If there are two things we’ve learned this year, it’s that you do not in fact have to be “super smart” to make money in a centrally-planned market and you do not in fact have to be “super smart” to be a world leader in possession of nukes.
As Kim Jong-Un would say, even a “dotard” can do it.
Either way, you gotta be super smart to run a country and sell vol. buddy, okay? It’s not easy.
Oh, really? Okay, well, maybe we should tell that to Donald Trump and the Target managers, because they’re waving nukes around and starting hedge funds, and they’re dotards.
He we are, on Friday, and despite a series of truly outlandish threats from Trump and Kim and despite a Fed that looks like it wants to stay the course on hiking again in December and is moving ahead with balance sheet normalization as expected, we came out largely unscathed – at least in terms of risk assets.
Stocks meandered around for the week, falling on the Fed before rebounding into the close on Wednesday and ultimately ending up largely back where they started with the Dow the best and the Nasdaq the worst:
The dollar had its second straight week of gains – that’s the best “streak” (if you want to call it that) since April. You can of course thank the Fed.
Everyone is watching the 5s30s – flattest since 2007 following Janet:
Gold and USDJPY reacted as you might expect to the Fed on Wednesday and while yellow doorstops moved back toward $1,300 on Friday after North Korea said it might detonate an H-bomb in the middle of the ocean (and yes, that’s just as crazy as it sounds), gold’s still sitting near its lowest levels since late August:
Biggest two-week decline for the yuan against the dollar since November:
For whatever this is worth, the data is still coming in positive in Europe, which adds to Draghi’s conundrum (remember: leaning hawkish risks sending the euro back off to the races):
South Korean shares have fallen for four consecutive days as the Kospi dips back below 2,400 defying those who claim nuclear war on the peninsula doesn’t matter:
Best two-week run for the Nikkei since last year (weaker yen):
Terrible week for iron ore (concerns on demand in China, worries about rising supply and falling steel futures). Dalian futs in a bear market, benchmark prices down 12% on the week:
Decent week for crude, but the OPEC and non-OPEC Monitoring Committee meeting produced nothing of substance.
Backwardation is the word of the day. Here’s SocGen:
The Brent strength (backwardation) reflects still-high crude runs in Europe and globally, due to robust refining margins; in addition, strong demand from Asia is pulling West African and other light sweet crudes out of the Atlantic Basin, and sporadic disruptions in Libya have reduced supply somewhat. Going forward, WTI vs. Brent should narrow. The WTI contango should become less extreme, as US refinery runs continue to recover. The Brent backwardation should also ease and perhaps disappear as refinery runs decline seasonally and US crude exports recover.
As you head into the weekend, remember two things:
- Short make-believe space money that has no value…
2. Long central banks that print safe haven currencies and use them to buy equities:
(MacroTourist on the annotations)