TMC #10! Mr. Bond Market got louder last week: further unwinding of reflation trades and resumption of secular trends. Where do we stand on The Macro Compass?
Nice work. May I ask where you source the credit impulse data from? I look at FRED and watch loans and leases, commercial loans, and margin loans (other, non-MBS).
Hi Alfonso - congrats Italia on winning the euros - Ireland is happy but our neighbour UK did well and had a great race to runners up - they have some great young players.
Feedback - yes, I like the macro compass and I really liked your RV interview.
Perhaps can you make it a little more practical. As a trader I just want something to look at, something to add to a watch list - it can be a long term idea. Simplify and make it a little more understandable to all - who cares about the academics. Add some basic lessons and refer back to them and then proceed. Assume we know little about capital markets.
First congrats of all congrats on Italy winning the EUFA final. I have to say that enjoy your articles and use you as a counter balance to insight reports that I read daily. It seem you go against the Bank analyst consensus and so far you are winning. I'm paying more attention!!!
I am really curious as to its slightly net dovish from the monetary standpoint. I think the implied policy rates for the vast majority of the countries are up, at least based on what Central Banks said. Their actions on the other hand ECB allowing a more flexible target, and the RRR cut from PBOC is another. I also wonder if its a difference in the horizon as well, most of the FED statements are well into 2222 or many years out. But that does not help our portfolio today.
In addition to the decreasing credit, I see a decrease in the speed of inflation. Maybe it's causal or not, but of the 2 elements on quadrant 1 and quadrant 4 it's the most stable idea to base some trades around.
Ciao Alf, first of all thank you really a lot for providing this incredible amount of valuable information and analysis for free. I really appreciate it. E poi sono del paese dove hai mangiato la pizza. Sei anche tu del posto? Saluti
Quadrant 4 here we come!? Hi Alfonso, I hope all is well. It should be an interesting next few months with perhaps increasing forces to Quadrant 4. Hopefully you don't see this trajectory being likely, and I look forward to your next update.
Great article! I have a similar view and positioned in markets accordingly. The risk to this base case could be additional trillion dollar fiscal stimulus (beyond what is currently in the works), which would push us back to quadrant 2 or 3 (depending on how Fed subsequently reacts). Historically, as real economy slows down, the US administration has tried to do more fiscal especially when effectiveness of monetary policy has run out (as it is now). Any thoughts on this risk? My own view is this is unlikely for now as governemnts would want commodity prices to come down first and show that inflation is transitory.
Great article, and learned so much from your RV interview. It looks like most of your readers are professional traders, but what would be your advice to someone who does not trade but holds stocks for a relatively longer time (at least 1 year). Long growth stocks? or may be options for those stocks that you really want to buy and hold?
Hi Alfonso, first all again many thanks for this great piece of real knowledge for free! This is top stuff! I have been following the Compass since early inception and had time to reflect a bit and I have one question. Is it the purpose of the compass to move/change every week or month? Basically moving following the wind blowing? Meaning isn't the quadrant creating a short term bias on our long term decisions? I would appreciate if your could (maybe in a new post?) please help me to understand better how should I read the compass for my long-term investment goals. Many thanks in advance and again, great stuff!
I think a long/short position XLK/XLF (you can replace XLF also with XHB or XLI) would do the job; one question though: should CPI overshoot expectations tomorrow, this would push things in the direction of quadrant 4, correct? The higher inflation, the higher the pressure on Fed to raise rates in advance; correct? Because credit growth / fiscal stimulus has already peaked and this is now on a fairly predictable trajectory, the only variable at the time being is inflation; higher inflation = Fed cannot go to quadrant 1 before visiting quadrant 4… do you agree?
Nice work. May I ask where you source the credit impulse data from? I look at FRED and watch loans and leases, commercial loans, and margin loans (other, non-MBS).
If the fed is pegging FFR at 0% and inflation is 2%, the real FFR is -2%. But is this not a tightening rather than loose monetary policy?
The fed is holding the FFR artificially high.
BTW, love your stuff. Thank you for posting it.
Hi Alfonso - congrats Italia on winning the euros - Ireland is happy but our neighbour UK did well and had a great race to runners up - they have some great young players.
Feedback - yes, I like the macro compass and I really liked your RV interview.
Perhaps can you make it a little more practical. As a trader I just want something to look at, something to add to a watch list - it can be a long term idea. Simplify and make it a little more understandable to all - who cares about the academics. Add some basic lessons and refer back to them and then proceed. Assume we know little about capital markets.
But you are doing great
First congrats of all congrats on Italy winning the EUFA final. I have to say that enjoy your articles and use you as a counter balance to insight reports that I read daily. It seem you go against the Bank analyst consensus and so far you are winning. I'm paying more attention!!!
thanks. 100% agreed.
XLU/IVE
I am really curious as to its slightly net dovish from the monetary standpoint. I think the implied policy rates for the vast majority of the countries are up, at least based on what Central Banks said. Their actions on the other hand ECB allowing a more flexible target, and the RRR cut from PBOC is another. I also wonder if its a difference in the horizon as well, most of the FED statements are well into 2222 or many years out. But that does not help our portfolio today.
In addition to the decreasing credit, I see a decrease in the speed of inflation. Maybe it's causal or not, but of the 2 elements on quadrant 1 and quadrant 4 it's the most stable idea to base some trades around.
Nice work! I'm currently building up my position on Long Yen Futures...would probably fit into section 1 and 4
Ciao Alf, first of all thank you really a lot for providing this incredible amount of valuable information and analysis for free. I really appreciate it. E poi sono del paese dove hai mangiato la pizza. Sei anche tu del posto? Saluti
Quadrant 4 here we come!? Hi Alfonso, I hope all is well. It should be an interesting next few months with perhaps increasing forces to Quadrant 4. Hopefully you don't see this trajectory being likely, and I look forward to your next update.
Great article! I have a similar view and positioned in markets accordingly. The risk to this base case could be additional trillion dollar fiscal stimulus (beyond what is currently in the works), which would push us back to quadrant 2 or 3 (depending on how Fed subsequently reacts). Historically, as real economy slows down, the US administration has tried to do more fiscal especially when effectiveness of monetary policy has run out (as it is now). Any thoughts on this risk? My own view is this is unlikely for now as governemnts would want commodity prices to come down first and show that inflation is transitory.
Great article, and learned so much from your RV interview. It looks like most of your readers are professional traders, but what would be your advice to someone who does not trade but holds stocks for a relatively longer time (at least 1 year). Long growth stocks? or may be options for those stocks that you really want to buy and hold?
Hi Alfonso, first all again many thanks for this great piece of real knowledge for free! This is top stuff! I have been following the Compass since early inception and had time to reflect a bit and I have one question. Is it the purpose of the compass to move/change every week or month? Basically moving following the wind blowing? Meaning isn't the quadrant creating a short term bias on our long term decisions? I would appreciate if your could (maybe in a new post?) please help me to understand better how should I read the compass for my long-term investment goals. Many thanks in advance and again, great stuff!
i saw that idea/post to be short Estoxx, but did not see a post for the cover and rationale...did i miss it? or is this it?
I think a long/short position XLK/XLF (you can replace XLF also with XHB or XLI) would do the job; one question though: should CPI overshoot expectations tomorrow, this would push things in the direction of quadrant 4, correct? The higher inflation, the higher the pressure on Fed to raise rates in advance; correct? Because credit growth / fiscal stimulus has already peaked and this is now on a fairly predictable trajectory, the only variable at the time being is inflation; higher inflation = Fed cannot go to quadrant 1 before visiting quadrant 4… do you agree?