Global Macro Trading Journal

[Specterx]

Quote from Ghost of Cutten:

What about shorting it hedged with equal $ amount of long QQQQ? Then you isolate the bet against Amazon itself, and hedge out your market risk.

It's an idea - though with the rocket-rally in the Qs the ratio is already off quite a bit (>4 to <3 since October) and is back to late 2009/2010 levels. To some degree AMZNs valuation is a function of rich markets generally; if its multiyear uptrend fails on the weekly there should be some edge in considering it a leading indicator for the Qs, implying you want some exposure there. By the same token a further collapse in the spread seems unlikely so long as Qs are fetching as strong a bid as they are.

Maybe the thing to do is plan to hedge 25-50% of the position, will have to see what the index looks like the next time a short setup appears.

 

[Daal]

Quote from Ghost of Cutten:

What about shorting it hedged with equal $ amount of long QQQQ? Then you isolate the bet against Amazon itself, and hedge out your market risk.

This would be essentially a pair trade. Its quite capital intensive if you want to generate a good return

 

[darkhorse]

Quote from Specterx:

Same as the SQE hints a few weeks ago. Presumably somebody at the Fed eventually realized that market crashes (or end of rallies) are correlated with the stimulus being withdrawn. After puzzling over it for weeks and passing around a dozen research papers, they decided that merely talking about stimulus could be just as effective as the real thing.

I suspect they'll trap themselves into further actual easing at the April meeting - or risk, god forbid, disappointing the markets.

A variant view is that Bernanke is playing this market like a fiddle.

When expectations start running too hot, he throws cold water on the inflation trade with some off the cuff comments hinting "No QE3."

Then when the dollar starts getting too strong he pivots, "Well yeah maybe..." Then if gold gets too strong and the $USD starts slipping a bit too much, he can just pivot again.

I still think they lose control -- eventually -- but a 1987 style scenario (and equities a lot higher) seems more likely before that happens...

 

[Daal]

Quote from darkhorse:

A variant view is that Bernanke is playing this market like a fiddle.

When expectations start running too hot, he throws cold water on the inflation trade with some off the cuff comments hinting "No QE3."

Then when the dollar starts getting too strong he pivots, "Well yeah maybe..." Then if gold gets too strong and the $USD starts slipping a bit too much, he can just pivot again.

I still think they lose control -- eventually -- but a 1987 style scenario (and equities a lot higher) seems more likely before that happens...

This variant view is correct, what is bizzare is that this latest 'Maybe QE' came out of nowhere, iexpectations were not weak, not even close to the level which they usually came out with to rescue the markets. Stocks too, usually have to do decline quite a bit(A investment house actually has an indicator that blends stocks with iexpectations as QE indicator)
I'm surprised Bernanke did this

 

[Daal]

Bernanke seem to be gearing up for quite a bit of revolt in the FOMC, but at the same time there is no way he would be going dove if he didn't think he had the votes so he probably do have the votes

Interestingly enough this could be bad for my potential Fed futures trade as QEs usually are since they speed up the inflationary outcome and boost the economy and bring forward the date of which they will have to hike rates.

At the same time Bernanke seem to be signaling he has a lock on the dovish command in the FOMC making the 2014 pledge more likely to hold even in the face of better than expected data

I'm not quite sure what to do here

 

[Specterx]

Quote from Daal:

This variant view is correct, what is bizzare is that this latest 'Maybe QE' came out of nowhere, iexpectations were not weak, not even close to the level which they usually came out with to rescue the markets. Stocks too, usually have to do decline quite a bit(A investment house actually has an indicator that blends stocks with iexpectations as QE indicator)
I'm surprised Bernanke did this

I don't think it's bizarre at all, QE entails significant costs in terms of political capital, PR and the Fed's balance sheet "ammunition." Dovish talk seems to have no immediate cost when at worst you're going to see a string of ZIRP announcements, and at best matters will deteriorate sufficiently to make more QE worthwhile for the Fed.

Of course I would say the costs are real enough if you build up market expectations only to disappoint at the meetings, coupled with economic data that, while tepid, doesn't cross the 'QE threshold.'

20 more SPX points and we bust the 2008 highs...

 

[Specterx]

Quote from Daal:

Bernanke seem to be gearing up for quite a bit of revolt in the FOMC, but at the same time there is no way he would be going dove if he didn't think he had the votes so he probably do have the votes

Interestingly enough this could be bad for my potential Fed futures trade as QEs usually are since they speed up the inflationary outcome and boost the economy and bring forward the date of which they will have to hike rates.

At the same time Bernanke seem to be signaling he has a lock on the dovish command in the FOMC making the 2014 pledge more likely to hold even in the face of better than expected data

I'm not quite sure what to do here

If the flow of better than expected data continues (big if imo) I still think it'll be hard to go wrong betting on continued low rates. On the one hand the 2014 pledge can be broken at any time, but the Fed is surely going to err on the side of too much inflation; just see what the Bank of England has done. Rate rises will IMO be the last thing they do, unwinding past QEs and shrinking the balance sheet will take priority. Aside from being perceived as least likely to derail the recovery, this would be the quickest way to disarm the Fed's critics and show they are aware of the need for an exit strategy, while putting subtle pressure on the government to resolve its fiscal problems (Bernanke has frequently made references to the need for this).

Breaking the ZIRP pledge would in my view require much stronger inflation than what anyone expects combined with the failure of either hawkish talk or other tightening (anti-QE, etc.) to arrest it.

 

[Daal]

Bernanke has said in the press conference that rates go up in 2014 and the balance sheet unwinds in 2015. I believe the majority on the FOMC also favors hikes first

 

[ralph00]

Quote from Specterx:

I don't think it's bizarre at all, QE entails significant costs in terms of political capital, PR and the Fed's balance sheet "ammunition." Dovish talk seems to have no immediate cost when at worst you're going to see a string of ZIRP announcements, and at best matters will deteriorate sufficiently to make more QE worthwhile for the Fed.

Of course I would say the costs are real enough if you build up market expectations only to disappoint at the meetings, coupled with economic data that, while tepid, doesn't cross the 'QE threshold.'

20 more SPX points and we bust the 2008 highs...

It's an election year and his days as Fed chief are numbered if Obama is defeated. I'm pretty sure this explains every action the man takes.

 

[ammo]

Quote from ralph00:

It's an election year and his days as Fed chief are numbered if Obama is defeated. I'm pretty sure this explains every action the man takes.

i cant think of anything bernank would like more than to get eased out because of political preference, over being fired,this is the worst and last government job he will likely stomach,he inherited a pretty big magic act and there was no pleasant way it could be forwarded