Being Tested

Published on: October 21st, 2019

Although the economic backdrop is weak, the dollar and bonds are testing Raoul’s hypothesis… it’s time to assess where we are…


  • AS
    Amit S.
    21 October 2019 @ 14:59
    Being tested is an understatement when one's g*nads are being squeezed!
  • AB
    Aaron B.
    21 October 2019 @ 15:13
    Concerning your reference to the ED Dec 21 chart. Did you intend to refer to the ED Dec 20 chart?
  • TB
    Thibault B.
    21 October 2019 @ 16:38
    It is not a test anymore. We clearly saw that the recent poor data from US had no impact on the bond markets. I see a trend clearly broken on ED. Given the COT, there is still some liquidation going on. If EDZ20 breaks 98.42 this is game over.
    • PT
      Pradeep T.
      21 October 2019 @ 20:20
      EDZ20 has demand/support levels at prices below (98.090 to 98.020 and 97.880 to 97.785). IMHO, all bets are off if both these levels don't hold (the first one in particular). If it bounces off, then it could be a false trend break.
  • JK
    James K.
    21 October 2019 @ 17:49
    Any comments on the current Bitcoin position ... ? Thanks ....
    • RP
      Raoul P. | Founder
      21 October 2019 @ 19:27
      Happy to hold it...I think its a wedge pattern and goes higher. Low is most likely in but not 100% certain
  • PT
    Pradeep T.
    21 October 2019 @ 20:25
    Raoul, is the US 2s 10s curve steepening real based on what you feel about the dollar price action? The 'US10Y-US02Y' has broken a trend line towards the upside and so do you see this as a genuine curve steepening or a false break?
  • DC
    D C.
    22 October 2019 @ 07:13
    Equities feel dodgy. But so says everyone. 12 week ascending triangle on the SPX supports a break higher.
    • JL
      J L.
      22 October 2019 @ 12:36
      100% of my friends are passive millenial investors I should add
    • JL
      J L.
      22 October 2019 @ 12:35
      Indeed they say so. Repeated by most nonfinancial friends: I know the stock market will probably crash in the next 6 months but over a decade or two you always make money. Could it be both statements are wrong...
  • AH
    Ali H.
    22 October 2019 @ 07:43
    Thank you, excellent analysis as usual
  • MS
    Michael S.
    22 October 2019 @ 17:51
    I've held the view QE everything. Drives my stock jockey friends crazy. My question is: could the world be in the process of re-rating all debt in a massive repricing of credit across all regions and debt instruments (as seen in short term funding mkts) ? Boom, we wake up and the 10 year treasury is 10 percent? The standard playbook finally goes up in flames. I'm core in gold.. I have never really owned much, seems like the logical way to carry out the game theory. Guess bitcoin fits as well.. they seem to run tight together.
  • JS
    Jim S.
    22 October 2019 @ 18:29
    Thanks for recommending turning down the noise, my wife and kids will appreciate it. Deleted my twitter account yesterday so I can stay focused. Have you heard Jeff Snider’s thesis on there being bad collateral in the repo markets that drove the rates up? And that there are plenty on excessive reserves to soak up the treasury issues, but that the dealers aren’t lending for some unknown reason.... just wondering if you had any thoughts regarding this ... not that I think it would change positions in any way.
    • BM
      23 October 2019 @ 01:47
      Repo market collateral quality isn't what drove rates up. Excess reserves are concentrated in the largest banks, and the largest G-SIB banks (e.g. JPM, C, GS) are deleveraging into end of Q4 because if they don't they are at risk of higher G-SIB surchages. Lending excess reserves in repo would raise their balance sheet right when they are trying to shrink it. On top of this, banks are already complying with NSFR even though it isn't in force yet, and NSFR has a 5% stable funding requirement for Treasury repo but 0% for excess reserves--so they would be penalized for deploying your excess reserves in the repo market. The bigger deal regarding credit quality concerns is the Fed's proposed standing repo facility--they are considering letting non-banks participate. Fed would then be lending to counterparties of unknown credit quality, so we will have thrown Bagehot's principles out the window.
    • MS
      Michael S.
      22 October 2019 @ 18:39
      Free advice is worth what you pay for it I guess. I've heard one major bank has has a epic derivatives blow up. There is uncertainty about how wide spread. I guess that might be considered a collateral problem. FWIW. Also fast and furious Chinese redemptions from all sorts or funds and asset pools. I'm unclear on this.
  • se
    scott e.
    22 October 2019 @ 20:43
    We cant argue with the data points Raoul but we know the markets can and will react to policy and politics ... in the UK, US , Japan , EZ and China we are likely to see dramatic intervention in line with both. It is a brave man to stand against this backdrop and the will of politicians to stay in power.
    • MS
      Michael S.
      22 October 2019 @ 21:39
      I agree Scott. When pomo was announced I blew out my long duration trades. I've kept gold, but that is like owning life insurance, you buy it and pray it never pays off. So I just don't watch it. If it falls whatever, I'll buy more.
  • TF
    Thomas F.
    23 October 2019 @ 13:54
    Is the Chart on the G10 Economies right? Seems like the wrong one...
    • DD
      Derek D.
      24 October 2019 @ 01:56
      Looks like the US chart just got repeated, yes.
  • DB
    Daniel B.
    24 October 2019 @ 05:30
    Raoul, what is the EPS Adjusted chart based on? Adjusted meaning it’s normalised for buybacks? Or adjusted earnings and we expect EPS to fall in line despite the buybacks?
  • DD
    Derek D.
    25 October 2019 @ 18:14
    Did the Saudi attack ruin our death flush in oil?