This week: AUSTRALIA, the G5 currency leading risk assets post-COVID. Christopher Joye, Coolabah Capital Investments co-CIO aka "the hunter of Australian housing bears" interviewed by Joe Walker of the Jolly Swagman Podcast, as they cover the RBA's easing policy inflating Australia's housing bubble and narrowing credit spreads, spotting opportunities as the RBA remains on a long path of accommodation.
Weston Nakamura Visionary5,577 Japan & US Global Macro Markets
NYC born and raised, currently based in Tokyo.
Former hedge fund equity sales at Jefferies and listed derivatives trading at Goldman Sachs Japan.
Current independent options investor/trader on single stocks/ETFs, index vol, rates derivatives, FX vol, commodities vol. Core long crypto holder, active long/short crypto trading & BTC options.
Founder of Across The Spread- covering global macro markets with focus on US & Japan, monetary & fiscal policy, geopolitical risk analysis for institutional buy side + individual investors. Aim to provide ONLY differentiated, non-consensus market views, observations, noise filtering and trade ideas. Active on Twitter @acrossthespread, charts featured on TradingView @acrossthespread, and website acrossthespread.com
Other work with economic policy committees, fintech/digital payments space.
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Bernd Ondruch, founder & CIO of Astellon Capital Partners interviews Mark Hiley, veteran short-seller and founder of The Analyst in Tales From The Front Lines of Short Selling, as they explore the fine art of betting against vested interests and new regulatory hurdles, all working against you for 100% upside and unlimited downside. Wirecard, Asian Bamboo, and NMC Health, as well as MIFID II. Not for the faint of heart!
Busy week? We know. Luckily, you can catch up with the best Videos Of The Week, individually hand picked as always by the RV Team below. Enjoy the weekend!
And for shows from within the hive, follow newly launched Exchange TV HERE 📺
Cross Asset Thoughts:
- SPX vs VIX vs AUDJPY
- Crude volatility vs Gold vs BTC,
- Gold vs Yen,
- Turkey vs Lira vs Gold
- Bitcoin vs Yuan
- the long NKY trade
I suppose it would be quite hypocritical to talk about proactive value contribution / extraction without attempting to do any of my own.
Been a “while“ but the following are some of my current market observations and views:
🇺🇸 SPX: Post election active vol selling crushes VIX and pushes SPX ↑
But with VIX at 20, is that a hard floor / cap to further SPX upside?
VIX could be floored & rangebound flat in the low 20s, but SPX can still catch a bid higher off AUDJPY, which had recently broken through recent highs and approaching its YTD levels. AUD can continue to move SPX ↑ at least until Dec FOMC, when Fed once again does nothing on US YCC, at which point AUD ↓.
AUD break through recent highs, looking at early Sept highs when they announced -7% GDP and first recession in 30 years.
As long as AUD is lifted and VIX / VVIX stays behaved, there’s still a lot of underweight institutions going into bonus season- SPX ↑ near term.
Note the week starting Mon Dec 14th may see some potentially serious ↑↓ swings, starting with Dec 14 when the electoral college meets - this officially shuts the book on Trump voting related lawsuits, but just in case you get a rogue elector (highly unlikely but wtf knows these days). Dec FOMC on 16th, YCC price in/out. Followed by Dec quarterly futures & options major expiry. (*ECB next week, €/$ in focus)
Gold ↓ vs BTC ↑ - which is “right / wrong?”
Depends on your time horizon - is the responsible answer but I choose irresponsibility. Both are wrong in different ways, but GOLD is wrong. There are a hundred factors or more pricing each, and this is just one of them - but according to WTI crude implied vol, gold is “wrong” directionally, and BTC is “wrong” in overshooting (or- “too right”).
Crude 1M implied vol tends to move inverse to gold and BTC, not so much as general risk on/off, but more so sentiment on actual fundamental mining & supply expectations. Higher oil prices aren’t so much a mining hindrance as uncertain oil prices are.
But since Election Day, cross asset implied vol got actively sold, BTC responded ↑ as its “supposed” to, but gold did not (more on why below). But with OPEC a coin toss, crude implied vol seems way too calm and can jump higher- for which gold is already priced/prepped but BTC is not.
GOLD vs YEN: Haven Futures Battle
From Abenomics start until this wild year ’20, Gold futures and JPY futures moved more or less in lockstep as one of two go-to‘s to get into / out of the dollar and risk
Then, something strange happened after the March sell off. Approx 30-40% of CME ¥ futures trading volume that existed consistently over the years just died, while gold futures volume doesn’t (though it certainly took a hit to upwards trading volume momentum).
So- things are ”different this time.” Obviously.
Given the genuinely cross asset, nothing spared markets, USDJPY in a 5 yen range has been incredible. USDJPY implied vol is the lowest among all major macro asset classes, let alone G5 FX pairs - that’s a bit insane.
The LONG 🇯🇵 NKY TRADE
...that every fund is putting on / talking about. NKY had a significant breakout that i pointed out a few weeks ago, above its Feb ‘18 Volmageddon levels that it was systematically capped at in the absence of foreign flows.
Here’s the Tokyo based market color:
NKY breaks out to 1990 highs with the lowest DM index P/E while SPX NDX and DAX are at record highs. Institutional bloomberg chat rooms start hyping up long NKY despite a falling dollar. Foreign flows and domestic retail leveraged inverse ETF flows push NKY higher. Institutional Japan baffled as to why - Japan macro sucks, as do earnings, but they see domestic NKY rally and they go risk on overseas → SPX. As SPX ↑, fund managers find NKY the better trade in full circle. Not a forever sustainable merry go round obviously, and the moment you get VIX shoot through 30, 40+, NKY will be the last-in, first-out, asset shedding.
View From Tokyo
1557 is the “Japan listed SPY” SPX ETF, which has always outperformed 1321 largest NKY ETF by AUM since the post-march recovery, and not only outperform, but not really well correlated. Until Nov breakout, now theyre lockstep, as Japan buys US and US buys Japan:
This is also futures / index ETF level led. OSE traded NKY futures, not NKY minis (which have far overtaken normal NKY futures in notional value traded for 2+ years now). Nov trading data from JPX shows the large contracts volumes still below minis, but increased MoM % at a greater rate.
Within NKY225 index, which is price weighted (like the Dow30), big names are Fast Retailing (UNIQLO), SoftBank, FANUC (robotics/factory automation manufacturer- how to be long the job destroyers and permanent human unemployment), and the SoftBank rival telecoms KDDI and NTT Docomo, the latter of which just got “delisted” (absorbed into parent co). SoftBank shares have been volatile, FANUC in line, but Fast Retailing, the largest weighting, has been killing it +100% off March lows. Yes, NKY’s component driver is: retail clothing. That’s like being long SPX because of heavyweight GAP stores.
Seen this movie a hundred times- NKY and BTC will have a blow off top simultaneously (because they share the same traders- Japan levered retail). Play NKY short dated upside calls, expecting to lose 100% premium on your last one (really lazy/bad ”advice“).
Here’s better: 🇯🇵 Longs only come because of how expensive other markets are, NOT because of Japan. It’s a sign of global market froth.
CNY & BTC, HKD & BTC
Anyone paying attention to China‘s currency strengthening relentlessly? You should either way. There’s also this matter:
Even the waves of upside swings peak out together in the short-med term
Could be nothing, could be everything. Either way, the yuan strength is not good for China. If PBOC pulls an Aug ‘15 shock devaluation that destroyed risk assets globally, they will again destroy risk assets globally. CCP insiders tend to move their money ahead. But there are no safe assets anymore (a 1 day - 1 week sharp drop in BTC that rebounds = perfectly safe, vs SPX, dollars, USTs that a sudden CNY deval could pull down and keep down).
For a less tin foil hat theory to explain BTC in part- Hong Kong authorities announced the banning of retail trading crypto in early Nov. Just around the time that the HKD peg to the dollar became a bit unhinged, and have subsequently traded together since ↓
Just reminding everyone (my fellow Americans): Gold is a global asset class, even though priced in USD. But BTC is definitely a global asset class, its definitely not an “American” one. Look at these assets through an international lens, and not just the US SEC/regulators, or PayPal, BlackRock and US corp treasuries for that matter.
Turkey: Genuine Erosion of Purchasing Power
This came out a few hours ago, YoY Inflation estimates were for 12%
So much for rate hike from 8% → 15%
Turkey’s Central Bank as of July has drained their FX reserves to prop up their worthless lira and be the worlds biggest buyer of gold.
Seriously, burned through everything YTD
...to buy lira and buy gold, single handed responsible for pushing global gold prices through $2k, which also makes them single handed responsible for gold topping when they stopped on the first Thurs of Aug.
Now, CBRT gold reserves and FX reserves are at a 1:1 ratio
And ↑ THIS is exactly why i watch USDTRY and EURTRY for cues on gold. If the lira sells off, gold sells off, because CBRT sells gold to prop the lira up. And vice versa - they’re actually / seriously intraday trading.
And In case you missed it, see the debut episode of THE DISCOURSE, weekly on the Exchange, where I’ll discuss market themes such as the above and/or anything else that’s relevant to the times. This first episode is different, as ExChangemaker @Sam Colt and I go through best practices and tips on using/extracting value out of the Exchange
The Discourse is a weekly program with Weston from the Exchange, taking the Hive Mind to the markets, and far more importantly- taking markets into the depths of the Hive Mind.
The key feature of The Discourse is for Weston to speak directly with individuals from The Exchange community, to explore and tap into the vast wealth of individual knowledge, expertise, skills and talents - both financial AND non-financially related - in order to proactively extract and distribute expertise, knowledge and value.
The special debut episode features ExChangemaker @Sam Colt the “Newmont Gold Mining” of value extraction. Sam gives his pro tips and step-by-step best practices on how to make an effective post, get answers to questions, and maximize the Exchange experience. A must watch for anyone who wants to be effective in tapping into the collective wisdom of the financial world‘s most ambitious and intellectually curious minds.
Preview for The Exchange’s weekly show The Discourse - debut episode later today featuring ExChangemaker @Sam Colt !!
Sam & Weston dive into The Exchange, explore why quality engagement is key, and reveal best practices & tips for maximizing value extraction.
Series Premiere from inside the hive! Watch the trailer below ↓
A few months ago, @Raoul Pal, behind his Cayman Islands bar, took out his phone and recorded an overly casual “can you guys record a video of yourselves discussing your personal financial journey and upload it online - thanks”
And yet we happily obeyed. Dozens of videos uploaded Immediately. Truly incredible. This is what comes of years of credibility building. This is how to tap the hive mind.
(Original Announcement from last week here )
Thank you to the speakers, and thank you all for attending The Aftermath!
But just because The Aftermath event is over, obviously does not mean social and political volatility and market risk is gone. Thankfully we have the Exchange! Post your comments, questions, videos, charts: collectively proactive expertise contribution + proactively effective value extraction = enemy of uncertainty.
I also just want to note: 3 months ago, these two were a bunch of early-20s nobodys (no offense). Today, they got to participate as speakers in an event with Dan Rather on the roster, and just expanded their network exposure by multiples.
If you don't think there's a direct return for engagement on the Exchange and proactively providing value, think again.
Links below for replay:
And shoutout to @Sam Colt for some SERIOUSLY impressive value add engagement throughout!
Day 2: John Fadool & Weston Nakamura
China Under Biden Administration, and The Coming Avalanche of Central Bank Gold Sell Flows
@John Fadool - Geopolitical Risk Expert
@Weston Nakamura - Manager, The Real Vision Exchange
Fresh off the heels of President-elect Biden officially unveiling his cabinet picks, John & Weston discuss US-China relations under a new/(old) administration. John explains his bearish gold thesis from EM central banks' forced selling.