Global Macro Trading Journal

Quote from Daal:

I actually I thought the biggest surprise of the day was uber hawkish. Bernanke says extended period means a couple meetings! I have never seen anything like that from anyone at the FOMC. Matter of fact Dudley said
Asked what "extended period" means, Dudley said he did "an informal poll of people" and "among my very informal set of people that I asked that question they said that 'extended' in their minds means at least six months."

Then one fomc minutes last year said extended period was not a timetable, now Bernanke claim it is and it means 90 days. I'm very surprised and I'm wondering if he didn't misspoke
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Maybe this isn't a huge deal. Bernanke says extended period means there would be a couple meetings before tightening. This adds up to 135 days(45x2 then the 45 days waiting for the meeting where they will hike). So that's 4.5 months not that far off the 6 months people consider that to mean, he also said 'probably' so he is not sure
 
Goldman says the same thing (their thoughts are up on ZH).

At this point, it's hard to tell where the government/FOMC ends and Goldman Sachs begins. Both are farm teams for one another, trading players as necessary.
 
Faber's latest:

What really concerns me the most is that “the inflation trade” has become consensus.

I am now quite negative about most assets. If I were a trader, I would short some US equities and as an investor, I am deferring any new purchases of the beneficiaries of the inflation trade (except for gold,which I accumulate every month regardless of its technical position).
 
Quote from Debaser82:

Faber's latest:

What really concerns me the most is that “the inflation trade” has become consensus.

I am now quite negative about most assets. If I were a trader, I would short some US equities and as an investor, I am deferring any new purchases of the beneficiaries of the inflation trade (except for gold,which I accumulate every month regardless of its technical position).
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I think Faber misunderstands the downward trend of the US dollar. It's not inflationary expectations which have caused it, but deflationary expectations. What the USD carry trade is pricing in is a prolongued period of low interest rates, which only materializes during times of soft economic demand and low inflation.

Furthermore, austerity measures in Europe's periphery have increased demand for the Euro, along with the expectations of rate hikes now that growth has picked up in Europe's center.

You can also find an academic paper on the BOJ's website in which the authors argue that FX intervention and rate hikes by emerging nations are causing a positive feedback loop that supresses rates in the USD and increases capital flows to emerging markets.

If you actually look at the price trends of soft commodities and base metals you'll find that they have all been correcting since early february. What this tells you is that the market is starting to price in decreasing demand from emerging markets due to the rate hikes and tighter monetary policy measures in those nations. I think that if this trend continues Faber will be confronted with a market situation that would be impossible according to his paradigm: decreasing commodity prices AND a decreasing USD.
 
Quote from FerdinandAlx:

I think Faber misunderstands the downward trend of the US dollar. It's not inflationary expectations which have caused it, but deflationary expectations. What the USD carry trade is pricing in is a prolongued period of low interest rates, which only materializes during times of soft economic demand and low inflation.

Furthermore, austerity measures in Europe's periphery have increased demand for the Euro, along with the expectations of rate hikes now that growth has picked up in Europe's center.

You can also find an academic paper on the BOJ's website in which the authors argue that FX intervention and rate hikes by emerging nations are causing a positive feedback loop that supresses rates in the USD and increases capital flows to emerging markets.

If you actually look at the price trends of soft commodities and base metals you'll find that they have all been correcting since early february. What this tells you is that the market is starting to price in decreasing demand from emerging markets due to the rate hikes and tighter monetary policy measures in those nations. I think that if this trend continues Faber will be confronted with a market situation that would be impossible according to his paradigm: decreasing commodity prices AND a decreasing USD.
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If that happens, when is the last time period we have seen this ?
 
Quote from pwrtrdr:

If that happens, when is the last time period we have seen this ?
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There's no historical precedent for the USD as the American economy has yet to experience a prolonged downturn in demand under a fiat system. However, there are now strong indications that the rest of the world is changing its savings desires for US dollars. Also, there are no strong indications that the Fed will hike rates or that congress will cut the deficit. Those factors are fueling the USD side of the carry trade as they suppress demand for that currency.

There's also not really a historical precedent for this with the JPY carry trade, although demand for commodities was pretty soft when that carry trade was inflating other asset prices around Asia in the '90s.

If the scenario I described happens it would entail a soft landing scenario for emerging markets. Inflationary expectations in those markets would then abide but decrease somewhat, without causing expectations of too much monetary easing. In such a scenario it's likely to see investors rotate funds out of commodities and into emerging market bonds and equities.

Ofcourse if monetary tightening in emerging markets leads to a hard landing this will cause alot of volatility and a likely blowout of the USD carry trade. So Faber's prediction is really premissed on a hard landing scenario for emerging markets. A soft landing however would allow for something to occur that's impossible according to his paradigm.
 
Quote from FerdinandAlx:

There's no historical precedent for the USD as the American economy has yet to experience a prolonged downturn in demand under a fiat system. However, there are now strong indications that the rest of the world is changing its savings desires for US dollars. Also, there are no strong indications that the Fed will hike rates or that congress will cut the deficit. Those factors are fueling the USD side of the carry trade as they suppress demand for that currency.

There's also not really a historical precedent for this with the JPY carry trade, although demand for commodities was pretty soft when that carry trade was inflating other asset prices around Asia in the '90s.

If the scenario I described happens it would entail a soft landing scenario for emerging markets. Inflationary expectations in those markets would then abide but decrease somewhat, without causing expectations of too much monetary easing. In such a scenario it's likely to see investors rotate funds out of commodities and into emerging market bonds and equities.

Ofcourse if monetary tightening in emerging markets leads to a hard landing this will cause alot of volatility and a likely blowout of the USD carry trade. So Faber's prediction is really premissed on a hard landing scenario for emerging markets. A soft landing however would allow for something to occur that's impossible according to his paradigm.
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interesting, thanks
 
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