Trader: “The Word Of The Month Is Going To Be ‘Frazzled'”

Former FX trader-turned Bloomberg contributor Richard Breslow is back from the holiday and boy, oh boy he’s in rare form on Tuesday.

In what I personally think is one of his better missives, Breslow deftly navigates a market fraught with absurdity and confusion in the short space of six bullet points.

There’s humor (see the bit about Pence at the DMZ), a dead-on critique of the “good cop/ bad cop” Mnuchin-Trump dollar rhetoric, a great question about “trouble with the curve” (so to speak), and a nod to what Marko Kolanovic noted last week which I’ll simply illustrate with the following two charts:

Read below as Breslow explains why “the word of the month is going to be ‘frazzled.'”

Via Bloomberg

With the holidays behind us, people would like to believe it’s back to business with all those bad things supposedly behind us. The word for the day is “sanguine.” The problem is, market pricing notwithstanding, nerves remain frayed. And markets may find that short-term volatility, in both directions, remains higher than is comfortable for most people. Because if there’s one thing we’ve actually learned over the course of the last couple of weeks is that we are in a state of serial disequilibrium. And that is likely to mean that the word of the month is going to be “frazzled.”

• Trade watching has made one thing abundantly clear. Despite all of the assurances to the contrary, traders just don’t take any solace that there really is abundant liquidity out there when it’s needed
• When emotion takes over completely, you get bizarre juxtapositions of news with editorial comment. Like pictures of the U.S. Vice President strolling along the DMZ with his children in tow, side-by-side with another above the fold column about being in the middle of this generation’s Cuban Missile Crisis. And analysts were unwilling to ask if some further explanation was warranted
• Is it any wonder that things seem so calm today. Despite there being no change in bellicose rhetoric? That’s yesterday’s news and the mood has passed. The Kospi is up yet again, won stable and little appetite for anyone to react to Mr. Pence turning right around in Seoul and saying, in effect, we saved you, now about that trade agreement. And it’s off to Tokyo today
• Today’s a dollar up day. Makes sense. I’d have probably bought some too. But ask yourself, can you describe U.S. dollar policy? The latest iteration is, cooler heads will prevail and Mnuchin gets it. Will you be able to laugh off the next tweet storm like you didn’t last week?
• Global growth is good. Certainly better. So how come bond yields can’t get out of their own way? It really is a question policy-makers need to answer. The Fed seems reassured that 10-year rates aren’t higher, despite hikes and balance sheet reduction talks. Actually, I think they shouldn’t take it as a welcome “twist”. Much analytical damage has been caused by the perpetrators of financial condition indices
• Prices will go up and down, but somehow I just don’t see those sine waves as likely to look like gentle ripples