JS Global Macro Notes

Attention Frustrated Chartists: It ain't HFT - it's the Macro!

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Roughly speaking, traders come in two classes: Those who use charts and those who don't.

Within the charting community -- especially among the practitioners of "pure" technical analysis, i.e. no fundamentals allowed -- there is a new meme going around.

That meme is as follows: High Frequency Trading (HFT) has ruined the markets.

Thanks to those damn robots and their wicked brutalization of support and resistance levels, this meme says, it's just hard for a chart trader to make a buck anymore.

It's a frustrated rallying cry -- and an effort to place blame. You can almost picture the laid off mill worker slumped heavily at the bar, muttering into his beer... the machines -- damn those machines...

Read full commentary here
 
Where the Wild Profits Are

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I have been an Economist reader since 1996. One of the best things about The Economist is the covers -- every once in a while they come out with an instant classic.

Perhaps the greatest Economist cover of all time -- in terms of mega-contrarian indicator -- was their "Drowning in Oil" issue in 1999.

It showed two filthy oil workers, covered in crude, trying to handle a gushing well head. That cover (and its prediction of $5 per barrel oil, when crude was just above $10) marked the all-time forever low for oil, within months (if not weeks) of the bottom tick.

The "Drowning in Oil" cover is suitable for framing and hanging on a trader's wall, given its place in market history.

"Acropolis Now," featured above, is another one worthy of such honor... and as I write these words, we are experiencing Acropolis Now Redux...

Read full commentary here
 
Martin Wolf: If Greece goes, the integrity of the eurozone is shattered forever.

http://www.ft.com/intl/cms/s/0/614df5de-9ffe-11e1-94ba-00144feabdc0.html#axzz1vECQfBlJ

The danger of contagion is obvious. The long-run danger is more subtle. But the eurozone either is an irrevocable currency union or it is not. If countries in difficulty leave, it is not. It is then an exceptionally rigid fixed-currency system. That would have two dire results: people would not trust in its survival and the economic benefits of the single currency would largely disappear.

p.s. my global macro tweet stream
 
Holy Pessimism Batman:

Try to get your mind around these figures. The US GDP, the largest in the world, is about 15 trillion. What Haldane is telling us is that the financial crisis will end up costing the world lost real income between 4 and 13 times the size of the current Gross Domestic Product of the United States. This could turn out to be an optimistic forecast.

In the end, the financial crisis could destroy Western civilization.

http://www.paulcraigroberts.org/2012/05/20/recovery-or-callapse-bet-on-collapse/

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"It's all... part of the plan..."
 
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Shit gets real very fast if Greece leaves the euro

http://www.reuters.com/article/2012/05/20/us-greece-newdrachma-idUSBRE84J03Q20120520

BORDER CLOSURES, TROOPS ON STREETS?

It would most likely be necessary to close borders to stop Greeks smuggling out euros to stash in banks elsewhere. But with hundreds of miles to cover, much of it in inaccessible mountain, wood and scrubland, security forces would be stretched thin.

Simultaneously, police would likely have to manage a dramatic spike in unrest and perhaps more political and criminal violence. Already, there have been isolated examples of Germans -- or those suspected of being German -- being assaulted in apparent anger over EU-enforced austerity.

Greece's leaders could decide to deploy the army onto the streets in an attempt to reassure the population and bring calm. But that could prove deeply divisive.

"If this happens, there are definitely going to be security incidents in the streets of Athens," says David Lea, Western Europe analyst at Control Risks. "But the Greek military is not designed to deal with this. It's designed to deter Turkey. And you have to remember, this is a country with a recent history of military dictatorship and using it could go down very badly."
 
Gold vs Bonds: At What Point Should Gold Believers Lose Faith?

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When it comes to trading macro, you cannot rely solely on fundamentals; you have to be a tape reader, which is something of a lost art form... technical analysis is at the bottom of the study list for many of the younger generation, particularly since the skill often requires them to close their eyes and trust the price action.

- Paul Tudor Jones

There are powerful arguments for why gold should continue to go up. There are also powerful arguments for why bonds (specifically U.S. treasuries) should go down.

These arguments, in fact, are two sides of the same fundamental coin: An expectation of inflationary outbreak via mass money printing and central bank loss of control.

Consider, for example, the various scenarios in which U.S. treasuries could crash (causing interest rates to skyrocket) and gold could go vertical:

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Friday's Jobs Report: An Inflection Point Game Changer for Gold

For the past few months, we have been bearish on gold...

But as that old devil Keynes once said: "When the facts change, I change my mind. What do you do, sir?"

In gold's case, the "facts" that constitute a game-changer are two:

* The surprisingly horrible U.S. jobs number on Friday.
* Gold's reaction to it (the message of price).

First up, price action. This chart speaks with no stutter:

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Read full commentary here
 
Quote from russiancircles:

Thanks for the excellent thread and even better website!
More...


Most welcome! We're having a hell of a lot of fun...

p.s. theme for today's market

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