APAC Global Macro Morning Brief – Happy Macro Tue 29 Oct 2019: Too Many Ideas, Not Enough Execution...
Summary: Morning APAC Global Macro & Cross-Asset Snapshot
(Note that these are solely the views & opinions of KVP, they do not constitute any trade or investment recommendations, nor advice of any kind.)
To see this wk’s Macro Monday click here
Happy Macro Tue 29 Oct 2019
APAC Global Macro Morning Brief – Too Many Ideas, Not Enough Execution...
KVP has more ideas than an IP office – if only we could get paid solely for the ideas. Can’t we just get the “A”, rather than have to do the whole “A, B, C… Y, Z?” (execution of the idea)…
And as far as he can tell no, the value seems to gravitate towards those that can execute consistently over time and/or those in places where folks can capitalize on their ideas. Skin in the game is needed
Generally speaking a hit rate over 50% is supposed to be great in trading… yet more experienced traders will tell you what’s is the magnitude of that hit rate… i.e. Cohen from
SAC Point 72 is supposed to have a hit rate well south of 50%, yet you can be assured he is one of the best traders to have ever walked this planet, hell maybe even this universe – because when he wins, he wins big & when he loses, he loses smalls. And yes, he can buy a goat or two, his Net Worth is likely well north of 10 yards
You cannot execute on a 100 ideas (not optimally at least… unless it’s the spray & pray model), and yes to get to the best 10 ideas, you need to get to 100 ideas – that’s the paradox of the process
Hmmm… wonder if the VC model transcends into the world of trading for certain strategies, you are cutting or stopping out of c. 80% of your trades, 10% of your trades go breakeven & the remaining 10% is where you shoot out the lights? Worth keeping in mind…
Most folks’ trading capital would not survive being wrong 80% of the time. They would be knocked out of the game, and you have to stay in the game, to win a play or eight
This was advise that KVP got one time from a super seasoned HF manager a while back in HK. Translation?
Persistence & Patience are two of the most important super powers of successful wealth generation over time…
...someone made a life-changing fortune in the last few wks just staying consistent on following the Brexit process
Speaking of North, that’s exactly the direction stocks are heading, as the SPX made new all-time highs - as we flagged on yest on MM & also pointed out on last wk’s MM that a lot of indexes were exhibiting inverse head & shoulder (IHS) patterns which could be very bullish if they played out. Back of the envelope from the IHS suggest 500 point to c. 3,500 over the course of 6-9month.
The S&P closed up +0.56% to 3039, with the Nasdaq +1.01% to 8326
Catch Garnry’s latest Equities are flying on TINA
Still the interesting thing from a cross-asset perspective, again “The North”, with yields ripping higher! We have crossed that 1.80% on UST and are sitting around 1.85%
This shift up higher in yields did have a drag on silver & gold (which had a great last wk, rising despite a stronger USD & higher yields), which saw -1.05% & -0.81% to 17.85 & 1492. Palladium in the meantime was completely unfazed & climbed +2.01% to 1779
Most likely reasoning on higher yields is linked to anticipation of the Fed being one & done, here are how current probabilities sit for the Fed meetings
Oct 30: Overall 92% probability of a cut, of which 92% is for a 25bp cut with 0% probability of 50bp cut or more, and 8% of no change
Dec 11: Overall 94% probability of a cut, of which 70.5% is for a 25bp cut with 23.5% probability of 50bp cut or more, and 6% of no change
Its worth noting a lot of the kryptonite data points this wk in the US from ISM mfg, to NFP, to AHE are all coming on Fri, post the Fed meeting
Worth remembering last month in the course of one wk & one set of ISM readings (both of which missed), we went from c. 40% prob of a cut in Oct to 90% prob of a cut, so things can still change dramatically even after the Fed meeting
On The GoB (Game of Brexit), we got another extension to Jan 31st – don’t get KVP started – & once again Bojo gets rejected for the snap elections for Dec 12. Back to the drawing board for Bojo & team, with now a potential Dec 9 date being considered alongside a different approach
Sterling continues to hold above 1.28 with Cable o/n at 1.2859 +0.28%. Say what you want about the toxicity, madness in all this… sterling crosses continue to tell the market that they feel the end is nearer rather than later
Again, KVP is very very impressed by the resilience in sterling strength… would have expected a retest to consolidation around the 1.2500 lvl on cable
You know what may work? No one in Parliament gets paid… until some sort of brinkmanship can be attained… at the end of the day its tax payers money & you are not doing your job as government officials representing tax payers
This is also something that should have been done in the US’s congress years ago, think people would be pleasantly surprised how common ground is found when unaccountable politicians stop getting paid
The cure to 99.9% of the issues we face globally in the world today stem from a lack of skin in the game - Taleb is absolutely right in this. If you want game changing policies & strategies for your company, organisation, club, team, Non-profit, school, government, country, family, etc.. design the system around skin in the game for everybody. Skin in the game introduces accountability, it introduces incentives, it introduces transparency. Its not a panacea, yet its vastly asymmetrical to no skin in the game
- JP: In at 0.5%a vs. 0.7%e 0.5%p
- AU: RBA’s Lowe due to speak at 14:45 SGT (07:45 CET, 02:45 ET)
- UK: House Prices, Money Supply, Net Lending to Individuals
- US: Consumer Confidence, Pending Home Sales
- To catch this wk’s Macro Monday Click here… & replay of the call here
- Don’t forget to bookmark & check our Daily SaxoStrats calls from the European morning session c. 09:00 CET
Quarterly Outlook Q2 2022
Quarterly Outlook Q2 2022: The End Game has arrived
- Shocks from covid and the war in Ukraine have forced the global financial and political world to change, but what will the end game be?
Energy crisis could turn energy stocks into secular winnerWith long-term expected returns for the global energy sector close to 10%, we look at 40 stocks that could be set to cash in.
The great EUR recovery and the difficulty of trading itIf the terrible fog of war hopefully lifts soon, the conditions are promising for the euro to reprice significantly higher.
Tight commodity markets – turbocharged by war and sanctionsWith supply already tight, commodities keep powering on. But will it last for yet another quarter?
Between a rock and a hard placeGeopolitical concerns will add upward price pressures and fears of slower growth, while volatility will remain elevated.
The Great ErosionInflation is everywhere and central banks try to combat it. But will they get it under control in time?
Australian investing: Six considerations amid triple Rs: rising rates, record inflation and likely recessionWhile global financial markets are struggling in an uncertain world, the commodity-heavy Australian ASX index is poised to keep a positive momentum.
Cybersecurity – the rush to catch up with realityWith the invasion of Ukraine, governments and private companies are rushing to reinforce their cyber defenses.