Monthly Archives: April 2015

So There’s This…

At the beginning of the month everyone was wondering how high the government obligations of respected nations could go. Their ascension has come with an under current of foreboding warnings of "shortage" and "hoarding." Long ago, we posited that the concept of "too few bonds (usually promoted because a CB was buying them)" was a meta-issue. A classic case of "sounds right economics."We have, on the other hand, been a bit of a worry wart about liquidity. Any C Team player now understands that Volume is not Liquidity, so now we can look at the issue more clearly.

And David Schawel pinged this:

"Definitely the first to highlight this issue twitter.com/tracyalloway/s…

(Twitter confessions). I'm so tired of the bond market liquidity story. Been hearing and writing about it for 3 years tinyurl.com/lhbu7z"

Tracy is a respected journo and David is a sharp player. I'm not convinced that just because the negative impact of the liquidity change hasn't manifested itself we should be writing it off. PDs have decimated their FI desks, especially in Govies. FF transactions have fallen off a cliff. A whole generation of "T Traders" experience now revolves around bidding a dutch auction and pitching your allotment to the Fed. Not exactly Mensa candidate work. Few have EVER had to actively participate in a Bear. The Taper Tantrum did kinda - sorta happen.

There was an old expression in the Eurodollar Pit (yes, I'm that old); where volume seemed to increase no matter what and then a crisis would pop up, "There's plenty of liquidity until you need to tap it." Then, things just reprice. Bond shortage? i still say "Challenge." Aunt Janet could help you out with a few trillion if you ever freaked hard enough for them. Bond liquidity? Color me skeptical. There may not be "bad bonds, just bad prices" but those prices can get thin and wide on the way down.

Classical Thursday

30 minute atr
240 minute atr

daily atr

daily pivots

weekly pivots

upside retracements

downside retracements

support and resistance
On the economic calendar:-
08:30 Jobless Claims (Consensus 288 K v Prior 295 K)
          Personal Income (Consensus 0.2% v Prior 0,4%)
          Consumer Spending (Consensus 0.5% v Prior 0.1%)
          Employment Cost Index (Consensus 0.6% v Prior 0.6%)
09:45 Chicago PMI (Consensus 50.0 v Prior 46.3)
          Bloomberg Consumer Comfort Index
10:30 EIA Natural Gas Report
11:00 Kansas City Fed Manufacturing Index (Consensus -2 v Prior -4)
          3 Month Bill Announcement
          6 Month Bill Announcement
15:00 Farm Prices
16:30 Fed Balance Sheet
          Money Supply
Speaking today:-
08:30 Daniel Tarullo

Classical Wednesday

30 minute atr
240 minute atr
daily atr
daily pivots
weekly pivots
upside retracements
price extensions
downside retracements
regression channels
support and resistance
On the economic calendar:-
07:00 MBA Mortgage Applications
08:30 GDP (Consensus 1.0% v Prior 2.2%)
10:00 Pending Home Sales
10:30 EIA Petroleum Status Report
11:30 2 Year FRN Note Auction
13:00 7 Year Note Auction
14:00 FOMC Meeting Announcement

Of Myths and Men

The dollar is a funny thing. Back in 2009 many a town crier warned of the "devaluing", "debasement" "demise" and impending implosion of the world's reserve currency. Any down day in the dollar brought out a host of commentators to challenge the integrity of Fed and Treasury officials and hype the "crashing greenback." Many shared an affinity for shiny metal.

Lately, the "strength" of the dollar has been causing some dyspepsia in the "single issue" market observation crowd. The rising fiat is "slowing the economy", "hurting exports", "causing deflation" and "complicating the Fed's exit." Over the weekend, the strong dollar even took the mantle of the "weak dollar" and was to blame for the coming "age of the Yuan as the reserve currency of the world." Clearly James Carville was wrong about the Bond Market, he would want to be re-incarnated as the Dollar because "It gets whatever it wants."

The truth is the dollar never "crashed" or was "debased" under the prior Treasury Secretary and is not escalating out of control now. The real rate differentials that have ebbed and flowed around the world, though abnormal, are not unjustified. The missed opportunity with the Asian Infrastructure Bank (well outlined in Hank Paulson's new book) will aid Renminbi openness and Eastern dollar diversification for some time.

Living, breathing currency problems, as opposed to Myths, tend to morph from debt exits and capital flight. Unlike the P.C. (Pre-Crisis) world threat of "the Chinese will sell all their bonds and destroy us," a deep stock of our obligations are now owned by US. The little grey haired lady in charge of them shows little inclination to sell. The recent rise should open a window for a robust debate on a greenback based infrastructure bank for the West. The dollar is not rising too fast and "killing" the expansion, nor did it "crash" in the crisis. Fiat moves. The ability to adjust is the hallmark of a fiat currency world. The rigidity of anchored paper and heavy metal have caused more frequent and harmful outcomes. Like George and Lennie in Of Mice and Men, currencies tend to define themselves by the reflection of another.

Classical Tuesday

30 minute atr

240 minute atr

daily atr

daily pivots

weekly pivots

upside retracements

downside retracements

regression channels

support and resistance
On the economic calendar:-
 
FOMC Meeting begins
08:55 Redbook
09:00 S&P Case-Shiller HPI (Consensus 0.7% v Prior 0.9%)
10:00 Consumer Confidence (Consensus 103.0 v Prior 101.3)
          Richmond Fed Manufacturing Confidence Index (Consensus -2 v Prior -8)
          State Street Investor Confidence Index
11:30 4 Week Bill Auction
          52 Week Bill Auction
13:00 5 Year Note Auction

Classical Monday

30 minute atr

240 minute atr

daily atr

daily pivots

weekly pivots

upside retracements

downside retracements

regression channels

support and resistance
On the economic calendar:-
09:45 PMI Services Flash (Consensus 59.5 v Prior 58.6)
10:30 Dallas Fed Manufacturing Survey (Consensus -12.0 v Prior -17.4)
11:00 4 Week Bill Announcement
11:30 3 Month Bill Auction
          6 Month Bill Auction
13:00 2 Year Note Auction