Listen, Bloomberg has a message for you this weekend and here it is:
If the selloff feels like news, don’t blame Binky Chadha.
That’s right: don’t blame Binky.
Because in addition to having just about the most blame-repellent name imaginable (I’m not sure anyone, in any context, has ever tried to blame someone called “Binky” for anything), Chadha was out with a note on January 31 that was about as foreboding as you can reasonably expect from Deutsche’s typically bullish chief strategist.
We highlighted some charts from that note on Friday as the Dow was in the midst of a death spiral, but one chart we didn’t show you was this one:
That chart is self-explanatory (and in case it’s not there’s a super-long header on it), but on the off chance you need more color, here’s what Binky said late last month:
Oil prices are up +57% over the last 7 months. US equities rose remarkably steadily by +34% over 15 months. The dollar is down -12% over the last 13 months. And bond yields (10y) are up +68bps over the last 5 months. The moves have been particularly tightly correlated over the last 3 months, with the average correlation between them rising steeply to 90%.
DB’s measure reflected in the chart above has only hit 90% twice prior, going back nearly 15 years. Chadha continued: “these moves have seen positioning build to extremes across asset classes, with many 1-3 standard deviations (sd) above average levels seen over the course of this cycle.” Here’s the chart on that:
In the piece linked here at the outset, Bloomberg goes on to write that “anyone heeding Chadha’s call would have at least had a clue.” That’s probably a bit strong. Binky said this:
Whatever the fundamental case for each of these trades, extended positioning argues at a minimum for a breather and more likely a pullback soon. Moreover, the tight correlation in the moves across the major asset classes (oil up, dollar down, equities and bond yields up) suggests a pullback in one for idiosyncratic reasons would likely spill over to the others.
So you know, props to Binky, but with all due respect, it’s not exactly like he pulled a Michael Hartnett by flat out telling clients that a “perfect” indicator had just flashed a “sell” signal one trading day before shit started to go to pieces…
From BofAML on January 26…
