe they can tighten and taper without killing the market so long as they jawbone this constantly.
    This is the Common Knowledge Game in action, this is the Missionary Effect, this is Communication Policy … this is everything that I’ve been writing about in Epsilon Theory over the past four years! And as we saw with the market’s euphoric reaction to Yellen’s prepared remarks for her Humphrey-Hawkins testimony on Weds, which were presented as oh-so dovish when they really weren’t, this jawboning strategy could absolutely work. It WILL absolutely work unless and until we get undeniably ‘hot’ inflation numbers – particularly wage inflation numbers – from the real world.

    This post was published at Wolf Street on Jul 13, 2017.


  • Global Stocks Rise Amid Strong Economic Data; Yen Drops To 2 Month Low As Oil Resumes Slide

    In a quiet overnight session, S&P 500 futures are fractionally in the green (2,426, +0.2%) with European and Asian stocks as oil drops second day after an initial ramp higher amid speculation that LIbya and Nigeria may be asked to cap their production. Nasdaq 100 Index are again higher, following the biggest daily advance in more than a week, up 0.4% as of 6:20 a.m. in New York.
    With Friday’s jobs data seen as largely favorable, and the lack of wage growth expected to keep the Fed subdued, focus is turning to Janet Yellen’s semi-annual testimony on monetary policy and a meeting of Canada’s central bank on Wednesday for the latest policy signals from the world’s major central banks. Over the past two weeks, markets have reassessed the outlook for tighter monetary policies from major central banks following a string of hawkish remarks. “We’ll see just how much substance there is to these comments on Wednesday, when the Bank of Canada announces its latest decision, with investors now expecting a 25 basis point increase,” said Craig Erlam, senior market analyst at OANDA. A rate rise from Canada’s central would be its first interest rate rise in nearly seven years
    Global macro markets have traded with a cautiously positive tone as weekend’s G-20 meeting ended without market-moving surprises, while continued hawkish sentiment has pushed benchmark yields modestly higher. The yen slipped to fresh 2-month low against the dollar, trading at 114.22, after trade deficit data and BOJ Governor Haruhiko Kuroda reiterated that policy could be adjusted as needed. In Asia, stocks rose in Tokyo and Sydney, with the MSCI Asia Pacific Index rising 0.3% after hitting a five-week low Friday. MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 0.4 percent while Japan’s Nikkei rose 0.8 percent to a one-week high helped by weakness in the Japanese currency; the Topix Index added 0.5% . Australia’s S&P/ASX 200 Index gained 0.4 percent. Hong Kong’s Hang Seng Index rose 0.7 percent, while shares on the mainland declined 0.2% after the PBOC drained net 30 billion yuan in liquidity after withholding open market operations for the 12th consecutive day even as the yuan strengthens for first time in six days. Dalian iron ore reverses early loss to gain for fourth day.

    This post was published at Zero Hedge on Jul 10, 2017.


  • Market Talk- July 7th, 2017

    Following on from the weak US session, Asia tended to drift in sympathy. Ahead of the US NFP’s it was always going to be light volume but with G20 also just stated numbers were even lighter. The Shanghai has managed a positive close (+0.17%), but not so for the Hang Seng which closed down -0.5%. After trading hours China released Foreign Reserves which were mildly better than expected at $3.057 trillion for June a rise of just $3bn. In Japan the BOJ was rumoured to be in action supporting 5 – 10yr JGB’s as we have seen bond markets fall globally this week. This programme failed to support todays Nikkei action which closed down -0.3% and also watched as the JPY traded close to 114 through US Dollar strength. This move was accelerated after the NFP report but we’ll discuss that further down. Australia is feeling the pinch as commodities, geopolitics and slowing trade unnerves trade flow which impacts confidence. The ASX closed almost 1% lower and saw the A$ trade back in the 0.75 handle.

    This post was published at Armstrong Economics on Jul 7, 2017.


  • Panicked BOJ Unleashes Bond Buying Bazooka: Offers To Buy Unlimited 10Y JGBs At 0.11%

    During this morning’s bond rout when a poor French auction sparked a high-volume selloff in German Bunds which also hit Japanese JGBs before slamming US TSYs, Goldman said that “with 10Y JGBs closing at 0.095 and getting hit at 10bp intraday, focus will be on how the BOJ will react tomorrow [i.e. now]. Opinions seem pretty split with some expecting an increase in purchase size in the 5-10 bucket, while others feel that the BOJ will let the 10Y run loose given the current sell off is more fundamental than event driven. With BOJ behind buying pace for 80tn reference anyway, personally I feel it doesn’t hurt the BOJ to remind market of their presence.”
    Goldman was right: the BOJ, panicking after the overnight bond rout, not only reminded markets of its presence, but did so in dramatic fashion when it first boosted the amount of JGBs bought in the 5-10 year bucket from JPY 450BN to JPY 500 BN, and then for good measure unleashed the QQEWYC bazooka, announcing it would purchase an unlimited amount of 10Y JGBs at 0.11%, just a fraction above the BOJ’s 0.10% line in the sand, only the second time it has done so in 2017 since February.
    In immediate reaction, the benchmark Japanese TSY, which was trading north of 0.105% and flirting with 0.11%, promptly slid back to 0.095% now that it has become clear that all the hawkish posturing by central banks was just that.

    This post was published at Zero Hedge on Jul 6, 2017.


  • In New Round Of “Brutal” Currency Wars, The ECB Is “Heading Down A Dark Alley”

    Currency moves can be “brutal,” as the European Central Bank well knows, since then-ECB President Jean-Claude Trichet used that memorable adjective more than a decade ago. The problem for the ECB is it may be heading down a dark alley where two well-armed peers await.
    Investors have reasonable clarity about the medium-term policy outlook for the U. S. Federal Reserve and Bank of Japan, with both central banks effectively anchoring long-term rates.
    The Fed’s dot plot, along with senior policy makers’ comments, have cemented the idea that the benchmark rate will top out at 3 percent, a level that won’t be reached for years.
    The BOJ has explicitly frozen long-term bond yields through its yield-curve control, and Governor Haruhiko Kuroda made crystal clear two weeks ago that he’s not about to embrace stimulus tapering.

    This post was published at Zero Hedge on Jun 30, 2017.


  • Japan’s Bond Market Grinds To A Halt: “We’ll Go Days When No Bonds Trade Hands

    The Bank of Japan may or may not be tapering, but that may soon be moot because by the time Kuroda decides whether he will buy less bonds, the bond market may no longer work.
    As the Nikkei reports, while the Japanese central bank ponders its next step, the Japanese rates market has been getting “Ice-9ed” and increasingly paralyzed, as yields on newly issued 10-year Japanese government bonds remained flat for seven straight sessions through Friday while the BOJ continued its efforts to keep long-term interest rates around zero.
    The 10-year JGB yield again closed at 0.055%, where it has been stuck since June 15m and according to data from Nikkei affiliate QUICK, this marks the longest period of stagnation since 1994,

    This post was published at Zero Hedge on Jun 25, 2017.


  • JPMorgan’s Head Quant Doubles Down On His “Market Turmoil” Forecast: Here’s Why

    After getting virtually every market inflection point in 2015, and early 2016, so far 2017 has not been Marko Kolanovic’s year, whose increasingly more bearish forecasts have so far been foiled repeatedly by the market, and the same systematic traders that he periodically warns about. As a reminder, his most recent warning came last week, when he cautioned that even a modest rebound in VIX could lead to dramatic losses for vol sellers. As a reminder, here is the punchline from his latest note:
    Days like May 17th and similar events “bring substantial risk for short volatility strategies. Given the low starting point of the VIX, these strategies are at risk of catastrophic losses. For some strategies, this would happen if the VIX increases from ~10 to only ~20 (not far from the historical average level for VIX). While historically such an increase never happened, we think that this time may be different and sudden increases of that magnitude are possible. One scenario would be of e.g. VIX increasing from ~10 to ~15, followed by a collapse in liquidity given the market’s knowledge that certain structures need to cover short positions. So in light of a market that refuses to post even the smallest of drawdowns (we are not sure if the words “selling”, “correction” or “crash” have been made illegal yet), has Kolanovic thrown in the towel and declared smooth seas ahead? To the contrary: in a note released late last night, he echoes warnings made recently by both Citi and BofA, and predicts that receding monetary accommodation from ECB and BOJ will likely lead to “market turmoil, and a rise in volatility and tail risks” and just in case there is some confusion, he reiterates what he said last week, namely that the “key risk of option selling programs is market crash risk.”

    This post was published at Zero Hedge on Jun 23, 2017.


  • One “Data-Dependent” Trader Is “Looking At The Bounce In Gold As Sentiment Indicator”

    As US (and global) economic data has disappointed at a rate not seen since Bernanke unleashed Operation Twist and QE3, so traders are shrugging off declining earnings expectations and weak macro data in favor of the continued belief that The Fed (or ECB or BoJ or BoE or PBOC or SNB) has their back. So, as former fund manager Richard Breslow notes below, it appears the ‘data’ that everyone is ‘dependent’ upon is very much in the eye of the beholder…
    Via Bloomberg,
    We’re all data-dependent. It’s not just the central banks that hide behind that aphorism. Traders and investors operate that way too. It’s just that data is a very poorly defined word and concept. The dictionary speaks of facts and specifics. But in reality it includes, biases, positions and a whole lot of other subjective factors. You and I can, quite properly, look at the same data and react differently.
    So while it’s a universally held concept that is proudly used to denote dispassionate rationality, it’s in fact a meaningless one.

    This post was published at Zero Hedge on Jun 23, 2017.


  • “The Next Leg Is Clearly Lower” – Global Excess Liquidity Collapses

    First it was Citi’s Hans Lorenzen warning about the threat to growth and global risk assets as a result of the upcoming slowdown in global central bank balance sheet growth. Then, yesterday, it was Matt King’s turn to caution that “the Fed’s hawkishness this week adds to the likelihood that in markets a significant un-balancing (or perhaps that should be re-balancing?) is coming.”

    That said, with both the ECB and BOJ injecting hundreds of billions each month – even as they are set to run ouf of “haven assets” in the coming year, there is still time before the global central bank balance sheet “tipping point” is reached and assets roll over…

    This post was published at Zero Hedge on Jun 17, 2017.