Global Macro Trading Journal

Its actually a little less than 10bps, maybe 8. depends on where the effective fed funds go. The august contract look like had 13.75bps EFF priced on it (99.8625 settlement)
 
Economists seem to be agreeing that the Fed will hike next meeting. I just don't see it. Hiking now (from the Fed perspective) is either a small good thing or a big mistake (because it can fuel the downside of financial markets, which would then make the hike unnecessary). Given that they are likely to behave as they usually do in these situations, which is wait and see. If there was an imminent inflation risk then sure, they would do it. But there is no significant upside to a hike now but there could be a lot of downside. From my observations of the Fed, they take into account these sorts of risk/reward thinking, I believe Greenspan intruduced that and it has remained part of their policy every since
Another reason on why they might not do it, is that central bankers (according to Paul McCulley), hate to do one thing and have to admit they were wrong and go in the other direction not much after that. Hiking now and having to cut because financial markets imploded and took the economy with it, would be a big loss of face for the fed (they might be blamed for the whole thing) so they might be more conservative than usual in key turning points. Specially without inflation risk.

Commodities are down a ton and bonds are not pricing in a lot of inflation
 
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I understand that there is some multiple equilibria issues right now. Like stocks rise on expectations of fed no hike but rising stocks make a hike more likely so stocks should actually fall, but a fall make a hike less likely and etc. This is confusing for everybody, including the Fed. Which in my view makes them to be more conservative than usual and wait until they are certain what do to and this means wait and see. At least for 1 more meeting. The downside of waiting one more meeting is quite small, they already defended equities from declines from years, doing it one more time wont be that hard for them
 
As far as the stock market goes I don't think it will matter a ton over the medium-term. The thing is, the US stock market become a large Fed induced momentum trade. As traders we know how momentum trades workout, eventually they turn and the move in the opposite direction is just as significant. But sometimes they can be very hard to die. I really thought tappering or the end of QE was going to be it but it wasn't. The proximity of the tightening of monetary policy then could be it. So this is the potential catalyst, meanwhile because it has gone for so long, valuations got pushed to levels that they should not have. Clearly the risk/reward of the market is horrendous because of those two factors. This combined with the price action for confirmation clearly makes it look likely that US stocks will face losses as the momentum trade unwinds.

I really wish I didn't miss my short on monday, being in from a good price would make everything easier. The problem of chasing the short here is that frequently things will bounce back for no reason and then you don't know what to do because it could be one of those rallies that don't stop all the way to the highs. At this point I'm just going to have to daytrade the indexes and wait for some kind of setup for a swing short
 
FWIW, my spec call is no hike before Dec since earlier in the year and now definitely not for the exact increased volatility reasons. But 1 thing that doesn't seem priced in is a possibility of 50bps instead of the regular 25bps. THAT would shock mkts.
 
sprstpd said:
That's because that is an impossibility with this paper tiger Fed.
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Yes. I would say it would be extremetly unlikely a 50 bps to start. 1937 paranoia, central banker risk aversion plus a number of other reasons
 
Shorted small QQQ at the close today. I'm hoping it rises so I can short more. The idea is that the markets will face an October panic
I'm just using QQQ because I day trade SPY (and today I did a terrible job at that) and I dont want to get the positions mixed up
 
m22au said:
Brazil cut to junk by S&P
http://www.zerohedge.com/news/2015-09-09/brazil-cut-junk-sp-etf-falls-5-post-mkt
http://www.bloomberg.com/news/artic...-rating-cut-to-junk-by-s-p-amid-budget-strain

Brazil stocks thread:
http://www.elitetrader.com/et/index.php?threads/brazil-stocks.290148/page-5#post-4175933

Daal:
Any thoughts / opinions on Brazil?

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I will say this. To me, the a good way to short brazil is to short BRL/AUD-NZD-CAD (basket), I was in the process of considering putting this trade on but this news will make this 'spread' blow wider and I'm not a fan of chasing the trade. I was hoping there would be a relief rally to get in that. I like that instead of shorting stocks or the currency outright because you are not exposed to commodity related news (like oil or gold rebounds), plus shorting stock markets that are down a ton is usually difficult. But the pair doesn't exist, I was going to apply the trade by unhegding the part of my funds that I keep in BZF. Since I live in Brazil and a certain % of my expenses are in BRL, I'm 'short' the real by nature. By underheding I would benefit from a further sell-off.

BZF is complicated because you got to pay 7% a year to short that. Matter of fact, from the long side its an interest thing to own bceause you get paid 12% (in the form of capital gains) + the IB short rebate of 50% of short fees, so effectively a 15% yield (though, it wont be lent all the time).

Maybe one can use the futures, I'm not sure what is the spread on this daily. If its tight enough then you can rollover the contracts without paying much. Then you can short the contract and short USD/CAD-AUD-NZD. But it might not be a cheap trade if you consider trading costs. Thats why i don't like to chase
 
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