Capital Trading Group

Alternative Investments within Managed Futures

GDP Gains But FANGS Repricing

Posted by Capital Trading Group on Jul 31, 2018 10:07:24 AM

 

The big economic news for last week came out on Friday as US Q2 GDP posted a decent 4.1%, estimates were as high as 4.4% but let’s not lose sight of the fact that we haven’t had a plus 4% print in nearly 4 years. This news wasn’t enough to help the NASDAQ which, and as we have warned about sector rotation, has seemingly stung the tech sector. The NASDAQ lost nearly 1% on the week while the Dow gained 1.5%. The sector arbs seemed to dominate flows here as the NASDAQ has seen selling while the other indexes as a whole have seemed to benefit. Anyway, here is a quarterly chart of US Real GDP:

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China Tries To Fight Tariffs

Posted by Capital Trading Group on Jul 24, 2018 10:39:51 AM

 

As we talked a few letters back about the prospect for protectionism and tariffs turning into currency wars, which then have a tendency to turn into hot wars, it is largely apparent this week things have certainly escalated. The PBOC has decided to fight Trump and his tariffs with a little bit of devaluation. Now we know the PBOC doesn’t have much leeway in this arena as they will risk two very important things,

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Posturing From the Position of Power

Posted by Capital Trading Group on Jun 7, 2018 11:04:49 AM

         Last Friday the U.S. Labor Debt. reported the economy added 223k jobs in May, which was higher than the forecast amount of 190k. The unemployment rate fell to 3.8% the lowest since 1969, even hourly earnings rose to annual rate of 2.7%. The WSJ reported that Trump tweeted “looking forward” to the jobs report about an hour before the release, but can POTUS be held to the embargo rule??? We doubt it, but the tweet caused an early jump in yields as traders anticipated a better than expected number based upon the Presidents tweet.

          Also, out last week the FED reported on upcoming changes with Volcker 2.0. The WSJ reports that the prohibition on prop trading by banks would continue, but less stringent and more simplified enforcement for the rule would give bank managers more flexibility toward trader behavior.

          Just tossing this tidbit out and despite the recent pull back in Crude, we went to the gas station yesterday and Unleaded Gas, the premium version was $4.30! How’s that for summer driving budgets? Is there a difference in 87 or 93 octanes? Probably, but I bet most will forgo the more expensive Premium and buy the 87 version! Somehow, we tend to feel that the price of oil is manipulated, but that’s just us!

          The WSJ also had a great article on the price of Lumber today. One thing of note there, Lumber hit a high on May 17 at $639 and as of yesterday closed at $589, down nearly 8%. Is this significant? Can we correlate the price of Lumber in leading the way to another down leg in housing? It peaked in early 2005 as well, so this should be interesting? A break of this 8% threshold may see some CTA trend followers hop on board.

 

We also continue to see political posturing due to the heightened trade tensions, especially with China. Today China proposed a deal that included a $70 billion deal to purchase farm, manufacturing and energy products. The Trump administration wants to see upwards of $375 billion in trade deficit reduction and what it seems like to us, is that Trump is a master negotiator and will most likely get his way. After all, negotiations are about posturing from the position of power and considering China is fully reliant on exports and considering their growing leverage, we tend to think the U.S. holds the power. We also came across this chart from Bloomberg, which clearly demonstrates growing Chinese corp. debt and interest costs!

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Italy and More...

Posted by Capital Trading Group on May 30, 2018 1:30:12 PM

Nothing more wets the contrarian investors’ appetite then when these 3 little letters start making their rounds around the financial sphere. What three letters you ask? “CDS”, Some of you novices might not be old enough to remember the damage that these things did a decade ago, but I love a good rehypothecated insurance product, don’t you? What risk is there any more, markets just rise and rise and its cherry Kool-Aid stained T-Shirts for everyone right? Yea more like blood stained in disguise, masked under trillions of global central banks interest rate fixing, bond buying, #QE4EVR regimes. Anyhow lets just take a look at Italian 5Y CDS shall we:

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