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Started By
Message
re: Discussion of Fed Liquidity’s Impact on Equity Markets
Posted on 6/21/21 at 3:57 pm to wutangfinancial
Posted on 6/21/21 at 3:57 pm to wutangfinancial
Good stuff
1
Posted on 6/21/21 at 4:01 pm to Hussss
We'll see on this RRP stuff. What happened is exactly what you would expect when there's nowhere to park your money right now.
Bump: RRP appears to be extracting money from the financial system. DXY looks like next leg up is coming on the technical side, which would mean it recaptures a 13 year up trend from GFC 1.
Bump: RRP appears to be extracting money from the financial system. DXY looks like next leg up is coming on the technical side, which would mean it recaptures a 13 year up trend from GFC 1.
This post was edited on 6/29/21 at 9:08 am
Posted on 6/29/21 at 9:09 am to wutangfinancial
Bump DXY update
Posted on 6/29/21 at 9:28 am to wutangfinancial
DXY has been holding its ground. If it keeps rallying, the y/y earnings comps are going to get tougher. The weak dollar has been a tailwind for the S&P, given how much of its aggregate revenue is now generated overseas.
On its own, it’s probably not a major issue, but when combined with the why behind the recent dollar and bond strength (expectations of tightening sooner rather that later and slowing economic growth), it could add fuel to the fire.
On its own, it’s probably not a major issue, but when combined with the why behind the recent dollar and bond strength (expectations of tightening sooner rather that later and slowing economic growth), it could add fuel to the fire.
Posted on 6/29/21 at 6:45 pm to wutangfinancial
King Dolla gonna surprise a lot of folks in the reflation trade(s).
Did you and Red Stick notice the action in the VIX as SPX hit 4300 this morning? Protection being bid.
We already have a topping process that started in May when the Dow and the Transports peaked. Will be curious to see if the Dow can make a new high while the Transports make a lower high, setting up a major divergence like we saw before March 2020 and October 2007.
I’m watching small caps closely as they sure look toppy and weak.
Did you and Red Stick notice the action in the VIX as SPX hit 4300 this morning? Protection being bid.
We already have a topping process that started in May when the Dow and the Transports peaked. Will be curious to see if the Dow can make a new high while the Transports make a lower high, setting up a major divergence like we saw before March 2020 and October 2007.
I’m watching small caps closely as they sure look toppy and weak.
Posted on 6/29/21 at 8:06 pm to Hussss
I did not notice the Vix action.
I’m with you on small caps. They’re wobbly and the ones that run have been struggling to hold the gains, as noted in my other thread. I frankly think that strategy will become even more profitable going forward, given it’s worked so far in the context of a broader market making ATHs.
I’m with you on small caps. They’re wobbly and the ones that run have been struggling to hold the gains, as noted in my other thread. I frankly think that strategy will become even more profitable going forward, given it’s worked so far in the context of a broader market making ATHs.
Posted on 7/5/21 at 12:48 pm to wutangfinancial
quote:
RRP appears to be extracting money from the financial system
Latest on RRP. Expected to hit 2T.
LINK
Posted on 7/9/21 at 6:29 am to Hussss
Posted on 7/29/21 at 9:33 am to TDFreak
quote:
Not the Fed, but any feel on how the upcoming T-bill supply cuts will affect equity markets?
We feel that the infrastructure bill will pass with bi-partisan support so the Fed has more bills to ease with.
I bumped this because I think we're at the point where bad news is good news for equities and bonds. I think that was around 2012 last cycle.
Posted on 8/11/21 at 12:30 pm to wutangfinancial
quote:
*U.S. 10Y NOTES DRAW 1.340% VS 1.372% PRE-SALE WHEN-ISSUED YIELD
Foreign buyers, the data indicated, took down just over 77% of the sale, suggesting the week's $126 billion in new bonds sales are unlikely to disrupt markets as investors hunt for returns in a market comprised of $16 trillion worth of fixed income assets trading with a negative yield.
Just to pile on the macro data, Yuan loan growth missed pretty big. We have ourselves a global slowdown.
This post was edited on 8/11/21 at 12:35 pm
Posted on 8/11/21 at 1:22 pm to wutangfinancial
Yup, and inflation is slowing as well, so will be interesting to see how the market begins pricing that in as opposed to the “reflation + mega-growth + a new roaring 20s” narrative that many were pushing earlier. The bond market picked up on this back in May …
Posted on 8/12/21 at 10:51 am to wutangfinancial
quote:
I bumped this because I think we're at the point where bad news is good news for equities and bonds. I think that was around 2012 last cycle.
Been thinking about this. I think it’s a certain combination of good and bad news that would be bad for markets at this point:
Bad news: inflation prints run hot, in that this may cause Fed to tighten sooner rather than later
Good news: labor market recovers more rapidly, in that this may cause Fed to tighter sooner rather than later
Combine those, and I don’t think it’s good. Of course, once the labor market looks like it is close to recovering, many expect they’ll move the goalposts again (well, it was actually this certain segment of the labor market we were talking about, i.e. minority UE, etc.).
Posted on 8/12/21 at 11:00 am to RedStickBR
I'd have to go back and look at the last cycle, but I think it took 4 years for them to raise FFR 25 bps once taper talk started 
Reuters - Taper Tantrum Key Events
Reuters - Taper Tantrum Key Events
This post was edited on 8/12/21 at 11:01 am
Posted on 8/16/21 at 6:43 am to wutangfinancial
This is a few days old, but a good read on some of the thinking around if, and when, substantial further progress will have been made. According to Raphael Bostic, President of the Atlanta Fed, we are already there on average Core PCE inflation (using a 5y average, we hit 2% in May) and will be there on the labor market in September. Further, he wants the taper process to be quicker than it has been historically and is fine with beginning Treasury tapering at the same time that MBS tapering begins.
LINK
ETA: VXX calls even out to December are looking pretty cheap to me
LINK
ETA: VXX calls even out to December are looking pretty cheap to me
This post was edited on 8/16/21 at 6:59 am
Posted on 8/16/21 at 9:51 am to RedStickBR
VXX has way too much decay unless the VIX futures curve goes into backwardation. Why not just use actual VIX options?
Posted on 8/16/21 at 10:54 am to Hussss
Vix term structure appears to be in a healthy contango but honestly I could see some really bad Q3 data. Stimulus only gives us a few months of positive narrative on the markets. Everything on the table is priced in. So what does that leave us with?
Isn’t Bostic a perma-dove?
Isn’t Bostic a perma-dove?
This post was edited on 8/16/21 at 10:55 am
Posted on 8/16/21 at 11:01 am to Hussss
I'm typically not one to even consider VXX, but when you look at the option premiums (no doubt reflecting the absolute complacency in the market), I'm a bit tempted I have to admit.
Posted on 8/16/21 at 11:03 am to wutangfinancial
Yeah, I think he definitely leans dovish. He's the one who cited systemic racism as a contributor to poor economic performance. So I think it says a lot that even he and other doves are beginning to think a taper needs to happen sooner rather than later. And on that topic, it would appear he has some of the most aggressive views on what and when to taper.
Posted on 8/16/21 at 11:36 am to wutangfinancial
quote:
Vix term structure appears to be in a healthy contango
It would be rare if it was in backwardation. I don't ever recall this existing.
Part of this is its usage as portfolio insurance.
About the only way to play this is weekly equity index options, or sometimes you can find inefficiencies in the future's contract and its options.
Posted on 8/16/21 at 12:36 pm to Iowa Golfer
When the indices drawdown hard the term structure flips to backwardation. It happened last March, Xmas Eve '18 etc...
Vix Term Structure
Vix Term Structure
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