Former trader Richard Breslow is back off a fantastic effort on Thursday and in his final missive of the week, he outlines his take on Jackson Hole.
Essentially, Breslow is taking a modified Thumper approach in his message to the two “uber central bankers” speaking in Wyoming on Friday:
If you can’t say something definitive, don’t say nothin’ at all.
So in the absence of anything concrete, Richard thinks that all we’re doing by relentlessly parsing Draghi and Yellen’s words is generating fees for our brokers while simultaneously failing to realize that the only thing policymakers are trying to do is kick the can.
Note that Breslow also suggests the Fed and the ECB care a whole lot more about Trump than they let on. And indeed, you don’t have to be a rates strategist to know that. All you have to do is substitute “Trump” for “fiscal policy” in the latest Fed minutes.
Anyway, here are Breslow’s thoughts, just out…
Via Bloomberg
Jackson Hole is here and the consensus is to expect few if any fireworks. Somewhat interestingly, to the extent traders haven’t given up totally on the event there’s been a few notable flyers laid on in Eurodollar futures betting on something on the hawkish side from Chair Yellen. And, while the euro has been moving sideways all week, it is going into today’s speeches above 1.18 versus the dollar, suggesting expectations that any surprise will also err toward less accommodation. That’s probably an appropriate way for the markets to look at things.
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- I, however, couldn’t care less what these two uber central bankers think. Outlining their impressions or hopes is just code for playing it by the ear. Frankly, if they won’t or, more likely, can’t tell us what they are planning to do, they should take a pass and stick to their economics and orthodoxies
- It’s tedious to get into a massive discussion of whether they were more this way or that. What the supposed subtle subtext implied by the choice of one word over another. Without an express game plan it’s all just can kicking where the only tangible outcome is racking up fees for future commission merchants
- In fact, we can handle the truth. And anything less isn’t only uninformative but heralds the reality that we all know the models are broken, politics remains a major subject in the council conference rooms and they’d rather be remiss than forthright
- Meanwhile, even if the lottery tickets are praying for a hawkish tilt, the underlying price action looks decidedly like it’s taking the other side. Bond yields remain in the sewer. Global equities look just fine. I know we like to pretend that the S&P 500 still defines the state of the entire world order, but take a gander at what the Shanghai Composite has been up to. Emerging market currencies aren’t flying, they’re rocketing. Even the winners from carry trades are wondering if they need to slow it down
- The fixation with financial conditions has invaded the real world to the extent that we view everything as “just a trade.” But surely we must move away from this. It leaves us, them, I’m opting out, with a short-term view on issues where we need to be thinking generationaly long-term. We had the crisis and were forced to live in the moment in order to deal with it. Now it’s time to move on, figure out where we need to be, clearly state our intentions about how we get there and mean it
