Macro Dragon WK 10: New Month + New Horizons = Pure Bliss Macro Dragon WK 10: New Month + New Horizons = Pure Bliss Macro Dragon WK 10: New Month + New Horizons = Pure Bliss

Macro Dragon WK 10: New Month + New Horizons = Pure Bliss

Macro 8 minutes to read
Kay Van-Petersen

Global Macro Strategist

Summary:  Macro Dragon = Cross-Asset Daily Views that could cover anything from tactical positioning, to long-term thematic investments, key events & inflection points in the markets, all with the objective of consistent wealth creation overtime.


(These are solely the views & opinions of KVP, & do not constitute any trade or investment recommendations. By the time you synthesize this, things may have changed.)

Macro Dragon: New Month + New Horizons = Pure Bliss 

 

Top of Mind…

  • TGIM & welcome to WK #10

  • Amazing discovery over the wkd in the Dragon household, would encourage everyone to go through the following exercise.

  • Step 1. Sit somewhere comfy & where you will not be disturbed, be it with a nice cup of early grey tea or hot cocoa, or maybe even a chilled rozeeeeee or clean whisky

  • Step 2. Slip on some noise cancelling headphones, get the track ready & close your eyes.

  • Step 3. Press play & just let go….

  • Your welcome :)…

  • This. This. Is. Global Macro Investing. This. Is. Life… with valleys, peaks, wins, losses, victories, defeats, joy, sadness, playfulness, despair… & the same constants… process, the love for one’s craft & the continued work in progress that we all are.

  • Here is to a beautiful & limitless upside Mar, lets have an epic close for 1Q21

  • Market focus this wk in addition to the classic new month staples - of final PMIs, US NFP / ISMS, month start flows - , will be on the latest US $1.9 trn Fiscal Package (c. +9% of US pre-covid GDP) finally being passed in the House. It is now about the Senate (which has always been the case) & whilst the Dems control the senate with Kamala Harris as a potential tie breaker, its worth noting two democrats in the House opposed the bill (Golden from Maine, Schrader from Oregon) & there were exactly zero republicans that voted for it.

  • Worth noting part of the package (Which has to clear the Senate, then potentially go back to the House – as to clear the Senate with a simple majority, looks like there need to be a tweak in the bill) is the +$1,400 stimulus direct checks to Americans. Will be interesting to see how much of that ends up in the WSB/Robihood crowd.

  • From the Dragon’s standpoint the key thing to watch is the inception of the move towards YCC. Remain highly convicted of the view it’s a question of WHEN not IF… & bear in mind the convexity of bond prices changes as yields go higher, its not like equities – momentum as a strategy is not symmetrical across life, nor is it symmetrical across assets.

  • So watch for a coordinated narrative from the likes of Clarida & Powell when they are getting ready to do implement YCC. As Piznair Capital’s CIO Gez said, “its not going to be digital, they will flag it first”.

  • So question is that US 10s at 2.0% from these 1.41% or 30s at 2.50%/2.75% from these 2.18%? Actually the accelerated move up is the best scenario from get a quicker & clearer response from the Fed. A more gradual grind up, would introduce a lot more noise over signals.

  • Lastly, regular readers of the Dragon will know of our ultra-high conviction on energy both for oil & equity since one wk before the US elections in 2020. And damn, have we been phenomenally on point there, with some grateful luck on the thesis, given the freeze across the US.

  • There is the direction of an investment thesis playing out & there is the magnitude of that move – still remain a high conviction bull on energy, as that a lot of these energy names will still likely pop +50% to +100% over next 12-18m (XLE $48.15, XOM $54.37, BP 291.75, WPS A$24.77) & are well below their Jan 2020 pre-covid lvl. Remember some of these names closed last year down -40% & they are in one of the sectors were valuation are cheap, plus they are also very much in the value bucket & a leverage play on the world re-opening out, vaccines being rolled out, etc.

  • Yet tactically worth noting how quickly we have moved in a very short amount of time. We are kicking off this Asia morning with WTI firmly above $60 at $62.65 +1.8% & Brent $65.60 +1.8% & when Texas eventually defrosts, winter in the Northern Hemisphere disperses, we are likely going to see a pretty brutal reversal on oil.

Rest of the Week & Other Reflections

  • Yes China PMIs came in worse than expected this morning, all noise as 1Q data always has the Lunar New year effects… generally an acceleration of activity into it & as a consequence of that, a deceleration post that.

  • Powell set to speak again this wk – did an interesting job of playing relaxed on the need to move rates up last wk… good Jay, good Jay – on Thu, so again… hints of YCC? Likely will depend where 10s & 30s are… if we are at 2.0% & 2.75%... he will talk YCC.

  • Australia GDP on Wed could be a big mover for currency traders on Aussie crosses.

  • UK should set its budget release this Wed.

  • CBs: Australia 0.10% e/p (remember RBA recently bought an unscheduled few yards of points to keep their YCC in place) & Malaysia 1.75% e/p.

  • ECB”s Lagarde set to speak on Tue, with RBNZ’s Orr on Thu

  • Hols: JP out on Tues.  


New Dragon Interview– Global Macro & Nature Conservationist Geo Chen

Our third Dragon Interview takes us to an outlier’s outlier, with Global Macro Trader & Nature Conservationist Geo Chen.

We had the pleasure of sitting down & speaking with Geo who is:

Board Member @ The Rain Forest Trust

Co-Founder of the Huang Chen Foundation  [Nature Conservation Focus]

@geochen

Whilst the interview was filmed at the tail-end of Nov 2020, there is something here for everyone to take something away, including bigger picture thoughts on 2021, broader implications of the macro regime that we are in, as well as overall framework, allocation & investment process.

Geo has been running his own capital across both liquid & illiquid strategies since 2017, chalking up world class returns in the process, which more importantly fuels Geo & his family’s passion & calling, for Nature Conservation.

What is impressive outside of the large returns over the period, is that Geo somehow does it all – from trading to investing, to internal capital allocations as well as external allocations across the entire asset class & strategies spectrum. I.e. its tough enough to consistently do well in one area, lets alone across the board.

We cover his come up story, his framework + process & approach, his passion & the importance of the Nature Conservation. Lastly we close with Top of Mind Thoughts & views for 2021 & the general global macro regime that we are in.

We hope you enjoy the interview, as much as we did putting it together. And if there is something that you take away from this, be it inspiration, enhanced framework, investment thesis that resonates, left you thinking, etc…  

Do consider making a donation to the Rain Forest Trust – which buys up rainforest land around the world & maintains them within an ecosystem of local residents.

From a markets perspective these are some of the areas we touched on:

  • How Geo fared in 2020, given the massive bullishness in Jan, crazy sell-off in Feb & Mar, then once again bullish recovery in Apr & May

  • Inflationary regime & the huge fiscal forces that we are seeing

  • Precious Metals & US duration

  • Bitcoin & Crypto

  • Energy

We hope you enjoyed this Dragon Interview, as much as we enjoyed putting it together

Previous Dragon Interviews

-

Start-to-End = Gratitude + Integrity + Vision + Tenacity | Process > Outcome | Sizing > Position.

This is the way 

KVP

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article
Disclaimer

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000
Australia

Contact Saxo

Select region

Australia
Australia

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.