Greece: The Gateway To Mispricetopia

Greece: The Gateway To Mispricetopia

“Location, location, location.” ~ William Safire

As the sea based terminus of China’s One Belt One Road (OBOR) program, Greece’s role as a gateway to Europe is greatly undervalued. There are good reasons for that undervaluation, or at least there were, whether it was the depressed European economy, the debt crisis, crippling austerity, global trade slowdown, or the business unfriendly Greek government. While the Greek government may not change anytime soon, everything else either has or is on its way to turning from a negative into a positive.

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Most importantly, a gateway is only as good as the two locations it connects. With the global economy undergoing a major slow down these past 3 years, and Europe stuck in a series of rolling crises for the better part of a decade, the value of Greece as a gateway was quite small. But that appears to be changing. Global growth is on the rebound (at least temporarily) and more importantly the EU appears to be growing for the first time since 2011.

You can make case for that growth has peaked and sentiment towards Europe is extreme, but if you had any doubt that there might be a recovery going on in Europe, look at the defeat of the populist and Euro-skeptic parties.

These political parties which feed off anger, disappointment, and despair have been pushed into the background. If there ever was a sign of improvement in the region, it would be exactly this.

And with the Euroskeptics out of the way, the EU can push towards closer unity.

The French led by Macron are pushing for Greece to be brought back into the fold. Macron has and continues to be a staunch supporter of Greece. From The Telegraph (my emphasis in bold):

“The confrontation at the height of the 2015 Greek debt crisis is revealed in “Adults in the Room”, the new memoir of Yanis Varoufakis, the controversial former Greek finance minister who tried – but failed – to win debt relief for Greece…

On June 28 2015, with Greece’s bank on the cusp of closure, Mr Varoufakis writes that he received a text from Mr Macron offering to broker a last-minute deal to win debt-relief for Greece in return for structural reforms.

“I do not want my generation to be the one responsible for Greece exiting Europe,” Mr Macron wrote, offering to broker a meeting between the Greek prime minister Alexis Tsipras and President Francois Hollande.

The attempt, however, was blocked by Germany whose ultra-hawkish finance minister Wolfgang Schaueble was suggesting that Greece take a ‘holiday’ from membership of the euro.””

Although Schaueble shot down the deal in 2015, a lot has changed since then.

On top of Schaeuble’s shift towards a more unified EU, Greece posted a 2016 budget surplus of 0.7% versus the 0.8% of Germany. This is in stark contrast to the 15% budget deficit Greece ran in 2009. And more importantly if Germany continues to push a hardline, it and the EU could cede even more of their influence over Greece to China.

From the article:

“Cooperation in infrastructure, energy and telecommunications should be “deep and solid”, Xi added, without giving details.

Tsipras is in Beijing to attend a summit to promote Xi’s vision of expanding links between Asia, Africa and Europe underpinned by billions of dollars in infrastructure investment called the Belt and Road initiative.

Greek infrastructure development group Copelouzos has signed a deal with China’s Shenhua Group to cooperate in green energy projects and the upgrade of power plants in Greece and other countries, the Greek company said on Friday.”

China also is a major stake holder in Greek ports. From Al Jazeera:

“Chinese shipping company COSCO is the majority stakeholder in Piraeus port, Greece’s largest, and Chinese officials harbour hopes it will become a major international trading hub.”

From Jing Daily:

“Chinese nationals have taken almost half of the investment licenses the country has granted to foreign investors over the past four years through its “Golden Visa Program.”

But it’s not just investment, China is going to start sending vast amounts of tourists to Greece after it launches the first direct flight between the two countries in September of this year. Over the next two years that Chinese tourists to Greece is expected to climb from 150,000 per annum to over 1,000,000 according to Chinese estimates.

Given that Greece’s tourism industry contributes 20% to GDP, this infusion of cash rich Chinese tourists should be a shot of adrenaline into Greece’s capital starved economy, which will go a long way to easing negotiations between Greece and its creditors. But it’s worth noting that China isn’t the only non-EU country investing in Greece. Russia has taken the 2nd most real estate investment licenses in the last year. From Jing Daily:

“By the end of January 2017, the Greek government issued a total of 1,573 real estate investment licenses to foreigners, out of which Chinese buyers took 664 seats, followed by 348 from Russia, 77 from Egypt, 73 from Lebanon and 67 from Ukraine, according to the data published by the Ministry of Economy. (The data is based on the number of real estate permits they have released.)”

Once again, this poses a huge problem for the EU who is beholden to Russia’s natural gas and oil exports. From MacroPolis (my emphasis in bold):

“To this end, the EC considers a route via the Mediterranean – the Southern Gas Corridor – a crucial investment, stating that “the Mediterranean area can act as a key source and route for supplying gas to the EU.”

This is where Greece comes in. The first major achievement was the signing of the Trans Adriatic Pipeline (TAP). This project sees some 550 km of the pipeline passing through Greece which will link to with the Trans-Anatolian Natural Gas Pipeline and the existing South Caucasus Pipeline (SCP) connecting Turkey to the Azerbaijani gas fields in the Caspian Sea via Georgia.

Together, the three pipelines will form the Southern Gas Corridor, seen as essential for Europe and to diversify away from its current dependency on Russia for gas.

In essence, Greece finds itself at the center of a tug of war between the east and the west. But this is not a zero sum game for Greece. Both sides need Greece to do well for their respective side to thrive. China needs Greece for the success of its OBOR program. The EU needs Greece to form a stronger Union, for it’s role as a buffer from migrants, and as a alternative energy route to end Russia’s gas monopoly among many other things.

It’s a win win situation for Greece, a country who has suffered for five years under harsh austerity without access to the capital markets. The economy is a coiled spring waiting to explode. With China and the EU vying for the country’s undervalued assets its a matter of time before the energy in that spring is released.

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Disclosure: The author is long GREK.

DISCLAIMER: This blog is the diary of a twenty something millennial who has never stepped foot inside a wall street bank. He has not taken an economic or business course since high school (which he is immensely proud of) and has been long gold since 2012 (which he is not so proud of). In short his opinions and experiences make him uniquely unqualified to give advice. This blog post is NOT advice to buy or sell securities. He may have positions in the aforementioned trades/securities. He may change his opinion the instant the post is published. In short, what follows is pure fiction based loosely in the reality of the ever shifting narrative of the markets. These posts are meant for enjoyment and self reflection and nothing else. So ENJOY and REFLECT!

The Price Of Stability In China

The Price Of Stability In China

Heading into the year of 2017, the word on everyone’s lips when it came to China was stability. With Xi looking to consolidate power in the upcoming government reshuffle in November, he would need the country as stable as a rock for another 11 months, and for the last 4 months, China appeared to be pulling it off. The PBOC’s pile of FX reserves had not only held steady, but began to rise. The country posted a higher than expected GDP growth of 6.9% in Q1 (that is if you think the market cares about the GDP number). SOE industrial profits were soaring… But above all, the Yuan held steady. From the WSJ (my emphasis in bold):

“BEIJING—President Xi Jinping gathered with his economic mandarins in December for their annual strategy meeting at a heavily guarded government hotel. In closed-door sessions, say people familiar with the confab, he made clear what their mandate was for 2017: He would tolerate no wobbliness in the economy.

The communiqué coming out of the session singled out one policy objective in particular—keep the yuan stable.

What followed has been the marked acceleration of a shift in priorities at the People’s Bank of China, the central bank, toward preventing the currency from cratering above all else.

Much has been said about the relative success the Chinese government has achieved in the first quarter of this year but there has been little said about the costs of their actions. There’s no such thing as a free lunch, and you can bet the Yuan’s recent stability did not come cheap. Since late February, financial assets in China have been selling off. The industrial commodities were the first to fall.

The equity market was next.

But more importantly the bond market has witnessed a dramatic sell off across the board.

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The sell off in Chinese Corporate credit has been even more dramatic.

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Even more serious signs of stress have begun to show up in the system.

Sharply rising interest rates threaten China’s massive shadow banking system which is “estimated” to be at $9.4T or 87% of China’s GDP. From WSJ:

“Shadow banking in China has nearly tripled in size to around 65 trillion yuan ($9.4 trillion) by the end of 2016 from five years earlier, equal to around 87% of gross domestic product, according to Moody’s Investors Service.”

I say estimated because no one, not even the Communist Party knows where all the risk is hidden. From Bloomberg (my emphasis in bold):

“Rising defaults in China are unearthing hidden debt at companies across the country.

Small firms that can’t get loans by themselves have been winning banks over by getting other companies to guarantee their borrowings. The companies making those pledges exclude them from their balance sheets, leaving creditors in the dark. Borrowers often extend the guarantees for each other, raising the risk that failures could ricochet, at a time when increasing borrowing costs have already added to strains.

China’s banking regulator has ordered checks of such cross-guaranteed loans, Caixin reported Friday.

Essentially, the regulators have marched straight into a mine field before checking where the mines were. Only after a few blow ups did they decide to ask the mines to reveal themselves. Talk about an omnipotent top down management style you’d want to bring home to your country. In stark contrast to these warning signs, investors have continued to throw money at Emerging Markets.

Investor flows/sentiment aside, if we take a closer look at where these cross guaranteed loans are located, we find the story only gets worse as much of the shady dealing has occurred between the weaker firms in the weaker sectors of the economy.

“This debt minefield could be big. The amount of loan guarantees at privately held firms in China is equivalent to 11 percent of their equity, and at LGFVs is 18 percent, according to Citic Securities Co. The load is even heavier at weaker borrowers. About 44 percent of issuers rated lower than AA- have a ratio of more than 30 percent, according to Everbright Securities Co.

Mal-investment is often the price paid for keeping zombie companies on life support for decades. The least healthy companies are given just enough to survive and nothing more. And there’s good reason why you shouldn’t give zombie companies more than they need… because they do really stupid things with that money.

From Caixin:

“In the 12 months ending Wednesday, 9,641 publicly traded companies listed on China’s A-share market moved 887.2 billion yuan ($128.5 billion) of capital into such financial products, according to data compiled by Chinese financial information provider Wind. That was a whopping near-46% jump over the same year period ending May 10 of last year.

That’s right, China’s zombie firms took the “free money” the government handed out like candy back in Q1 2016 and invested it in these Ponzi Wealth Management Products. To be fair, $128.5B is just a small amount of the total outstanding WMP market which has ballooned to $4.35T or over 10% of China’s financial system in just a few short years.

Zombie companies investing in WMPs for gains is just the next step in the evolution of WMPs. From investing in the same assets to themselves, WMPs are interconnected in more ways than we can imagine.

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Given WMPs are really just levered bets on other financial assets, and that every financial asset class in China is in some form of a sell off at the moment, it’s not hard to believe that the losses have begun to pile up. These losses are compounded when one WMP is invested in another. If one WMP loses money so too do the WMPs that are invested in it. So the Chinese banks, in order to survive will have to issue an accelerating rate of WMPs to paper over these losses…

Except we are seeing the exact opposite. WMP growth began to slow in March. From Bloomberg:

“Outstanding products issued by banks stood at 29.1 trillion yuan ($4.2 trillion) as of March 31, up 18.6 percent from a year earlier, according to the China Banking Regulatory Commission. The growth rate slumped from 53 percent during the same period last year, CBRC said.”

Only to slow even further in April. From Bloomberg:

“The number of wealth-management products issued by Chinese banks slumped 39 percent in April from the previous month, while trust firms distributed 35 percent fewer products, according to data compilers PY Standard and Use Trust. Sales of negotiable certificates of deposit, a popular instrument of interbank lending known as NCDs, tumbled 38 percent from a record, figures compiled by Bloomberg show.”

With rising losses and not enough additional funding to paper the losses the liquidity in China’s interbank market has dried up and recently like the Chinese government yield curve, inverted.


Of course it’s not just WMP issuance that has slowed dramatically, the entire shadow banking sector has tightened its lending. From Reuters:

“Trust loans, entrusted loans and undiscounted banker’s acceptances, which are common forms of shadow banking activity in China, totaled 177 billion yuan in April, down from 753.8 billion yuan in March, according to Reuters calculations based on the central bank’s data.”

The entrusted loan industry is $1.7T. Of which $500B comes from WMPs! Not only are WMPs invested in each other, but they are also loaned out to asset managers who lever up and speculate with those funds. From Bloomberg:

“When banks sell wealth-management products — popular savings vehicles that offer higher yields than deposits — the firms sometimes farm out client money to entrusted managers such as hedge funds and mutual funds. The managers invest the cash in bonds, stocks and other securities, hoping to generate enough income to cover the banks’ promised returns to WMP clients — plus some extra for themselves.

Chinese banks allocated an estimated 3.46 trillion yuan of WMP cash to such managers as of Sept. 30″

With paper wealth losses piling up and magnified by the leverage, China’s banking system is in dire need of liquidity. Unless the PBOC is going to allow a hard landing this year, we will have to see a massive amount of liquidity pumped into China’s banking system. Which brings us right back to where this all started, the Yuan’s stability.

Despite the PBOC’s dramatic tightening of monetary policy, the Yuan barely held its own against the dollar. The pattern in USD/CNY looks eerily similar to past instances prior to a weakening of the Chinese Yuan.

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It’s worth noting that the dollar hasn’t even been particularly strong in 2017. It has fallen quite steadily against a basket of currencies since the year began.

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So if the Yuan, despite dramatic tightening out of the PBOC, cannot maintain its value against a weak currency, what’s going to happen to the Yuan if the PBOC is forced to unleash a new wave of liquidity? Will CCP be able to prevent capital flight again?

I don’t think they’ll be very successful. At the same time, I recognize the futility in trying to time an event that is over a decade in the making.

Instead, imagine you are a Chinese citizen. Due to strict capital controls, you cannot get your money out of the country. Financial assets, and industrial commodities are falling in value. The government has put tighter controls on housing speculation preventing you from buying a second or third or eighth home. You are left with just a few options:


And precious metals.


DISCLAIMER: This blog is the diary of a twenty something millennial who has never stepped foot inside a wall street bank. He has not taken an economic or business course since high school (which he is immensely proud of) and has been long gold since 2012 (which he is not so proud of). In short his opinions and experiences make him uniquely unqualified to give advice. This blog post is NOT advice to buy or sell securities. He may have positions in the aforementioned trades/securities. He may change his opinion the instant the post is published. In short, what follows is pure fiction based loosely in the reality of the ever shifting narrative of the markets. These posts are meant for enjoyment and self reflection and nothing else. So ENJOY and REFLECT!


Oh Canada: Have The Stars Have Aligned For A Loonie Eclipse?

Oh Canada: Have The Stars Have Aligned For A Loonie Eclipse?

Apologies for the title, but it was worth a shot. Speaking of shots, Canada has taken quite a few recently. If you’ve been on twitter and follow Marc Cohodes you know exactly what I’m talking aboot (sorry I couldn’t resist).

Before I get to the implosion in a few of the subprime Canadian Mortgage lenders, I’m going to be very honest here: Last year, I went to the John Mauldin’s investment conference and told everyone brilliant enough to listen to a man-bunned millennial how much I hated the Canadian banks and how I was short them with low delta puts. The banks proceeded to run up another +25% on me while paying 4% dividends. Needless to say, I nailed that trade…

With that said, John Mauldin’s investment conference is rolling around again, and like clockwork I once again find myself short some of the Canadian Banks which I believe are at the nexus of a number of deflationary trends.

1. Canada’s two biggest subprime lenders, EQB and HCG (DISCLOSURE: both of which I am short) are on the verge of bankruptcy threaten the very fragile Toronto Real Estate bubble.

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EQB went crashing back down the 2007 highs. Likely a matter of time before it heads much lower.

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HCG which plunged 60% in a single day is speculated to be guilty of fraudulent lending and is levered 15 to 1. Against this back drop, investors have been pulling money out of the bank to the tunes of hundreds of millions of dollars per week. With the bank run in full swing, HCG has been forced to borrow at an incredibly high rate of +15%. When you take into account the fact that HCG lends at 5%, it doesn’t take much intellectual prowess to come to the conclusion that the equity is worthless.

2. More importantly, the sudden collapse of Canada’s two largest subprime lenders has sent the sector in a whirlwind. Subprime borrowing rates are set to go higher. With some mortgage brokers saying as much as 20% of their mortgages go to subprime, the impact higher subprime borrowing rates have on further demand  And despite what Canadians and Canadian bank bulls say, their housing market is loaded with hidden risks. Canada’s shadow banking sector per capita is actually 5x larger than China’s! Yes you heard that right.

From the article (my emphasis in bold):

“While BoC researchers caution there are “significant gaps” in data and knowledge, what they could find was massive. They estimated that the industry has liabilities of $1.1 trillion dollars, just a little more than half of the $2.1 trillion in liabilities Canadian banks have.

Given the size of the shadow banking sector in Canada, it is likely that EQB and HCG are likely the tip of the iceberg of a levered financial system that has pushed real estate prices to all time highs.

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In the wake of Vancouver’s 15% foreigner’s tax which redirected all the Chinese capital flight elsewhere, we’ve witnessed Toronto’s housing market “go to plaid”.

3. With the most excellent of timing and in a bid to prevent housing prices from rising any further the government of Ontario instituted a similar 15% foreigner’s tax, which should put further downward pressure on real estate prices.

4. At the same time, Canada’s economy remains heavily exposed to the Chinese economy, which has likely peaked in Q1 of this year due to base effects.

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From Reuters:

“The National Bureau of Statistics’ official Purchasing Managers’ Index (PMI) fell to a six-month low of 51.2 in April from March’s near five-year high of 51.8.

Analysts polled by Reuters had predicted a reading of 51.6, the ninth straight month above the 50-point mark that separates growth from contraction on a monthly basis.

Demand weakened across the board with the biggest decline in the input price sub-index, which fell to 51.8, its slowest expansion since June last year, from 59.3 in March.”

Despite the headline, this slowdown was entirely predictable given the YoY base effects. China’s economy bottom in Q1 on the back of a the largest government stimulus since the 2008 financial crisis. Ever since last summer, the PBOC has been on mop up duty, attempting to de-lever and drain liquidity from the financial system.

One of Chinese speculator’s key vehicles of shadow banking risk, WMPs have seen their growth slow in the wake of this dramatic tightening. From Bloomberg:

“Outstanding products issued by banks stood at 29.1 trillion yuan ($4.2 trillion) as of March 31, up 18.6 percent from a year earlier, according to the China Banking Regulatory Commission. The growth rate slumped from 53 percent during the same period last year, CBRC said.”

In order for the credit cycle to continue, these Ponzi finance vehicles need to grow at an accelerative rate. This slowdown in credit growth is a warning sign that should be noted as China’s credit cycle approaches its Minsky moment.


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Given M1 growth in China, it is a matter of time before the PBOC turns on the liquidity taps again, which would push the US dollar higher.

It’s important to understand the impacts a slowing Chinese economy would have on future oil demand and prices, a key component of the Canadian economy. China has surpassed the US as the number one importer of oil in the world, in large part due to massive vehicle demand and an unsustainable stimulative push. As of Q1 of this year, China’s government also ended a car subsidy, leading to a dramatic slowdown in sales. From MarketWatch:

“Growth in China’s car sales slowed sharply in March, illustrating the effects of a higher sales tax on the world’s biggest car market.

Sales of vehicles, excluding those typically used for commercial purposes, grew 1.7% to 2.1 million units in March from a year earlier, the government-backed China Association of Automobile Manufacturers said Tuesday.

This marked a slowdown from the 6.3% growth in the first two months of the year. By comparison, sales grew nearly 10% in March 2016 from the previous year.”

Inventories have risen sharply as well.

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In the end, despite OPEC’s best attempts to jawbone the price of oil higher, we find the price resting at a key technical level as well as its 200dma. A breakdown in oil, would put even more pressure on Canadian banks who remain highly exposed to the sector.

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Lastly, the charts of some of these banks listed on the NYSE look very weak. (Disclosure: I am short both CM and BNS on the NYSE). CM has broken below the reflation trade trend-line as well as its 200dma.

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BNS chart is similar, with a familiar H&S topping pattern to boot.Screen Shot 2017-04-30 at 7.28.22 AM.png

Also the longer term weekly chart of BNS shows the stock failed to break at a previous resistance line.

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Given these pressures on the Canadian banking system it is very likely we see a significant drop in the Loonie against the dollar. Although we should all be weary of millennial hedge fund managers bearing “obvious” trades. Cheers!

DISCLAIMER: This blog is the diary of a twenty something millennial who has never stepped foot inside a wall street bank. He has not taken an economic or business course since high school (for which he is immensely proud of) and has been long gold since 2012 (which he is not so proud of). In short his opinions and experiences make him uniquely unqualified to give advice. This blog post is NOT advice to buy or sell securities. He may have positions in the aforementioned trades/securities. He may change his opinion the instant the post is published. In short, what follows is pure fiction based loosely in the reality of the ever shifting narrative of the markets. These posts are meant for enjoyment and self reflection and nothing else. So ENJOY and REFLECT!

Additional Disclaimer: The Author is short the NYSE listed CM and BNS as well as TSX listed EQB and HCG.

The Correction: Don’t Forget To Look Ahead

The Correction: Don’t Forget To Look Ahead

TRIGGER WARNING: This post will include political analysis with very trace amounts of opinion thrown in. As investors so often like to say and rarely actually do, “I am just observing”.

“Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.” ~ Winston Churchill

The first correction in the final leg (according to me) of the post crisis bull market has begun. Given the tremendous tremendous divergence between market expectations and reality there is likely a bit more downside to come. Positioning, and sentiment are polar opposite to the bottom we saw in Q1 2016.

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Especially, if you consider at what the market was pricing in: record business and consumer optimism as well as a smooth and efficient US government that would pass healthcare and tax reform in short order.

Instead we have a bellicose interventionist President Trump who has sparked geopolitical tensions in the Middle East and North Korea. At the same time, the French elections are turning out to be less clear than the market also predicted (notice a pattern).

In the end, shit is about to get somewhat more real, but that doesn’t mean the highs are in (more on this later). For now the Trump/reflation trades, which have looked weak these past few months are beginning to unwind. The key 2.30% technical level on the US 10 year was finally breached this week.

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The technical breakdown in the US 10 year treasury likely signals further downside in US financials (XLF), a key beneficiary of the Trumpflation narrative.

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The Yen a key measure of risk has been strengthening, blowing through stops, and just generally crushing risk appetite. Now below the 200dma and the 0.618 fib re-tracement level off the pre-election lows.

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Semiconductors, the post Brexit leader, up 50% from the lows, has closed below its 50dma and is testing the super special (sarcasm) 79dma. But seriously. We haven’t seen a close below the 79dma since BREXIT. This will be something to watch going forward.

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There’s a clear H&S pattern on the Russell 2000.

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At the same time, XLE has led oil this year and looks to be headed lower. Given the importance US shale plays in the economy, this could signal further economic weakness.

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Throwing salt on the open wound, retail sales and inflation both disappointed expectations on Friday.

In short: “It’s an ugly planet, a bug planet!” (Video might be broken, but hey! At least you get the reference now).


Although the risks, given the lofty valuations, are asymmetric to the downside, it is of vital importance to not get carried away with our bearishness. I made this mistake in 2016. I missed the signs of a bottom. I had been short on the way down, but instead of pulling back, I pushed harder and paid for it. Maybe this is the time to do that, but maybe it’s not (more on this later). It is worth noting that folks are still incredibly scared of a one off event (including myself).

As investors we are in constant conflict with our inner animal which tells us us to sell when we should buy, and buy when we should sell. Not only must we not give in to these primal instinct, we must also be keenly aware of the fact that if we are experiencing these emotions it is quite likely that others are as well.

If this correction continues it does NOT mean equities are about to fall apart. Market tops are long processes that take months if not years rarely ever days. Sure the parallels to a 1987 style event have been shown time and time again. Vol selling is the new portfolio insurance. Passive is only passive on the way up. CTAs have record assets under management. The fuel is certainly there. I get it. I am aware of it, but so is everyone else. Stocks have barely fallen and yet the cost of hedging has already shot up dramatically.

Investors remain keenly aware of any downside risk. Meanwhile the central bank put is still there. The Fed may be hiking now, but with economic data coming out towards the downside, Trump meeting stiff resistance in Congress, and most importantly a falling stock market the Fed can quickly pivot from hawkish to dovish rhetoric. If the sell off does accelerate, I expect talks of balance sheet reduction to give way to QE4.

Perhaps this shift potential shift from hawkish to dovish may already be showing in precious metals.


Although I’d likely attribute most of the move in gold to the war premium.

Worth noting, as Luke Gromen likes to remind people smart enough to follow him on twitter: high stock prices are now a matter of national security.  Even with equity markets at at all time highs, pensions remain tremendously underfunded. A fall in financial assets would cripple pension funds. The knock on effects would spiral out beyond the government’s control leading to consumer debt crisis with the Fed forced to monetize an ever widening US Federal Government deficit.

Thus the Fed, and “the powers at be” have a hefty amount of incentive to keep stock prices elevated. At the very least, the Fed, armed with its newly minted ammo, should be able to hold the line for 3-6 months before it has to even think of threatening the nuclear option, QE4. Look for the Fed to buy time while the market narrative adjusts to the reality.

From the WSJ:

“A growing number of forecasters are beginning to reconsider their bullish outlook for the U.S. economy as doubts grow over the extent to which President Donald Trump will be able to implement his agenda.”

Now that price and economic soft data are beginning to reflect the “hard: reality, I find it quite comforting to see economists like rats jump from the sinking ship that is Trumpflation and the hopes of fiscal stimulus that come with it. Ironically, as the mainstream lose faith in any Trump stimulus or healthcare reform, the odds of the passage of said legislation are actually rising, albeit from a very low base.

WARNING: Here be Dragons. You are entering the political analysis section of the blog post.

What the narrative surrounding Donald Trump refused to acknowledge was just how little power US presidents have domestically. This is especially true when Congress is gridlocked to a standstill. Throw in debt and demographics on top of the rigid congress, and the US president’s domestic policy is practically set in stone.

After failing domestically, Trump has turned his focus abroad. He needs to score some quick wins politically and I’d say he’s done just that. He has used missile strikes in the Middle East to threaten North Korea and force Chinese action (at least superficially).

By projecting US military strength abroad, Trump has pulled the war hawk members of Congress on both sides of the aisle closer to his point of view. At the same time, he has allowed more of his policy decisions to be influenced by Jared Kushner a left leaning New Yorker further bridging the wide divide between his administration and the Democrats.

At the same time, as the economic backdrop continues to deteriorate, Trump will be more than happy to lay the blame at the feet of a gridlocked Congress. I can see it now: “Congress can’t pass much needed health care reform while bad Obamacare implodes. Sad!”

The Democrats have the most seats in contention next year, and will need political wins to secure those seats, else they’ll cede total power to the Republicans and Trump. They can’t do that if they sit by idly as the economy implodes. With some of the Dems coming closer to Trump’s camp, it won’t be hard to leverage the necessary votes for health care reform which would then pave the way for tax reform. Throw in talks of QE4 and the stock market could surge for the final leg of the post crisis bull market.


DISCLAIMER: This blog is the diary of a twenty something hedge fund manager who has never stepped foot inside a wall street bank. He has not taken an economic or business course since high school (for which he is immensely proud of) and has been long gold since 2012 (which he is not so proud of). In short his opinions and experiences make him uniquely unqualified to give advice. This blog post is NOT advice to buy or sell securities. He may have positions in the aforementioned trades/securities. He may change his opinion the instant the post is published. In short, what follows is pure fiction based loosely in the reality of the ever shifting narrative of the markets. These posts are meant for enjoyment and self reflection and nothing else. So ENJOY and REFLECT!




Updating The Global Macro Road Map

Updating The Global Macro Road Map

This is a long article, that you’ll find to be more free flowing than previous articles (Aka I was too lazy to trim some of the fat). I don’t apologize for the length. I find writing down my thoughts to be an incredibly helpful exercise. Just like I find publishing said writings to be incredibly cathartic. With that said, this post was originally supposed to be about China, but then it eventually morphed into a more generalized view on the global economy and the major sign posts I’m looking for as the year progresses. Enjoy!

Those who follow me have probably noticed by now the hefty emphasis I put on narrative when analyzing markets. Lately, the market narrative on China has gone “surprisingly” quiet.

This silence has persisted despite a tremendous amount of action going on underneath the surface.

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Like a duck on a pond, China’s legs have been churning a mile a minute. In a country where every financial asset including P2P loans comes with an implicit “government guarantee” there is not much room for restraint. Combine this false sense of security with the PBOC’s almost uncontrolled stimulus in the post crisis era, and it’s not hard to see why the central authorities in China have been so busy over the past year.

Recall that back in Q1 2016, the PBOC and Chinese government launched a massive stimulus program that forced a temporary bottom in not just China’s economy but the global economy as well. With the economy on a seemingly strong rebound, the PBOC began the process of tightening liquidity and imposing some restrictions on lenders.

Unfortunately, when a banking system is as interconnected and shadowy in nature as the Chinese banking system, this process of imposing any sort of discipline is incredibly difficult. From Caixin:

“No one in the banks knows where the money they invested in other banks’ wealth management plans ended up,” an official from the central bank told Caixin earlier. “They could not tell because the selling bank itself used the funds to buy other banks’ wealth management plans.”

So far the PBOC’s tighter monetary policy has gone on without a hitch (unless you count the December panic when a medium size brokerage firm attempted to default on its Trust Beneficiary Rights). As alluded to in the opening paragraph, this relative calm is only surface deep.

Underneath the calm waters, the risks in China’s banking system have merely shifted from one section to another, forcing the PBOC to play a game of whack-a-mole while providing just enough liquidity so that the whole system doesn’t collapse. By now, the ballooning size of Wealth Management Products and their increasing interconnectivity is well known as well known as what they are actually invested in is unknown.

“Along with the surge in the issuance of CDs, more than 15% of bank wealth management products were held by other banks as of June 2016, up from less than 4% at the beginning of 2015, an increase of 3.5 trillion yuan over a period of just 18 months, according to the report.”

What has been less talked about is the burgeoning role that interbank certificate deposits are playing in the Chinese banking system.

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From the Caixin:

“In the first two weeks of March, the issuance of interbank negotiable certificates of deposit (CDs) exceeded 1 trillion yuan ($145 billion), following a record net increase of almost the same amount in February, according to data from Wind Information, a financial data provider. The issuance of CDs in January and February was 990 billion yuan and 1.97 trillion yuan respectively.

One possible reason for the explosion in CD issuance in recent months could be the dramatic increase in rates. Rising from 2.8% last August to 4.77% in March. Banks may be trying to lock in the cost of funding before it rises any further.

The interest rates that banks needed to offer to get funds through the CDs have increased as well, reaching an average of nearly 4.77% on March 22 for a three-month contract. In late August, when the central bank started raising money costs through open market operations by tightening the supply of short-term, cheaper funds, the rate was only about 2.8%.”

At the same time, about 48% of CDs are set to expire by the end of the Q2, further driving demand. Of course, these products will all be rolled over at much higher costs, hurting bank profitability. From Natixis Research:

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To make matters worse, the rising risk associated with interbank CDs is concentrated in the smaller less well capitalized banks. From Caixin (my emphasis in bold):

“Small and midsize banks have been the primary issuers of interbank CDs. According to a research report from Haitong Securities, nearly 90% of the 7.4 trillion yuan worth of outstanding CDs as of March were issued by the national joint-stock banks and city commercial banks.

Just how poorly capitalized are these banks? From Caixin (my emphasis in bold):

“A simplified way to measure the leverage, as provided by the report, shows that, on average, the total assets of depository financial institutions in China (excluding the central bank) have grown to almost 50 times their net capital. The ratio for some midsize banks, which rely more on interbank loans, has reached 60. In 2007, the average ratio was just about 30.”

So what does this all mean? It seems that the PBOC’s runway to tighten liquidity in the interbank market will be significantly limited going forward. The fact that the PBOC has been able to tighten as much it has without incident is more illustrative of the incredible amount of excess liquidity in the system than its resiliency. Arguably no sector in China has benefited from these high levels of excess liquidity than real estate.

Despite house prices rising at their fastest rate in 7 years, profitability among developers has declined.Screen Shot 2017-04-08 at 5.34.46 PM.png

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Falling profits and rising leverage against a falling liquidity backdrop is not exactly the ideal mix for a speculative bubble. But if you ask members of the PBOC, they don’t seem very worried at the moment. Apparently they’ve solved that seemingly “impossible trinity” problem.

From the SCMP:

“Chinese central bankers have done the economic “impossible”, finding a way to have a ­stable yuan, a free market and effective monetary policy.

That is the assessment of two central bank researchers, who claimed in a paper published on the People’s Bank of China’s website on Thursday that Beijing would continue to realize the “impossible trinity”.”

How does that saying go? Something something pride before the fall? This is almost as bad as the Latvian central banker claiming to be a “magic person”.  To be clear Latvia hasn’t found itself in a heap of trouble, and the PBOC’s alleged conquering of the impossible trinity is not exactly an indicator of anything other than central banking hubris which let’s face it is always turned up to 11.



Central bank hubris aside,  it’s true capital flight out of China has stopped… for now.

Which is not entirely surprising, from my post The Reflation Trade:

“I also see incredible potential for the PBOC to defend the psychologically important $3T reserve level this month. Come the release in early February, the market may be shocked to discover that the $3T reserve level has held. The Yuan could strengthen and the narrative would temporarily shift to the masterful job done by the Chinese Authorities, and developed markets would rally on the back of higher inflation.

My oh my how the narrative shifts. Of course, China has not solved any of its problems. If anything they have grown larger, which has forced the authorities to take drastic actions. Like preventing foreign companies from taking their profits out of the country.

These stricter measures on top of a false sense of currency stability has emboldened Chinese corporates to ramp up their offshore dollar borrowing again. From the WSJ:

“Chinese firms have issued some $52.6 billion worth of U.S. dollar bonds in the first quarter, up 72% from the previous three months, according to Dealogic, and nearly five times the amount from the first quarter of 2016.”

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One of the corporations borrowing dollars in the offshore market is one of the most indebted domestic property developers, Evergrande Group.

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The purpose of this money is to “refinance existing debt”, because what else can Evergrande do? If Evergrande can’t get profits offshore (if it even has any) how on earth is it going to pay back this debt, unless it borrows even more dollars. From the WSJ (my emphasis in bold):

“In mid-March, one of China’s largest and most indebted property developers, China Evergrande Group , priced three dollar bonds in Hong Kong within a week for a total of $2.5 billion, which the company says it will use to refinance existing debt.”

All it takes is for a little stability in China and everyone loses their minds. But Chinese corporates aren’t the only ones throwing caution to the wind. As pointed out numerous times on Twitter by Darth Macro, investors are increasing their exposure to Emerging Markets, despite deteriorating macroeconomic fundamentals.

I think you get the point. Investors have looked around, and found the coast to be clear. Which is why I put an emphasis on the subsurface activity in China. Important to note that it is not just in China where the subsurface activity betrays the market narrative. Any China and EM related story would be unfinished if I did not touch on the US dollar, where once again we find the narrative to be in opposition to the underlying fundamentals. The following is a headline from the WSJ:

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“Dollars shortages are now going away, helped by expectations that U.S. regulation will be relaxed, the success of overseas banks in finding alternative sources of finance and greater appetite from investors to pick up what looks like free money left lying around by the global financial system.”

I’ll leave it to Jeffrey Snider of ALhambra Investment Partners to dispel any dollar flow myths. From his appropriately titled article:

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“In 2013, the same sentiments were expressed only with QE3 in mind rather than regulations. It was only after the events of later 2014 forward completely and utterly surprised these mainstream opinions that it was after-the-fact decided regulations just had to be to blame. Even if we assume that was and is the case, the relative comparison of swap spreads (or UST yields, eurodollar futures, etc.) then versus now shows a very different interpretation than a return of dollar flow. Markets were much more excited and indicative of a that four years ago versus now, and given that turned out to be a false assertion, what does that say about the same one being prepared all over again?

For one, it was the 30-year swap spread that turned positive if only briefly in the summer of 2013. Almost four years later, the 30s have like the 10s improved but only in comparison to last year; they are still highly negative.”

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In spite of this shortage of dollars, the Fed in all of its “wisdom”, has decided that now is the time to take away the punchbowl. After two back to back rate hikes the Fed has quickly moved on to balance sheet reduction.

The hawkish shift from the Fed in light of the subsurface problems in China is either hilarious or astounding depending on your disposition (I myself am half astounded half cracked up). Curiously enough, the most recent FOMC minutes tell a different story (my emphasis in bold).

“Some participants viewed equity prices as quite high relative to standard valuation measures… prices of other risk assets, such as emerging market stocks, high-yield corporate bonds, and commercial real estate, had also risen significantly in recent months.”

Clearly they are worried about something, or as the quote suggests… pretty much everything. If high yield corporate bonds, commercial real estate and equity prices are all overvalued then there isn’t much room for anything else.

Perhaps even more importantly, the underlying US economy is not nearly as strong as the Fed’s hawkish rhetoric or the Trumpflation narrative would suggest. US Q1 GDP growth is weak per usual.

The latest jobs number was a dud as well. Amazon’s onslaught on the retail sector is accelerating.

Or maybe it’s more than Amazon’s creative destruction…

And this could just be the beginning of the bursting of a large multi-decade bubble in American retail stores. Retail square feet per capita in the US is 6x more than that of Europe or Japan. For all the grief Americans give China over its real estate boom, we have one of our own.

The bursting of this bubble will hurt and spread through out the economy, where we are seeing other bubblicious sectors suffer under tremendous strain. Auto sales have broken down.

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Used car prices have dropped sharply.

Of course this not all that surprising given the state of the subprime auto loan bubble.

Lastly, lending growth is slowing at an alarming rate.

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I know I’ve gone all over the map right now, so here I’ll try and wrangle some of these ideas back in. China’s economy although swimming in excess liquidity is going to face some headwinds towards the end of the year. Dollar liquidity although better than last year, is nowhere near a level to justify a hawkish Fed. US economic data, is nowhere near the level to justify a hawkish Fed. So why is the Fed hiking? An even better question might be: how have financial conditions been easing in the face of the hawkish Fed?

My answer for this strange development is the short vol crowd.

In this world of passive investing and ZIRP and NIRP, traders and now larger and larger asset managers are just looking for any excuse to sell vol. Every single time the VIX spikes above 13, it is immediately sold. This prevents equities from correcting and leads to a build up of risks in the system.

This is rampant selling of vol will lead to a whirlwind of unintended consequences, because it creates a false sense of security at the Federal Reserve. Historically the only thing that has stopped the Fed from hiking is a falling stock market. The Fed never responds to economic data, or dollar liquidity issues or anything of that sort. It only responds to falling stock prices. And if stock prices are being artificially propped up due to this “rampant selling of vol” then the Fed will keep on hiking or said differently vol sellers have numbed the Fed to its own hawkish policy!

It is quite likely given the rampant vol selling that the Fed has already tightened too much. Especially if you use the Wu-Xia shadow fed funds rate.

With that in mind, I think the odds of the stock market going considerably higher are quite limited. I’ve expressed my bearish views on the stock market for the past few months in a number of posts and believe my position has continued to be supported by the economic data as well as the capital flows. Dumb money in.

Smart money out.

Add the two together and you get record dumb money longs and record smart money (commercial hedgers) short!

Now I don’t have a crystal ball, so I don’t know if stocks go up or down over the rest of the year. I’m just saying the odds that stocks continue to rise is falling at a rapid rate. But if stocks continue to rise, we should expect the Fed’s hawkish rhetoric to continue DESPITE any deterioration of economic data. When the next correction does come, I suspect any talk of “balance sheet reduction” will be dropped faster than Romulan Red Matter (although technically it was created by the Vulcans?).


DISCLAIMER: This blog is the diary of a twenty something millennial who has never stepped foot inside a wall street bank. He has not taken an economic or business course since high school (for which he is immensely proud of) and has been long gold since 2012 (which he is not so proud of). In short his opinions and experiences make him uniquely unqualified to give advice. This blog post is NOT advice to buy or sell securities. He may have positions in the aforementioned trades/securities. He may change his opinion the instant the post is published. In short, what follows is pure fiction based loosely in the reality of the ever shifting narrative of the markets. These posts are meant for enjoyment and self reflection and nothing else. So ENJOY and REFLECT!

Trumpflation: The Narrative Is Deflating

Trumpflation: The Narrative Is Deflating

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“I can feel it coming in the air tonight, oh Lord”

~ In The Air Tonight by Phil Collins

“Father tell me, we get what we deserve
Oh we get what we deserve

And way down we go
Way down we go
Say way down we go
Way down we go”

~ Way Down We Go by Kaleo

“The closest thing to eternity on earth is a government program.”

~Ronald Reagan

You would think Reagan fanboys like Donald Trump and Paul Ryan would heed their idol’s words of wisdom, but no. This week, the world’s worst healthcare bill was pulled effectively putting the Trumpflation narrative on notice. To be clear, tax reform is not impossible, just a lot less likely than the market had originally priced. We should see those diminished odds be reflected across the Trumpflation trade over the next few weeks.

I could not agree more with Jawad’s assessment. All the legs of the Trumpflation narrative came under fire this week. First up, long term bond yields are showing no signs of higher expectations of growth. Possible double top forming in the 10 year.

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The 30 year is has fallen back to 3% as well.

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Of course falling interest rates, and a flatter yield curve bode quite poorly for one of the largest beneficiaries of Trumpflation, US financials.

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In this new era of Trump, banks were set to be deregulated allowing them to make more loans. A steepening yield curve means that banks would make more money per loan. On top of making more loans, banks would make more money per loan, a bank bull’s dream. Not only were Trump’s plans of deregulation dealt a sizable a blow and the yield curve flattened to post crisis lows but to make matters even worse, bank lending has been slowing like the US economy is about to enter a recession. In short, this euphoric fever dream has quickly turned into a bad mushroom trip.

From the article:

“We find three key channels that are inhibiting demand growth: 1) political uncertainty, 2) elevated corporate leverage, and 3) Fed policy, both through past tightening and expected tightening going forward. We see little evidence that the slowdown in lending is due to tighter bank or non-bank lending standards.”

Given the embarrassing defeat of the Republicans and Trump administration this week, it appears political uncertainty is far from resolved. Elevated corporate leverage is not going away anytime soon. And the Fed continues to talk a big game despite a lack of data to support their hawkish stance.

It’s not “hard” to see where I’m going with this. It’s 2011 (Déjà vu) all over again.

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The Fed may think it can pull its foot off the pedal but the market knows better.

Which brings me to the dollar or what many consider to be the most crowded trade. If the Fed is reached peak 2017 hawkishness, this crowded traded could be in big trouble.

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Those betting on higher growth, higher US interest rates, a resurgent financial sector and tax reform are also betting on a stronger dollar. Although I think the case for a stronger dollar over the long term continues to build, the short term forces are only pointed in one direction and that is down.

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Lastly, oil closed under the 50 week moving average this week for the first time since last July.

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I don’t think speculators realized US shale could grow production as fast as it did.

Either that or they really did believe US economic growth was accelerating. Which brings me to the rising role that US shale has played in US economic growth over the past year.


The trucking and sand industries have been huge beneficiaries of the US shale resurgence. To increase the effectiveness of their wells, companies have been using more and more sand per well.

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“Tudor, Pickering, Holt & Co. estimates the sector will need 120 million tons of sand by next year, more than double the demand in 2014 at the height of the U.S. drilling boom.”

The increased demand for sand has flowed through to increased trucking demand as well.

“The expense is compounded by the logistics of moving sand from mines to well sites thousands of miles away. Drillers don’t use sand found on a beach. They prefer fine white silica, much of it found in northern Midwest states. Shipping 5 million tons of sand can require 200,000 truck loads, according to a 2013 study by the University of Wisconsin.”

In short, US economic growth is heavily reliant on US shale growth. Lower oil prices not only puts bond bears on notice but US economic bulls as well. The longer oil stays low, the more likely we’ll begin to see a further liquidation of the record long oil contracts.

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Given the fragility of the situation you might expect investors to be a bit more worried about a pick up in volatility, but you would be wrong. Despite the potential unwind of several large speculative trades, investors remain incredibly complacent.

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A lot of this may have to do with volatility being sold short. The fact that this week marked the first weekly close above 12 this year is simply incredible. Which leads me to believe that the sell off we saw this week is likely a prelude to a larger move.


DISCLAIMER: This blog is the diary of a twenty something millennial who has never stepped foot inside a wall street bank. He has not taken an economic or business course since high school (for which he is immensely proud of) and has been long gold since 2012 (which he is not so proud of). In short his opinions and experiences make him uniquely unqualified to give advice. This blog post is NOT advice to buy or sell securities. He may have positions in the aforementioned trades/securities. He may change his opinion the instant the post is published. In short, what follows is pure fiction based loosely in the reality of the ever shifting narrative of the markets. These posts are meant for enjoyment and self reflection and nothing else. So ENJOY and REFLECT!

The End of Monetary Policy Divergence: RIP US Equity Outperformance?

The End of Monetary Policy Divergence: RIP US Equity Outperformance?

The past several months I’ve been pointing out that speculators have been increasingly shifting to one side of the boat, long reflation. And then this week, central banks finally joined the party, tightening monetary policy only after these inflationary base effects had peaked.

I think this development is very bad over the medium term for global liquidity conditions. As noted by Johnathan Tepper in his recent Macrovoices interview, higher inflation and economic growth will pull excess liquidity out of financial assets and into the real economy. Throw in the hawkish shift of the world’s four largest central banks, and global liquidity conditions in the second half of the year should not be nearly as elevated as they are today.

With that said, global liquidity will not be the main topic of this week’s blog post (but I’ll touch on it later). Instead, I am choosing to focus again on yet another wobbly pillar of not just the reflation trade but US equity market’s outperformance these past +3 years as well.

In light of the hawkish shift of foreign central banks, the Fed finds that it is no longer the only game in town. Since 2013, the Fed’s relatively hawkish stance was super charged by the incredibly dovish policies that foreign central banks embarked on. During that time the ECB and BOJ increased their asset purchase programs and adopted negative interest rate policies. The combination of these central banking policies pushed capital into the US and strengthened the dollar.

As the dollar is a major source of emerging market funding, the stronger dollar tightened financial conditions in these countries, and hurt their economies which led to a prolonged period of capital outflows and equity market underperformance (vs the US). During this time, the phrase, “the cleanest shirt in the dirty hamper” was commonly applied to the US dollar, economy and stock market, but is that still true?

From a technical standpoint these trends seem to be waning and on the verge of a reversal. SPY / Europe (IEV):

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Despite the parabolic move higher, US equities have gone nowhere against emerging markets for over 18 months and counting. This week, we saw a break below the 50 week moving average as well as the +3 year trendline. SPY / Emerging Markets (EEM):

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SPY / World (VT):


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With the central banking divergence set to converge, we could even see the Fed hold steady or shift to a more dovish policy while the ECB and BOJ further tighten monetary policy. Given that the BOJ and ECB are still experimenting with NIRP there is plenty of room for them to tighten their monetary policy. Could you imagine the rally we would see in European financials if the ECB reduced its NIRP tax on the banks?

The Fed on the other hand may have overplayed its hand. If we look at inflation where it seems everyone (except those holding record treasury short positions) is now aware of the falling base effects associated with energy prices.

But in the US, little ink has been spilt over one of the largest contributors to inflation, rental prices.

In short, the inflationary pressures that the Fed has tried to get ahead of are unlikely to develop before the June meeting. Meanwhile, economic growth is also likely to disappoint or at least not accelerate to the upside as lending growth continues to fall.

Corporations have also put their debt issuance on hold as they wait for Trump’s regulatory cuts and stimulus package to form up.

If Trump and Congress cannot get their act together, look for the Fed to lower expectations of a future rate hikes.

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Which would mean that the Fed is unlikely to defend the dollar, and we could see it fall below the 99.5 level, completing this H&S pattern that I’ve been calling for these past few weeks. More importantly, by not defending the dollar, the Fed is essentially giving the green light for capital to leave the US.

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Lastly, any narrative about capital flight would not be complete without the country who has suffered from capital flight the most these past few years, China. And if there is a country that would benefit more from a falling dollar and falling US treasury yields than China I would not know it.

Previously I noted that the central authorities in China were hard at work to blow another stock bubble, Bitcoin: The Rising Tide Pressures The Biggest Leak:

“The stock market which everyone believes left for dead, may rise from its shallow grave and roar like never before. Pension funds will begin allocating additional holdings to the stock market as soon as this week. This is a pretty serious development. The last thing Beijing wants to do, is torpedo the pensions of millions of workers. On the back of this move, Chinese authorities have cut equity margin requirements from 40% to 20%.”

Just last week, the PBOC hiked interest rates. The reason: to apply more pressure on the nation’s out of control housing bubble.

It is likely that the authorities are trying to funnel China’s big ball of money back into other asset classes such as precious metals and equities. The inverse H&S pattern is quite obvious, throw in a weaker dollar and falling treasury rates and a new bull market could in fact be in the cards.

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It’s worth pointing out, that being bullish Chinese equities does not mean I am necessarily bullish on China’s economy, or global growth for that matter. There’s still plenty of warning signals out there.

And as I noted earlier, the Chinese authorities are actively working to deflate their booming real estate bubble. If successful in their efforts, the deflationary effects, will reverberate across not just emerging markets but the globe. And this in my view would likely mark a great opportunity to be long the dollar. As global liquidity begins to dry up around the world approximately 3-6 months from now, the dollar should bottom and begin to build up a head of steam for all the wrong reasons, There Is No Alternative (TINA).


DISCLAIMER: This blog is the diary of a twenty something millennial who has never stepped foot inside a wall street bank. He has not taken an economic or business course since high school (for which he is immensely proud of) and has been long gold since 2012 (which he is not so proud of). In short his opinions and experiences make him uniquely unqualified to give advice. This blog post is NOT advice to buy or sell securities. He may have positions in the aforementioned trades/securities. He may change his opinion the instant the post is published. In short, what follows is pure fiction based loosely in the reality of the ever shifting narrative of the markets. These posts are meant for enjoyment and self reflection and nothing else. So ENJOY and REFLECT!