The Credit Crisis Financial Stocks Short Journal

Quote from makloda:

I am also in awe about the UST, especially today. All headlines read "on higher inflation expectations" yet the 10y is yielding 3.25%, up a full THREE basis points.

Of course, the inflation mongers tell us treasuries will implode as soon as the Fed "stops buying all the supply". But what if they phase out QE and yields don't explode? If the entire bond market was betting on high inflation they would steamroll and negate any Fed buying.

Will be interesting to see how this plays out.
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I'm curious makloda, do you currently have some macro trades on?If so, could you detail the reasoning behind them?
Tks
 
I am not a discretionary trader, so it's hard to classify any of my positions as representing a macro opinion. Still like reading your journal though. All of my trading is purely mechanical, and currently around 25% is allocated to my future trendfollowing system.

I trade basically all the futures I can at IB, a maximum of around 60 or so.

Some positions that might reflect a "macro" opinion if you will are long many of the major bond markets (Schatz, BOBL, Long Gilts, 2y UST and 5y UST) and long many of the interest rates. Long Dec ED, Dec EURIBOR, DEC Sterling, NOV FF and Dec 10y EUR Swapnote :cool:

I was forced to lighten up on many of these just last month, as correlations among these are very high (by my measures), i.e. little diversification benefits/high statistical risk holding too many of these in the same direction.

I have my highest net long exposure to all the major currencies this month in a LONG time. Obviously I am nervous going like that into October although it looks good so far. Maybe a little too good. I have big long exposure to AUD/NZD/NOK in particular and I am curious when the "bubble" pops.
 
Quote from makloda:

I am not a discretionary trader, so it's hard to classify any of my positions as representing a macro opinion. Still like reading your journal though. All of my trading is purely mechanical, and currently around 25% is allocated to my future trendfollowing system.

I trade basically all the futures I can at IB, a maximum of around 60 or so.

Some positions that might reflect a "macro" opinion if you will are long many of the major bond markets (Schatz, BOBL, Long Gilts, 2y UST and 5y UST) and long many of the interest rates. Long Dec ED, Dec EURIBOR, DEC Sterling, NOV FF and Dec 10y EUR Swapnote :cool:

I was forced to lighten up on many of these just last month, as correlations among these are very high (by my measures), i.e. little diversification benefits/high statistical risk holding too many of these in the same direction.

I have my highest net long exposure to all the major currencies this month in a LONG time. Obviously I am nervous going like that into October although it looks good so far. Maybe a little too good. I have big long exposure to AUD/NZD/NOK in particular and I am curious when the "bubble" pops.
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You must be doing well, if great to see that you stuck to your system regardless of what other say. You were bombarded daily by guys like me, rosenberg, zero hedge on why this rally is BS but hanged in there and followed your system. I will be the first to say that the system is more imporant.

I wish I had this kind of discipline, I find it really hard to not follow my macro opinion, which is one of the reasons I'm still have tons of improve as a daytrader. I tend to get more excited about trades that follow my view and get fearful of the ones that dont. I should have tried to go long this market many times based on momentum, I tried like 3-4 times ended up in losses but had I tried more I would have made protected my put position way better
 
Quote from Daal:

This is amazing. Gold is up 2.5% almost, silver 5%, stocks 1.5%, oil 2%, dollar down nicely. Yet UST bonds and Fed futures are hanging in there, 30y futures -0.33%, Dec 2010 e$ -0.02%, ZQ mostly flat.

Its like the interest rate market is ignoring everyone else and betting on deflation
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Its just an amazing amount of liquidity sloshing around. All financial asset classes going up. Lots of fun until it isn't anymore. Either stocks and commoditites are due for a big fall or one day the bond market is going to wake up and literally crash. Unprecedented times.

Here's Kyle Bass' most recent letter to investors. He does a pretty good job explaining the historic nature of central bank pumping and of how he sees it playing out ...

http://www.marketfolly.com/2009/10/kyle-bass-hedge-fund-hayman-capital-50.html
 
Quote from ralph00:

Its just an amazing amount of liquidity sloshing around. All financial asset classes going up. Lots of fun until it isn't anymore. Either stocks and commoditites are due for a big fall or one day the bond market is going to wake up and literally crash. Unprecedented times.

Here's Kyle Bass' most recent letter to investors. He does a pretty good job explaining the historic nature of central bank pumping and of how he sees it playing out ...

http://www.marketfolly.com/2009/10/kyle-bass-hedge-fund-hayman-capital-50.html
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I would be in the bond bear camp if the next Fed Senior Loan Survey were to show banks loosening standards dramaticaly. If they bought the V shape recovery story
However this looks unlikely as the Fed's H8 is plunging to new lows
http://federalreserve.gov/releases/h8/
(line 9)
 
Another one who will be checking in at urgently needed NY Fed Mental Health Center
Hoening is quite hawkish, suggests hikes right now wouldn't be a big deal as a long rates would still be bellow the 'neutral rate'

http://www.kc.frb.org/speechbio/hoenigpdf/Denver.Forums.10.06.09.pdf

Lacker is out of the FOMC but Hoening is in next year. This guy might very well create a big dip in ZQ by dissenting in his first vote. So perhaps I need to wait to see what he does before buying more
 
The new FOMC members for next year are
* James B. Bullard, St. Louis(hawk)
* Thomas M. Hoenig, Kansas City(mega hawk)
* Sandra Pianalto, Cleveland(a woman, probably dove)
* Eric S. Rosengren, Boston(dove, 'Voting against was Eric S. Rosengren, who preferred to lower the target for the federal funds rate by 50 basis points at this meeting.' Dec 2007 25bps cut)

Out will be
Charles L. Evans, Chicago(neutralish)
Jeffrey M. Lacker, Richmond(mega hawk)
Dennis P. Lockhart, Atlanta(hawk)
Janet L. Yellen, San Francisco(dove)

On net, it doesnt seem that the differences will large. If anything the FOMC should get a bit more dovish even though dissents will be more likely with the activist HOEnig around
 
One argument on why fed will be on hold here is using Pimco as a guide. They have access to Alan Greenspan, who knows/voted with tons of the people at the Fed. If there was an argument on why they would have to 'raise sooner rather than later' like Hoenig says, pimco would know and they would not forecasting no hike for 2010. Greenspan doesn't like to make judgements about monetary policy in public but he does in private
 
Quote from Daal:

One argument on why fed will be on hold here is using Pimco as a guide. They have access to Alan Greenspan, who knows/voted with tons of the people at the Fed. If there was an argument on why they would have to 'raise sooner rather than later' like Hoenig says, pimco would know and they would not forecasting no hike for 2010. Greenspan doesn't like to make judgements about monetary policy in public but he does in private
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PIMCO got it horribly wrong (at least in their publicly available pronouncements) in predicting the rate rise cycle starting in 03/04. Greenspan is truly the emperor w/o clothes - the guy hasn't had a correct economic prediciton in forever. Even if you believed in an omniscient PIMCO and Greenspan, do you really think they are going to show their real cards to the world?
 
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