Great read as always. Love your clear thinking and lateral views which are fascinating. One thought I had on your point about Fed staying at an elevated level of rates constituting incremental tightening. I agree with that as rate hikes are second order tightening and pace is third order. The level of Financial Conditions in some respect capture this. Conversely, was not the Fed way too easy for way too long and hence will the Fed not need to be tighter for longer or long enough for price pressures to ease. Wages in particular will take a long long time to cook much after labour market cools. Rents similarly have not even reflected the rise in house prices and vacancies fully.
I think the curve stays inverted with long-end trading more based on growth - although if the Fed does pivot dovishly (not my expectation), I'd expect the long end to sell off and curve to steepen aggressively
I would gladly give credit if indeed I had seen that note - anyways put spreads funded by calls (put spread collars / quiet bears) )isn’t all that unique a structure - these trades go through the market daily - my point simply was upside is limited and downside process is likely to take longer and be slower than 1h so put spreads make more sense than puts outright - The intent of my notes is not to give trade ideas per se but to the frame discussions on macro and central banks in particular
mate no reason for hostility - if "credit to GS" makes you feel better I'm cool with that - I write to share my views and encourage debate to improve my thought process - not for glory - been doing this long enough to know markets always find a way to make fools out of even the smartest folks
Great read as always. Love your clear thinking and lateral views which are fascinating. One thought I had on your point about Fed staying at an elevated level of rates constituting incremental tightening. I agree with that as rate hikes are second order tightening and pace is third order. The level of Financial Conditions in some respect capture this. Conversely, was not the Fed way too easy for way too long and hence will the Fed not need to be tighter for longer or long enough for price pressures to ease. Wages in particular will take a long long time to cook much after labour market cools. Rents similarly have not even reflected the rise in house prices and vacancies fully.
great read. prefer your wave -particle approach..put-call play. Wolfgang Pauli Heisenbergs advocatus diaboli would appreciate it😉
why is august the last post
Clearly formulated and explained reasoning for 1 major market idea/feature at the time.
If you think the higher rates will remain sticky at the short end, what’s your outlook for the backend of the curve over the next 6-12 months?
I think the curve stays inverted with long-end trading more based on growth - although if the Fed does pivot dovishly (not my expectation), I'd expect the long end to sell off and curve to steepen aggressively
You should give credit to Goldman's recent research note if you're going to steal their idea of put spreads funded by calls.
I would gladly give credit if indeed I had seen that note - anyways put spreads funded by calls (put spread collars / quiet bears) )isn’t all that unique a structure - these trades go through the market daily - my point simply was upside is limited and downside process is likely to take longer and be slower than 1h so put spreads make more sense than puts outright - The intent of my notes is not to give trade ideas per se but to the frame discussions on macro and central banks in particular
It was the headline article on the front-page of Bloomberg yesterday.
https://www.bloomberg.com/news/articles/2022-08-02/goldman-warns-against-being-too-early-in-fading-recession-risk
"[Goldman] continue to favor selling calls to buy puts in a bid to protect equity exposure, according to the note."
But if you say you didn't see it, then, congrats, you trade like Goldman.
mate no reason for hostility - if "credit to GS" makes you feel better I'm cool with that - I write to share my views and encourage debate to improve my thought process - not for glory - been doing this long enough to know markets always find a way to make fools out of even the smartest folks
It's not hostility to say you trade like Goldman — that is a compliment.
aah - my apols - totally misunderstood - thanks for the compliment ..
Hoping you continue the publication.