Sell EUR/NOK when (if) oil stops falling…

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Quotable

“Suiting the correct tactics and strategies to each situation may be considered the mystery of life.”

--Victor Niederhoffer, The Education of a Speculator

Commentary & Analysis

Sell EUR/NOK when (if) oil stops falling…

Bottom line: The current yield spread favors Norway; expected yield spread favors Norway; and growth expectations favor Norway. It strongly suggest once oil prices stop going down (we don’t know when that will be; but we do know they will stop going down at some point) one of the best intermediate-term trade setups should be short EUR/NOK... READ MORE...

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Gold, interest rates and dollar correlations in front of the Fed

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Quotable

“Anything that endures over time sacrifices its ability to make an impression.”

--Robert Musil

Commentary & Analysis

Gold, interest rates and dollar correlations in front of the Fed

061317 fed-says-2.jpg

Lots of ink is being spilled by analysts and pundits world over in an effort to provide some clarity on what the Federal Open Market Committee will do and say tomorrow.  Given that a quarter-point hike in the Fed Funds rate seems well-baked into the cake, emphasis on what Janet & Company say tomorrow will be most important. 

A look at a couple of tight correlations...READ MORE

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Gold and Interest Rates - Joined at the hip! Dollar implications?

US interest rates edging higher yesterday and this morning so far.  Still seems the intermediate-term key for the US dollar

..and we continue to see that correlation between rates and gold…the chart below compares gold futures and 10-year yields (inverted to see the correlation)…higher yields equates to lower gold prices; and higher yields likely equates to higher US dollar prices…at least according to the ongoing correlations

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Angela! Seriously? You want to go your own way?

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Quotable

“Our world cannot be understood by looking at people behaving within the system because of emergent phenomena.  Our markets display decisions that are not in the ergodic world of a gambler at the roulette table because our environment shifts with every interaction and experience---and particularly during crises, which is where it is most critical we find a way to predict or at least understand.  When we come to comprehend these limits, we approach a world filled with the giant unknown unknows: radical uncertainty.”

--Richard Bookstaber, The End of Theory

Commentary & Analysis

Angela!  Seriously? You want to go your own way

Not satisfied with her maniacal immigration policy, which threatens the very existence of hard fought western cultural norms across Europe, German Chancellor Angela is now complaining about the US not being a viable partner for Germany or Europe. It’s doubtful she vetted these comments with her German industrialist buddies.  Why do I say that?  It’s because Germany has piggybacked on the US capital and trade regime (and NATO defense shield) to unprecedented proportion for the last fifty years....Read More

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Do you like betting against one-way bets?

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Quotable

“The pendulum of the mind alternates between sense and nonsense, not between right and wrong.”

--Carl Jung

Commentary & Analysis

Do you like betting against one-way bets? 

According to Bloomberg, positioning by specs in the long bond is the highest it has been in 10-years:

There are lots of good rationales for being long bonds; but there are some good reasons for being short too...Read More

 

Comment

2's vs. 10's: The Trump Unwind?

When the spread between the 2-year and 10-year note contracts, it is generally indicative of slowing economic conditions.  We have already witnessed a dramatic reversal in this spread, as you can see in the chart below. Lots of potential implications: 1) earnings growth predicated on a strong economy may be overestimated; 2) bank profits tend to be pressured as the profit spread from "borrow" short and lend "long" pinches profit.  Granted, now that we have morphed into monetary Never-Never Land, the implications aren't that simple for banks.  But, it is something to keep an eye on. 

Comment

Pound is losing yield support--news suggest further deterioration

Note the recent rally in GBP/USD (green line) was taking place as yield support (red line bottom) was declining.  This was a divergence in what has been a positive correlation.  Based on the news bites from Reuters below the chart, it would seem relative yield (UK versus US 2-yr benchmark) is poised to decline further.

LONDON, May 11 (Reuters) - British industrial output shrank for a third month in a row in March, official data showed on Thursday, underscoring how the impact of last year's Brexit vote has begun to weigh on the economy.

LONDON, May 11 (Reuters) - Sterling fell to a one-week low against the dollar on Thursday after the Bank of England's inflation report showed interest rates were unlikely to rise within the next two years.  Although the BoE said it might need to raise rates before the late 2019 date market pricing indicated, that was nine months later than its February forecasts showed.

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