DOOM UNVANQUISHED?

Published on: October 12th, 2019

Over-discounting a “race-to-the-bottom” in global interest rates, positions became extended in the summer. Corrections were truncated by geopolitics. Stasis and indecision followed. While loss of confidence in policymakers is weighing on global growth, is Doom back for good? What to watch.

Comments

  • FO
    Frederic O.
    24 October 2019 @ 17:20
    Still expect silver to drop down to 17.1? Patience is what I’m struggling with here
    • FO
      Frederic O.
      25 October 2019 @ 10:20
      Bought at 17.85, this looks like a breakout
  • JQ
    JACK Q.
    23 October 2019 @ 13:59
    Hi Julian, if your reading this - which part of ED curve do you currently like for steepening? Appreciate your input thanks!
    • JQ
      JACK Q.
      23 October 2019 @ 14:14
      found it through your tweets :) for others that are interested its march 22s vs sep 23s
  • KH
    Kavi H.
    20 October 2019 @ 09:02
    Many negative comments on this video highlight his main point - that sentiment has turned too bearish for now.
  • CS
    Cameron S.
    18 October 2019 @ 19:58
    Hi Julian, I'm new to MI but have been binge-watching the insider talks for the past week. Great stuff! I'd be curious to hear your thoughts on buying calls for silver. The premium is ridiculously cheap and with your price target, seems like a skewed risk/reward. Any insight would be great, thanks!
    • JB
      Julian B. | Contributor
      18 October 2019 @ 20:55
      Hi Cameron Look I like silver as you know. But frankly I'm not sure that we have the conditions yet for a turn, (bond yields are rising and the $ has yet to definitely turn lower). That suggests you might just bleed time decay. If you want why not just by the delta for the option? That way you'll have skin the game. Alternatively wait for the levels I set in the piece to buy.
    • CS
      Cameron S.
      19 October 2019 @ 12:55
      That makes sense. I was thinking of if the Fed "wakes up with religion", this might be an alternative to the ED trade, since I'm not very familiar with EDs. Do you need both yields lower and the $ falling to constitute the turn? If the Fed starts cutting aggressively, but the dollar doesn't fall (as Raoul likes to point out, it may not just be a matter of interest rates), do you think that would that still constitute a turn? I agree that the ED trade is the higher quality one since it removes the $ factor though. Thanks again!
  • GP
    Geoff P.
    15 October 2019 @ 21:03
    Hi Julian, I enjoyed the twitter question and answer session for MI2. I was hoping when you get a chance you can walk thru the ED steepener trade (in particular the choice of long and short legs Mar 22 / Sept 23). I'm familiar with the concept of a steepener but am somewhat curious why those particular years and only 18 months apart. Many thanks.
    • JB
      Julian B. | Contributor
      18 October 2019 @ 20:31
      Geoff glad you enjoyed the Q&A. As for the ED steepener the rational is as follows. As you can see from the current piece, I'm increasingly worried that there are more and more storm clouds gathering. Further more, while I believe the Fed has the ammo (between rates and the $) to extend the cycle, I'm worried they won't act in time. Hence, my concerns re October. This creates a LOT of path dependency in any trading at present, which is causing my institutional clients a lot of angst. Therefore, they are looking for trades that pay off in a number of scenarios. The nice thing about this ED spread at present is that 1) Relative to history it is extremely low i.e. cheap 2) Judging from how it behaved in 1995, if we wake up tomorrow and the Fed has realised the risks and cut aggressively, which is what they did then, it should steepen nicely. 3) If on the other hand they prevaricate and the jobs market really rolls, then it should really kick in hard, because this spread almost perfectly tracks unemployment. So bottom line a cheap trade with duel payoff scenarios.
    • GP
      Geoff P.
      19 October 2019 @ 11:57
      Appreciate the explanation Julian. Thank you.
  • MW
    Marco W.
    13 October 2019 @ 07:53
    Marvellous. Julian's trendline highlights are very bold given the current sentiment.
    • JB
      Julian B. | Contributor
      18 October 2019 @ 20:49
      Appreciated it Marco
  • P
    Phil .
    13 October 2019 @ 17:49
    This is brilliant- Considered, Understandable & Actionable trade ideas with suggested targets and stop losses. For a relatively newbie like myself who has a smaller capital sum to play with, this is MI at its best in my humble opinion. Thanks Julian.
    • JB
      Julian B. | Contributor
      18 October 2019 @ 20:48
      Thanks Phil
  • BD
    Bryan D.
    14 October 2019 @ 06:05
    Great clear, concise summary of where we are at. Thanks Julian.
    • JB
      Julian B. | Contributor
      18 October 2019 @ 20:48
      A pleasure!
  • JL
    J L.
    14 October 2019 @ 16:12
    any thoughts on the recent bund move? in particular where would you be taking profits or partial profits if you caught the low in yields. thanks
    • JB
      Julian B. | Contributor
      18 October 2019 @ 20:48
      Hi JL. Its always a little tough to manage others P/L. However, here's what I'd say. Between Brexit, an ECB that has shot its last bullet, historic duration highs in European fixed income I'd be careful. Short term we might get a little bit of a pause in the sell-off. But our initial target on Bunds is -23bps and then essentially zero.
  • GP
    Greg P.
    15 October 2019 @ 02:12
    Hi Julian - a great report as always, but this one I think stands out! Thank you. I really appreciate your updates across bonds, currencies and commodities. And your format of presenting a fundamental review, followed by charts, presents a really clear and concise perspective on where the current macro outlook is and where it might be heading. If possible, I would really appreciate your continuing format with future reports, and if you can continue to provide updates between each report to demonstrate either a change or continuation of your macro-trade themes / ideas.
    • JB
      Julian B. | Contributor
      18 October 2019 @ 20:42
      Thanks Greg and I will try my best!
  • CH
    Clifford H.
    15 October 2019 @ 15:50
    Thanks for the commentary. It would be great to get an email alert when something gets posted! In thinking about the whole recession/reflation debate it seems to me that the bet is really as simple as whether or not the Fed and global CB's can do enough to stimulate the global economy before companies start laying off workers. Everything else from a data perspective seems to be in place for a global recession call. What else am I missing???
    • JB
      Julian B. | Contributor
      18 October 2019 @ 20:41
      Hi Clifford I think that sums it up well. But don't count the central banks out yet. They typically show up just in time. That means that while big picture they might be out of ammo this time, they will try and deliver a bit of shocks and awe first!
  • GP
    Geoff P.
    15 October 2019 @ 15:53
    Nice piece Julian. Thanks. Any thoughts on whether or not the Fed can go slow enough on rate cuts while ramping bond purchases ("not QE" lol) such that they can prevent the eFFR from dropping below 50-100BPs? It seems they are favoring QE over rate cuts this cycle.
    • JB
      Julian B. | Contributor
      18 October 2019 @ 20:36
      Hi Geoff, re cuts vs QE...yes and no. As we have seen Powell seems to have ruled out negative rates, which in my opinion is a huge positive. That said, internally QE has been incredibly controversial because of the wealth disparity effects. Hence, I believe that if necessary they cut until Funds hit 25-50bps, then we see forward guidance and only after that more QE. I think they hope that they can hold off on QE until post the election. That way the next round of QE is part of any MMT programme.
  • TB
    Tim B.
    16 October 2019 @ 02:28
    Hi Julian and Raoul, Re: alerts, at some point I'm thinking of building my own alert based on the MI homepage to notify me of new content. But before I do that, do you guys have plans to add an alert service in, say, the next 4 to 6 months? If so, I can just wait for that. Thanks
    • TB
      Tim B.
      16 October 2019 @ 02:31
      And Julian, I agree with the other positive comments. This piece was really fantastic.
    • JB
      Julian B. | Contributor
      18 October 2019 @ 20:14
      Many thanks Tim and for that matter everyone else!
  • JW
    Joel W.
    15 October 2019 @ 17:50
    I agree with JL and Clifford that receiving email alerts specifically for MI new content would add a lot of value for a humble sub like me.
  • JL
    J L.
    15 October 2019 @ 11:04
    By the way I know it has been said before but we need optional email alerts for all MI uploads whether flash updates or whatever you want to call them, it's a joke this is not available at this point considering the amount of money that has been spend on music, video editing and all the rest of it
  • AM
    Artur M.
    14 October 2019 @ 11:22
    Thanks Julian, keep us updated
  • SS
    Shanthi S.
    13 October 2019 @ 05:23
    Thank you!