Global Macro Trading Journal

ralph00 · Jan 6, 2012

Interesting piece from my man Mike Riddell. French 5 year bonds now yield more than EFSF 5 year paper. Since France guarantees EFSF debt and would probably cut those guarantees if things got bad, EFSF paper is basically subordinated French paper. No way it should be yielding less than France.

http://www.bondvigilantes.com/2012/01/06/france-now-yields-more-than-efsf-hmm/

Best line is the end:

"Personally I wouldnât touch either of them, but shouldnât EFSF bonds yield more than France?"

Martinghoul · Jan 6, 2012

Quote from ralph00:
Interesting piece from my man Mike Riddell. French 5 year bonds now yield more than EFSF 5 year paper. Since France guarantees EFSF debt and would probably cut those guarantees if things got bad, EFSF paper is basically subordinated French paper. No way it should be yielding less than France.

http://www.bondvigilantes.com/2012/01/06/france-now-yields-more-than-efsf-hmm/

Best line is the end:

"Personally I wouldnât touch either of them, but shouldnât EFSF bonds yield more than France?"

This pricing actually makes some sense, given the structure of the EFSF and the portion of it underwritten by the Germans. So EFSF is not really subordinated French paper and it can trade through France. Ultimately, however, it depends on the conditional default probabilities, as well as the exact legal definition of the claims. So the pricing of EFSF/France spread isn't actually that bizarre. I wouldn't touch either of them myself, however.

Specterx · Jan 6, 2012

Quote from Martinghoul:

Well, I don't know of another CB that is buying quite such a plethora of private assets (REITs, ABS, equities, you name it). To me that's pretty extreme.

Maybe so but I think these are mostly just gestures, e.g. TMS money supply growth in Japan has consistently been barely positive and far below that in Europe or America. Hell, the ECB's balance sheet just increased by what, 30% overnight, with presumably a similar increase to come at the February LTRO?

Specterx · Jan 6, 2012

Quote from Daal:

This was driven my 2 trades
-Long fed funds futures

Interesting, hasn't the fed funds rate been held steady for years now with all signals pointing to extended low rates, etc? How then would being long the futures have paid off?

Daal · Jan 6, 2012

Quote from Specterx:

Interesting, hasn't the fed funds rate been held steady for years now with all signals pointing to extended low rates, etc? How then would being long the futures have paid off?

You would think that but pre 2nd half of 2011 the world was in a constant fear of rate hikes 8-12 months in the future. I made quite a bit of coin since 2008 fading big those expectations, even in 2011 Narayana Kocherlakota(Or whatever his name is) created a large sell off in those futures by saying to the WSJ that 'rate hikes are possible by year end'.

I lost money on that day and was too conservative to buy even more after his statement(I was already quite long). I fell that I should have made 25% than I did from all my gains in fed futures. However I was too paranoid about a loss that would wipe me out(Each contract is worth $400K, I was long several of these)

But now I came up with a number of backup plans in case a black swan takes me out one day. I will graduate in financial management this year so I probably will be able to get some kind of income from a job, I'm also quite proficient at english(Been reading 2-3 hours a day in english from all kinds of subjects for 12 years and can speak fluently) so I can give english lessons(Pay is not good however). I also can increase the number of hours I dedicate to online gambling(Although every year those 'markets' get more efficient)

This should enable me bet bigger with more peace of mind in case I run into a trade so obvious and good like that one(Which I don't expect to happen anytime soon)

Fed will shut down my fed funds futures trading(At least the easy trading) at the next meeting

ralph00 · Jan 6, 2012

Closed all positions except for a few OOM puts on AUD and EUR. I didn't want to get in so deep in the markets this early this year. Need to clear my head. Headed to the beach in 2 weeks for awhile. Going to try

) ) and refrain from doing anything other than reading and (lots of) pontificating until then.

Daal · Jan 6, 2012

One will only be able to make money on the fed futures by forecasting the economy better than the Fed/Markets. The taylor rule miscalibration will be gone once they publish their FF forecasts

My own Taylor type calibration was rate hikes only with the UR bellow 8% and inflation above 2.5% on the core. The market was constantly betting on insane stuff like hikes with UR at 9% and low inflation

If you look back in 2009/2010 you can't help but to laugh how wrong the market was

gmst · Jan 6, 2012

Quote from Daal:

You would think that but pre 2nd half of 2011 the world was in a constant fear of rate hikes 8-12 months in the future. I made quite a bit of coin since 2008 fading big those expectations, even in 2011 Narayana Kocherlakota(Or whatever his name is) created a large sell off in those futures by saying to the WSJ that 'rate hikes are possible by year end'.

I lost money on that day and was too conservative to buy even more after his statement(I was already quite long). I fell that I should have made 25% than I did from all my gains in fed futures. However I was too paranoid about a loss that would wipe me out(Each contract is worth $400K, I was long several of these)

But now I came up with a number of backup plans in case a black swan takes me out one day. I will graduate in financial management this year so I probably will be able to get some kind of income from a job, I'm also quite proficient at english(Been reading 2-3 hours a day in english from all kinds of subjects for 12 years and can speak fluently) so I can give english lessons(Pay is not good however). I also can increase the number of hours I dedicate to online gambling(Although every year those 'markets' get more efficient)

This should enable me bet bigger with more peace of mind in case I run into a trade so obvious and good like that one(Which I don't expect to happen anytime soon)

Fed will shut down my fed funds futures trading(At least the easy trading) at the next meeting

Daal, not even a college and the kind of reading and knowledge you show - I admire it. Doesn't matter how big an account you are trading, but you have something that very few people have. Keep it up!

Curious, how much coin do you make from online gambling - consistently make it month after month or you would want to increase your consistency ?

Daal · Jan 6, 2012

Quote from gmst:

Daal, not even a college and the kind of reading and knowledge you show - I admire it. Doesn't matter how big an account you are trading, but you have something that very few people have. Keep it up!

Curious, how much coin do you make from online gambling - consistently make it month after month or you would want to increase your consistency ?

I think in 2011 I made a bit less than half of all my yearly expenses from online poker. its not a lot but it helps to diversify
Frankly, I can't wait till I can stop playing entirely. I find poker much more stressful than trading. The only reason I play is to help to pay expenses so I don't feel the pressure to put trades on and end up making some mistakes

My plan for 2012 is to make consistent gains from short-term trading so I can stop playing poker. Last year I lost some in Quant stock/index(the stock part made money but the index lost more than that, all due the Aug sell off being quite persistent, I was getting long during the sell off) but I realize some of my errors(index position size was too large relative to single stock, I also missed a lot of signals) I believe I will get some gains from that one

I will also experiment with some intraday index futures trading. I'm in contact with a trader to has a long history and is helping me out

I find there is a large difference between playing poker and HAVING to play poker, the latter is not enjoyable at all

Martinghoul · Jan 7, 2012

Quote from Specterx:
Maybe so but I think these are mostly just gestures, e.g. TMS money supply growth in Japan has consistently been barely positive and far below that in Europe or America. Hell, the ECB's balance sheet just increased by what, 30% overnight, with presumably a similar increase to come at the February LTRO?

Sure thing... I suppose we should really call what the BoJ is doing Credit Easing (CE), rather than QE. And, to me, the striking difference is the quality of the assets they purchase, rather than the quantity. Moreover, they have been getting proportionately more aggressive with their purchases of private sector assets and less aggressive with JGBs. As to the ECB, yes, its balance sheet has grown, but, as you may have heard, a lot of the money they have pumped into the system has ended up at the ECB marginal deposit facility (MDF).