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Global Macro Sales Observations Fortnightly: “Central Banks made sure Financial Crisis talks die down for now. Main Street versus Wall Street woes remain. WTI & Brent Oil Crash, but Equities Resilient. YCC officially next? EM Attacked”

Written on April 22, 2020 by admin

Posted by mobile phone:
WHAT DO I THINK HERE? Oil gave her best punch but Resilient Equities thanks to enabling Central Banks.

This is not surprising & should continue. It is not exactly a “free” market anymore. Certainly “favors” certain players & crashes like 2191 will be avoided thanks to Central Banks.

Factors like oil doing historical things don’t change this fact thanks to March 23 & April 9 interventions

“Ohhh.. it was just May.. Just May”

WTI June & July flirt with single digit figures settling now.

May go negative while NYC has breakfast at home 😉

Bigly saying live “it’s just a technical thing” 2 nights ago fastened everything.

Brent at 21 year lows.

Steepeners has been the new fashion for those who wanted to pay & pay rates few years ago. That will remain a widowmaker in medium term.

But we don’t rally much either because everything is de facfo YCC in that market.

Sooner or later, that may go official, too.

Next week, this market will find fresh support from Fed & ECB “sugar” time

Es up 30….

you gotta love this stat from Client/friend: The 5 biggest stocks in the SPX 500 have the same weighting as the bottom 350 – up from 282 in July 2018. Congrats to MSFT, AAPL, AMZN, GOOG, and FB. See below SPX versus SPX equal weighted. The multiple on these 5 stocks can be literally anything, ANYTHING, in this current environment of COVID, massive liquidity injection, and CB interventions”

He has a point! Now, Kurzarbeit program, I really care about. Because it’s truly helping main street: “{GE} German Kurzarbeit: The Bundesanstalt für Arbeit (BA) has prepared scenarios for its governing board. In a “worse case” scenario it assumes the number of people in Kurzarbeit peaking at 8m and averaging at 2.6m in the year. This would not only eliminate the BA’s reserves of close to EUR26bn but also require a close to EUR10bn loan from the federal government. Based on a survey among its members the trade union’s research institute WSI estimates that some 4m employees were working short shifts in the first half of April. Metal sector employers are expecting another 1m within their own sector. So the BA’s scenarios might experience the same drift as we have seen with so many scenarios during covid-19: Pretty quickly the “worse case” morphs into the new baseline.” (Stefan Schneider)

The big European leaders meeting is tomorrow. I believe ESM has a bigger chance if all countries are under the same umbrella. Similarly a 400-500 bio recovery fund may also be in the works

I sense a coalition of “wanting to be negative about EU” between fast money & Italian friends. So whatever the leaders do, they may try to trade from negative side. Lagarde will come in & buy though

More also sound like me that “France should trade closer to Italy, Spain.. than Germany”

Both my trader Aditya & researcher Drausio quite bearish about EM.. I am as well, but not that much. Stories differ & EM local bonds can trade better than EMFX for example

Mexico gives surprise cut, South Africa gives a big stimulus package.. Not too sure these save them from recession doom

Turkey will come up with the latest cut at noon.. 75-100 bps wouldn’t surprise me. With the lack of global swap development yet, we may also go beyond 7.0 soon.

In UK; there are not much good developments on tests, masks, PPE. So Hancock builds up vaccine hopes.

Main problem of “market” for past 12 years or so.. but also fundamentally

People (or now much more robots) are better at math, physics, modelling etc

But they have no edge & flat out most are very bad at politics, geopolitics, macro econ & main street “common sense”

That’s why so many suffer in Godot, no normalization age

Oil worries gave a hit to US equities.. Resilient w/ Central bank

Same for Italy and Estoxx. Resilient with ECB.

Even Krugmans on TV criticise PPP program for “not really helping the small guy,” but gives Enabler an “A.”

Well; if that’s your analysis, Main Street will go south & so called Wall Street north.

Because the system is to socialize the losses & privatize the gains.

I call it as it is

2 steps up, 1 step down for Risk.
3-4 steps down for Main Street.

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