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Fri, 26th May 2017

Anirudh Sethi Report

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Archives of “February 14, 2017” Day

5 key takeaways from Yellen’s Senate testimony

  1. Didn’t want to put the focus on a specific meeting but said hikes (plural) ahead this year as long as the economy stays on track
  2. She will complete her term, which ends in a year
  3. “I indicated that at our upcoming meetings, we will try to evaluate whether or not the economy is progressing. If so “it probably will be appropriate to raise interest rates further.”
  4. She said that at the start of the year most Fed members concluded “a few” hikes appropriate this year. “Precisely when we would take an action, whether it’s March, or May, or June, I know people are focused on that, I can’t tell you exactly which meeting it would be. I would say that every meeting is live.”
  5. The Fed balance sheet will end up “substantially smaller”

The Fed funds market is now pricing in a 34% chance of a hike. That hasn’t moved up much today but May has moved to 54% from 48% and June to 74% from 71%.

Yellen promised nothing but the market thought she might be a bit more cautious in order to avoid building up hike hopes. Instead, she left the door wide open to a move (and moves) at any time.

So the rally in the US dollar is completely justified. The next question is whether (or when) her talk will be overshadowed by something in Congress or the White House.

China Just Created A Record $540 Billion In Debt In One Month

One week ago, Deutsche Bank analysts warned that the global economic boom is about to end for one reason that has nothing to do with Trump, and everything to do with China’s relentless debt injections. As DB’s Oliver Harvey said, “attention has focused on President Trump, but developments on the other side of the world may prove more important. At the beginning of 2016, China embarked on its latest fiscal stimulus funded from local government land sales and a booming property market. The Chinese business cycle troughed shortly thereafter and has accelerated rapidly since.”

DB then showed a chart of leading indicators according to which following a blistering surge in credit creation by Beijing, the economy was on the verge of another slowdown: “That makes last week’s softer-than-expected official and Caixin PMIs a concern. Land sales, which have led ‘live’ indicators of Chinese growth such as railway freight volumes by around 6 months, have already tailed off significantly. “ 

Credit Suisse Announces Another 6,500 Layoffs After Reporting 2016 Loss

After Credit Suisse reported yet another significant loss for the full year 2016, amounting to 2.35 billion Swiss francs, more than the CHF2.07bn expected, the Swiss banking giant said it was looking to lay off up to 6,500 workers and said it was examining alternatives to a planned stock market listing of its Swiss business.

“We’re setting a target now of between 5,500 and 6,500 for 2017,” Chief Financial Officer David Mathers said in a call with analysts on Tuesday after the bank published earnings. The bank did not specify where the extra cuts would come but said this would include contractors, consultants and staff, Reuters reported.

For the fourth quarter, Credit Suisse reported a 2.35 billion franc net loss, largely on the back of a roughly $2 billion charge to settle U.S. claims the bank misled investors in the sale of residential mortgage-backed securities.  Despite the loss, Credit Suisse proposed an unchanged dividend of 0.70 francs per share, in line with market expectations.

CEO Tidjane Thiam, who took over at Switzerland’s second biggest bank just over 18 months ago, is shifting the group more toward wealth management and putting less emphasis on investment banking. As part of his turnaround plans, the bank is looking to cut billions of dollars in costs and cut a net 7,250 jobs in 2016 with more to follow this year.

3 destructive habits every trader must avoid.

Three destructive habits that will kill your trading day, week, month, or career.

Not having a plan. Get a plan, who cares if it is bad, start with something. You can build off of it and refine it. You have to be willing to spend the time to make the plan yours. You do not start anything without some level of planning. Trading is hard; your brain spends a lot of time in fast forward, affecting your memory. You can slow it down by having a plan and increase your brains ability to remember.  A plan makes it possible to improve. Most importantly, a plan gives you a chance at removing emotion.

Forgetting why you are trading.  The purpose of trading is to make money.  Every action should bend to that goal. That does not mean every trade makes money.  It means every trade gets to closer. If you are looking for comfort, get a teddy bear. If you are looking to be right, play trivial pursuit.  If you want excitement, drive fast.

Letting it go. It is really important to separate what happened from how you felt. The more distance between the two the less time it takes to learn from that situation.  Admitting you made a mistake or are wrong are necessary for letting it go.  Unlike life, you get no credit for admitting you are wrong, it is just a part of trading. Neither matter unless you take action.

Secret to trading success: U

“You are the weakest part of your system”. That is a defeatist statement and completely untrue. It makes your expectation to fail easier to accomplish and more importantly it makes failure easier to handle. It shifts the pressure away from you and unto fate.

Would you fly on an airline if their motto was “Our pilots are the weakest part.” I do not think so. You are your system. Even if your system is automated you added the inputs, parameters.

Taking responsibility for your action is not easy. Taking control of the outcomes of trading or life is a huge responsibility. You will have moments of weakness, but you are not weak. The market does not go straight up and either does the road to success.

Fed’s Yellen: Hike appropriate at one of its upcoming meetings

Fed’s Janet Yellen Humphrey Hawkins testimony 14 February 2017

  • Rate hike will likely be appropriate at one of its upcoming meetings if employment and inflation evolve in line with expectations
  • Reiterates the view that three hikes are possible in line with Fed forecasts
  • Repeats, waiting too long to tighten would be unwise
  • Gradual increases in Fed funds rate will likely be appropriate but mon pol is not on a set course
  • Hopes that fiscal policies will be consistent with putting the US on a sustainable trajectory
  • Incoming data suggests that the labour market continues to strengthen and inflation moving up to 2% in line with FOMC expectations

The buck has jumped on what is pretty much a repeat of the last FOMC meeting. USDJPY is up to 114.20 on this.

Traders have jumped on the “upcoming meeting” comment but that’s a straw clutch at best, as far as picking a date goes.

The “March” of the Yellen starts today

Yellen starts her two day appearance in front of the government

I’ll keep this one short and sweet. There’s really only going to be one thing the market is going to hang on for when Yellen starts speaking, and that’s whether March is going to feature as a hike possibility.

We’ve almost got a repeat situation to last year where we had a Dec hike accompanied by FOMC members proclaiming multiple hikes throughout the year. We all know what we got then and I suspect we’ll get the same now.

The market is looking at the summer for the next likely hike but it will be on guard to change that if Yellen gives them cause to do so, so any green light for a March hike will see the buck pop higher.

We won’t accept one euro of more austerity says Greece

Comments from Greek government spokesman Tzanakopoulos

  • There is no justification for new austerity measures
  • Greece expects the IMF to be more reasonable
  • Germany must also adopt a more reasonable approach
  • Greek GDP data confirms the economy’s recovery (Q4 GDP was out earlier, -0.4% vs 0.9% prior q/q, 0.3% vs 2.2% prior y/y. Great recovery there 😉   )
  • Greece expects to close the review successfully

Strong words from someone looking for many more favours.