Till all the seas go dry
February 14, 2018

Mint - Blain's Morning Porridge

For Nicky: "Till all the seas go dry, my dear, and the rocks melt with the sun! I will love you still my dear, while the sands of life shall run..."

The Morning Porridge is unrestricted market commentary freely available to all investors on an unsolicited basis. It is not investment research. 

Today's US inflation data might get interesting – where will it push the dollar and sentiment in the equity market? With the US budget deficit set to soar, and higher inflation – surely that's a bond negative? Headline on CNBC says US household debt is now at record levels as student, mortgage, auto and credit cards soar. Nothing to worry about then. And higher rates should spook equities again? You would think so…UK inflation confirms the Bank of England's hawkish stance last week.

It's been a boring week thus far. Half-term holidays here in Blighty mean I got over 500 "Sorry I am on Holiday" email auto-responses to yesterday's Porridge. It feels like only a few my clients are at work – and one of them has bailed out today with toothache! Most of the market is on the ski slopes…but that doesn't explain the tiny volumes in stock markets.

A week after the Vix-VaR (volatility index-value at risk) crash, some commentators are talking about stability and better prospects for further upside. They point to the large amounts of buy-the-dip money hitting the market in the late session. That is positive, but it's small volume. We aren't seeing a  proper "I'm utterly convinced" bull rush back into the market. It's more speculative, it's more "I can't think what else to do with the money" action at the moment. 

Meanwhile, my stockpicking chart gurus are muttering something about: "the Elliot Wave corrective B wave tracing the A wave all the way down." I think that means they think we go down before we go up. Right?  

There are certainly opportunities in this market – but direction plays feel a bit early. The market is still roiling after last week's VAR storm, and it's as likely to move one direction as the other. There are clues from the charts – a range-driven phase with a breakout in early March looks likely. It's amazing to watch market timers piling back into short-Vix products so early…but folk are still buying bitcoin, demonstrating something about the ultimate futility of it all. The ability of markets to delude themselves never ceases to amuse…

Meanwhile, the big theme is dollar weakness. The yen has been the "beneficiary" of the sloppy dollar – much to the concern of Japan businesses. As the US fiscal deficit descends towards 4.5 percent and the current account deficit hovers around 2.5 percent, Japan's twin deficit equals zero with a current account surplus at 4 percent. A chart from my macroeconomist, Martin Malone, shows the dollar/yen cross pretty much tracks the US-Japan twin balance differential  - suggesting the greenback is heading lower.

However, my  chum Christopher Grafton – whose Rotation Pro (RPRO) App on Bloomberg is a heat map application allowing users to look at likely market movers – suggests the dollar versus all currencies (DXY is the dollar index on Bloomberg) is heading higher in the near future despite the strength of the yen. The app allows you to look at indices or markets on a timeframe basis. It currently shows the dollar versus the euro looks ripe for inflection, while sterling is getting close. Interesting to look around and see what's out there!

Meanwhile, got asked a very interesting question about the bond bear market by a journalist yesterday. When does it officially start? At 3 percent treasury yields? I told her the bear market in bonds is a long-term secular shift – and it has begun. The main thing holding back investors is the number who still fear the US is headed towards recession rather than benefiting from the global macro growth alignment. Once the strength and longevity of the current growth phase become even clearer, expect the slide to steepen. 3.05 percent is as good a level as any – but the rot began earlier. Check out bonds like the Argentina century bond (down 12 percent this year) or the recent Greek debacle.

The bond bear market is unlikely to be a rout; yields are not going to rise dramatically, but it will be enough to slap bondholders quite sharply.

Out of time…

Bill Blain

Head of Capital Markets/Alternative Assets

Mint Partners





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Mint - Blain's Morning Porridge

For Nicky: "Till all the seas go dry, my dear, and the rocks melt with the sun! I will love you still my dear, while the sands of life shall run..."

The Morning Porridge is unrestricted market commentary freely available to all investors on an unsolicited basis. It is not investment research. 

Today's US inflation data might get interesting – where will it push the dollar and sentiment in the equity market? With the US budget deficit set to soar, and higher inflation – surely that's a bond negative? Headline on CNBC says US household debt is now at record levels as student, mortgage, auto and credit cards soar. Nothing to worry about then. And higher rates should spook equities again? You would think so…UK inflation confirms the Bank of England's hawkish stance last week.

It's been a boring week thus far. Half-term holidays here in Blighty mean I got over 500 "Sorry I am on Holiday" email auto-responses to yesterday's Porridge. It feels like only a few my clients are at work – and one of them has bailed out today with toothache! Most of the market is on the ski slopes…but that doesn't explain the tiny volumes in stock markets.

A week after the Vix-VaR (volatility index-value at risk) crash, some commentators are talking about stability and better prospects for further upside. They point to the large amounts of buy-the-dip money hitting the market in the late session. That is positive, but it's small volume. We aren't seeing a  proper "I'm utterly convinced" bull rush back into the market. It's more speculative, it's more "I can't think what else to do with the money" action at the moment. 

Meanwhile, my stockpicking chart gurus are muttering something about: "the Elliot Wave corrective B wave tracing the A wave all the way down." I think that means they think we go down before we go up. Right?  

There are certainly opportunities in this market – but direction plays feel a bit early. The market is still roiling after last week's VAR storm, and it's as likely to move one direction as the other. There are clues from the charts – a range-driven phase with a breakout in early March looks likely. It's amazing to watch market timers piling back into short-Vix products so early…but folk are still buying bitcoin, demonstrating something about the ultimate futility of it all. The ability of markets to delude themselves never ceases to amuse…

Meanwhile, the big theme is dollar weakness. The yen has been the "beneficiary" of the sloppy dollar – much to the concern of Japan businesses. As the US fiscal deficit descends towards 4.5 percent and the current account deficit hovers around 2.5 percent, Japan's twin deficit equals zero with a current account surplus at 4 percent. A chart from my macroeconomist, Martin Malone, shows the dollar/yen cross pretty much tracks the US-Japan twin balance differential  - suggesting the greenback is heading lower.

However, my  chum Christopher Grafton – whose Rotation Pro (RPRO) App on Bloomberg is a heat map application allowing users to look at likely market movers – suggests the dollar versus all currencies (DXY is the dollar index on Bloomberg) is heading higher in the near future despite the strength of the yen. The app allows you to look at indices or markets on a timeframe basis. It currently shows the dollar versus the euro looks ripe for inflection, while sterling is getting close. Interesting to look around and see what's out there!

Meanwhile, got asked a very interesting question about the bond bear market by a journalist yesterday. When does it officially start? At 3 percent treasury yields? I told her the bear market in bonds is a long-term secular shift – and it has begun. The main thing holding back investors is the number who still fear the US is headed towards recession rather than benefiting from the global macro growth alignment. Once the strength and longevity of the current growth phase become even clearer, expect the slide to steepen. 3.05 percent is as good a level as any – but the rot began earlier. Check out bonds like the Argentina century bond (down 12 percent this year) or the recent Greek debacle.

The bond bear market is unlikely to be a rout; yields are not going to rise dramatically, but it will be enough to slap bondholders quite sharply.

Out of time…

Bill Blain

Head of Capital Markets/Alternative Assets

Mint Partners



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