Global Macro Trading Journal
- Thread starter Daal
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New all-time record overnight, now +6.7% for the day. LOL.
Commodities and currencies now in game of chicken with the Bernank. If you're going to print by the hundreds of billions, we're going to go up every single day. This man is destroying our society and he has the power to stop it instantly by announcing the end of QE and a start of rate hikes.
Commodities and currencies now in game of chicken with the Bernank. If you're going to print by the hundreds of billions, we're going to go up every single day. This man is destroying our society and he has the power to stop it instantly by announcing the end of QE and a start of rate hikes.
Simply comical weekly letter of Hussman this week. He engages in fear mongering for most of it then at the end presents the actual realistic scenario which puts all his 16 cents theory in the garbage can
http://www.hussmanfunds.com/wmc/wmc110425.htm
"As a final note, the Fed does have an additional policy tool - the ability to pay interest on bank reserves, in hopes of preventing base money from becoming an inflationary "hot potato." The difficulty here is that the Fed's balance sheet is now leveraged 51-to-1. Even 0.25% of annual interest on reserves works out to about 12% of the Fed's total capital. The Fed is already in a position where a 35 basis point increase in long-term interest rates would effectively wipe out that capital. Though the Fed does earn interest on the Treasury debt it holds (which is remitted back to the Treasury for public uses), it would still take an increase in long-term interest rates of less than 1% to wipe out the Fed's capital as well as its entire net interest margin. So while the Fed might have the latitude to pay another 0.25% of interest on reserves, every extension of its present policy course, be it more quantitative easing, or paying interest on existing bank reserves, substantially increases its already untenable level of balance sheet leverage, and the likelihood that the public will quietly need to subsidize that balance sheet."
He build his 16 cents theory from data that did not include the IOR authority nor it had QE happening so a larger % of the 'monetary base' was cash instead of bank reserves(creating the inflationary effect). Thats why his theory fit the data, as for right now, its a completely different scenario. Most of the base will have interest paid so banks will not flee it stoking inflation
Yes the Fed will lose all its capital on a MTM basis but they don't MTM so its likely to be irrelevant. Worse case they will need some kind of bailout. Thats not likely to mean anything given that the value of the central bank is the present value of all the future Seigniorage which is probably way more than any capital loss they might suffer
http://www.hussmanfunds.com/wmc/wmc110425.htm
"As a final note, the Fed does have an additional policy tool - the ability to pay interest on bank reserves, in hopes of preventing base money from becoming an inflationary "hot potato." The difficulty here is that the Fed's balance sheet is now leveraged 51-to-1. Even 0.25% of annual interest on reserves works out to about 12% of the Fed's total capital. The Fed is already in a position where a 35 basis point increase in long-term interest rates would effectively wipe out that capital. Though the Fed does earn interest on the Treasury debt it holds (which is remitted back to the Treasury for public uses), it would still take an increase in long-term interest rates of less than 1% to wipe out the Fed's capital as well as its entire net interest margin. So while the Fed might have the latitude to pay another 0.25% of interest on reserves, every extension of its present policy course, be it more quantitative easing, or paying interest on existing bank reserves, substantially increases its already untenable level of balance sheet leverage, and the likelihood that the public will quietly need to subsidize that balance sheet."
He build his 16 cents theory from data that did not include the IOR authority nor it had QE happening so a larger % of the 'monetary base' was cash instead of bank reserves(creating the inflationary effect). Thats why his theory fit the data, as for right now, its a completely different scenario. Most of the base will have interest paid so banks will not flee it stoking inflation
Yes the Fed will lose all its capital on a MTM basis but they don't MTM so its likely to be irrelevant. Worse case they will need some kind of bailout. Thats not likely to mean anything given that the value of the central bank is the present value of all the future Seigniorage which is probably way more than any capital loss they might suffer
The guy from calculated risk summarized his Fed views
"3) Timeline for Fed tightening It appears QE2 will end in June as scheduled with no tapering of purchases. It also appears the Fed will continue to reinvestment maturing securities - at least for a couple of months following the end of QE2.
This suggests a timeline for the earliest Fed funds rate increase:
⢠End of QE2 in June.
⢠End of reinvestment 2+ months later.
⢠Drop extended period language a couple months later
⢠Raise rates in early to mid-2012.
That is probably the earliest the Fed would raise rates - and it could be much later."
I couldn't agree more. My worse case scenario is I lose a little bit, now its more given the open profit I hold but a few weeks back it was a total nobrainer to buy those fed futures
"3) Timeline for Fed tightening It appears QE2 will end in June as scheduled with no tapering of purchases. It also appears the Fed will continue to reinvestment maturing securities - at least for a couple of months following the end of QE2.
This suggests a timeline for the earliest Fed funds rate increase:
⢠End of QE2 in June.
⢠End of reinvestment 2+ months later.
⢠Drop extended period language a couple months later
⢠Raise rates in early to mid-2012.
That is probably the earliest the Fed would raise rates - and it could be much later."
I couldn't agree more. My worse case scenario is I lose a little bit, now its more given the open profit I hold but a few weeks back it was a total nobrainer to buy those fed futures
Have no idea if these numbers are reasonable but this is scary shit
http://www.zerohedge.com/article/ci...untry-waits-4-years-debtgdp-ratio-back-down-6
http://www.zerohedge.com/article/ci...untry-waits-4-years-debtgdp-ratio-back-down-6
If debt/gdp is around 150%, it takes a substantial haircut to get down to a "manageable" level of 60%. I'm no Citi anal ist, but even I can figure that out.
I assume Greek pension funds have been forced to buy this crap paper for years and have their books stuffed with it. Why do you think the Greeks are fighting so hard to avoid default?
Greek 2 years up another 100 basis points today, yielding 24%. It's over, whether it happens this week or Memorial Day or July 4, it's over. Just waiting for the bureaucrats to figure out a way to break it to the world.
I assume Greek pension funds have been forced to buy this crap paper for years and have their books stuffed with it. Why do you think the Greeks are fighting so hard to avoid default?
Greek 2 years up another 100 basis points today, yielding 24%. It's over, whether it happens this week or Memorial Day or July 4, it's over. Just waiting for the bureaucrats to figure out a way to break it to the world.
Maybe having a poker background could help me today. We will see if I can read bernanke better than the avg mkt participant
I do know there are some autism tests out there that can help quantify how well one's 'reading' ability is. I took a simple one and scored 26 out of 34
http://glennrowe.net/BaronCohen/Faces/EyesTest.aspx
it's supposed to be a bit above average but I didn't know what some of those words meant(aghast) and did a bit sloppy so maybe I could have done better
There is a more extended one which I did not take but plan to do so soon
https://www.testmybrain.org/consent_all.php?exp=65
Thats what the efficient market morons don't get, if you work towards being better than the avg market participant you will see some things they won't and as a result be effectively in the same position as insider trader is because you know things that other don't
Not everyone can succeed of course but thats true in every sport/game
I do know there are some autism tests out there that can help quantify how well one's 'reading' ability is. I took a simple one and scored 26 out of 34
http://glennrowe.net/BaronCohen/Faces/EyesTest.aspx
it's supposed to be a bit above average but I didn't know what some of those words meant(aghast) and did a bit sloppy so maybe I could have done better
There is a more extended one which I did not take but plan to do so soon
https://www.testmybrain.org/consent_all.php?exp=65
Thats what the efficient market morons don't get, if you work towards being better than the avg market participant you will see some things they won't and as a result be effectively in the same position as insider trader is because you know things that other don't
Not everyone can succeed of course but thats true in every sport/game