Former trader and current man who is going to give the stamp machine at the post office one more goddamn chance to read the chip on his debit card before he storms out without mailing his letters, Richard Brelsow, is out with his first irritable missive of the week and on Monday, he thinks you need to show a little spirit.
Sure, you’re still hungover from Sunday, but “how about” you slam a Red Bull, snort a line and get “a little frenetic back and forth” action going on, ok?
As you’ll read below, someone told Richard that “it’s been a slow day so far” when he got to the desk and “the first thing” he thought was “I just don’t want to hear about it.” And the reason he doesn’t want to “hear about it” is simple: every central bank that matters seems like they want to taper or tighten or otherwise take their foot off the accommodation accelerator and you’re either too belligerent to trade on it or else you don’t know how, and as usual, Richard isn’t sure which one of those alternative explanations for your complacency is worse.
But what he does know is that you should “take all of these blithe assurances that everything during the [normalization] process will be calm, cool and collected with a grain of salt,” because “rates are going up [and] tapering is beginning.” So you can either sit there like the useless knot on a log that you are or you can “show a little spirit and giddy up.”
Oh, and finally, Richard has solved the missing inflation mystery. Why is inflation so low? Simple: “we measure it incorrectly.” Because he can “assure you” that the basket of goods you consume (which for Richard we imagine includes copious amounts of red meat, 5-hour Energy shots, and maybe the souls of lackadaisical traders) is more expensive now than it used to be.
The first thing I thought when I was told it’s been a slow day so far was, I just don’t want to hear about it. Markets are inching toward some really interesting levels and it’s time for them to show a little spirit and giddy up. There’s a lot of uncertainty out there and the response to it shouldn’t be an inability to trade. How about a little frenetic back and forth? We could use some of the good kind of noise, as in, let’s show a little life.
- For once, try taking central bankers at their word that tapering and, eventually, rates, are on the move. And take all of these blithe assurances that everything during the process will be calm, cool and collected with a grain of salt. We need to stop saying global economic growth and trade are showing meaningful strength and then agree that everything is still horrible and we can’t afford to change
- Do you know why there’s no inflation? We measure it incorrectly. I can assure you it’s more expensive to live than it used to be. Which is the simplest and truest definition. Why isn’t wage growth higher? Because we’ve utterly skewed the relative bargaining power between capital and labor. Monetary policy will never be able to fix that. Nor the masses forever soothed by rolling out another reality show
- No matter who is selected as the next Fed Chair, rates are likely going up in December and will be in play for March. Tapering is beginning. The BOE is looking to pull back some stimulus and the ECB wants to as well. Even the BOJ has begun to include warnings about investor complacency in their comments. Yesterday’s Japanese election may seem like a strong endorsement of the status quo, but it has also changed the underlying discussion on a number of topics in a meaningful way. The Bank of Canada may be on pause, but they are among a number of banks waiting to pull the switch
- At whatever point along the Treasury yield curve you look, the charts suggest we have crept up to important pivot points. And it’s going to be even more apparent if the recent mini bounce in its steepness can generate some momentum. What a difference it will feel like if the 10-year can break above 2.40%. Not a big ask given we sit so close below. Yet, if it was so easy, we wouldn’t be having this discussion. Twos and fives are right where they will have to decide whether to fish or cut bait. Where they go from here matters. And if I wanted to be a starry-eyed optimist, I’d point out that while it remains low, option volatility has traced out a nice floor since July and has been trying to push higher in the last week
- The dollar, too, is showing some signs of life, even though the majors continue to see volatility selling. The dollar index traded at 94 this morning and if it can eke out another half-percent, there’s going to be a different narrative circulated. Which countries’ set of woes will take center stage? Or to put it another way, how much of whose bad news is already priced into prevailing levels?
- I hope this all leads to something interesting. Because who wants to sit around watching the paint dry some more. In any case, at these prices, you definitely have something well worth watching. Volatility pricing can be backward looking as well as prescriptive