Global Macro Trading Journal

Not a chance he gets fired once it gets close to the election. Not a chance. If it doesn't happen in 2011, it's not going to happen. Geithner's remaining in office is proof BO takes orders from the Bob Rubin crowd.

Funny story. I unloaded most of my FCX puts weeks ago at a nice profit. I had completely written off a slug of them that I held onto, assured they would expire at 0. Just thought I'd check 'em out and saw that they've exploded to $0.50 in the past week, so I just unloaded those. Makes the weekend taste a little sweeter!
 
Quote from Daal:

From my observations since I have started to follow stock markets closely the risk-off mode continues till the markets finds ANY reason to stop it, it doesn't have to be all that rational or the government doing the 'right' solution. the EU has been imploding all through the QE2 period and it was all predictable, yet the market kept climbing because bad news got ignored, now its the other way, till it isn't anymore
It seems that fear is mean reverting, there is only so much that can go on before people change their minds
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Just goes to show is in effect, bond buying did almost nothing for greece, portugal and ireland and people know it yet the spain and italy buying prospect was enough to pop ES by some 40 points or so
 
This really is following the script of 2008 more and more closely. How many rallies on the latest gubmint measures did we see that year? To paraphrase Keith Mucullough: It's sad and pathetic.

My condolences to the Italians who are now to join the Greeks, Irish, Portuguese, Spanish in economic depression for years to keep the glorious dreams of Europe's central planners alive.
 
To everyone,

what does this rating downgrade means for stock markets, ccys and precious metals especially on monday, this week and 2 months from now?

When Japan got downgraded few months ago, there was a spike in usdjpy which lasted one day before usdjpy was back at its original level. Japan sovereign CDS spiked by 4 bps and then it was back in few hours also. Bond markets movements also got reversed.

However, with USD, situation might be different. Treasuries still remain the biggest and most liquid bond market in the world. In theory few countries' credit does become better than USA, however their bond market is not comparable to US. Treasuries will still maintain the flight to safety property.

Also, Japan was downgraded before also and US has been downgraded first time in this generation. IMO, Shock and awe of this reaction will move markets 5%-10% down on monday and tuesday. It might force some confused rambling from Bernanke which might do either good or harm (looking at the market reactions of Feb 2009 confused ramblings from the administration).

I think all commodities get sold hard, silver,crude, copper going down 20%-30% next week. Don't know what will happen to gold. Long gold, short silver might be a good trade for this week. Euro might spike against dollar initially but then dollar rallies again as monday progresses. JPY and CHF reach historic highs on Monday. Will Japan and Swiss central banks intervene? I don't think so atleast not on monday. There might be a coordinated G-7 intervention sometime next week though.

Please share your thoughts.
 
Quote from gmst:

To everyone,

what does this rating downgrade means for stock markets, ccys and precious metals especially on monday, this week and 2 months from now?

Please share your thoughts.
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My thoughts is that this is largely a media event.

It's too hard to attribute the US downgrade to movements in financial markets, because other factors (eg Europe) are at play.

The Europe story is far more important than the downgrade of the US by one ratings agency (not all three), of a nation that has a printing press.

My guess is that the range in the ES on Monday will be smaller than that of Friday (which was about 55 points).

Likewise other markets (bonds, FX including gold) will be more effected by Europe rather than the US downgrade.

Bonds will remain well bid if it's another risk-off day, however it looks like a multi-day top (bottom in yields) was reached at midday on Friday.
 
The next shoe to drop is some government like banning credit agencies or making it illegal to switch currencies or something big like that.

They have been standing by idle for most part but I bet some of them are quite anxious to step it up.

Dress it up nicely and the crowd will love it.
 
yes, the main turmoil on monday will be in bonds and fx. Things are much clearer there: Bonds will sell off due to forced selling, USD will go down (200-300 pips compared to the euro ?). The yield spread will widen. Those are the certainties for monday. The stock market is anyone's guess ...
 
Quote from cvds16:

yes, the main turmoil on monday will be in bonds and fx. Things are much clearer there: Bonds will sell off due to forced selling, USD will go down (200-300 pips compared to the euro ?). The yield spread will widen. Those are the certainties for monday. The stock market is anyone's guess ...
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I guess the 'money lying in the corner' kind of trade for monday is short usdchf and short commodities except for gold. I am 70%-80% sure EURUSD will also go up but it might come back later due to risk aversion and people buying treasuries. aka 2008 - US financial system collapsing but people buying treasuries and usd rallying. Not sure if 10yr is headed towards 3% or 2%??

Another question is what effect will this development have on rules of endowments/PFs that can hold only AAA paper, at least in the short term before they can modify their charter a bit. What will be the dominoes effect on AAA rated commercial paper and what does it mean for money markets ?

I think another near certain trade is shorting AUDUSD on rallies.
 
Quote from cvds16:

yes, the main turmoil on monday will be in bonds and fx. Things are much clearer there: Bonds will sell off due to forced selling, USD will go down (200-300 pips compared to the euro ?). The yield spread will widen. Those are the certainties for monday. The stock market is anyone's guess ...
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Likely wrong on all counts (except the line about stocks). Who in their right mind would buy euro/$ because of this (i'm not saying euro/$ isn't a buy, but whether it is or not has nothing to do with the downgrade).

Collateral arrangements will be quickly rewritten to account for the downgrade, likely meaning no forced selling of bonds. Heck, the ECB changed their stance on defaulted Greek paper overnight. Does anybody truly believe the repo markets are going to go to crap because of U.S. going to AA+ from AAA?

Markets will do what they do, but not because of this non-news.
 
Quote from gmst:

I guess the 'money lying in the corner' kind of trade for monday is short usdchf and short commodities except for gold. I am 70%-80% sure EURUSD will also go up but it might come back later due to risk aversion and people buying treasuries. aka 2008 - US financial system collapsing but people buying treasuries and usd rallying. Not sure if 10yr is headed towards 3% or 2%??

Another question is what effect will this development have on rules of endowments/PFs that can hold only AAA paper, at least in the short term before they can modify their charter a bit. What will be the dominoes effect on AAA rated commercial paper and what does it mean for money markets ?

I think another near certain trade is shorting AUDUSD on rallies.
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There is no 'money lying in the corner' trade, except maybe fading the initial reaction.

The rules for endowments and such will be amended immediately - meaning no effect whatsoever.
 
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