Gold

The Biggest Event Risks In June

The Biggest Event Risks In June

Today being the first day of June, and the start of the last month of the first half of 2016, we thought it would be aptly appropriate to list down some of the biggest event risks that June will bring. These are the known unknowns — uncertainties which we already know about but not their outcomes.

The biggest risks in June (in our opinion) will be the EU referendum by the UK in the later part of the month, the June ECB monetary policy decision and press conference, the June FOMC statement and interest rate decision, and lastly the BoJ's monetary policy decision.

We feel markets will likely be most sensitive to these types of events, having chopped around for almost half a year now. There is great anticipation for guidance on where to go next, and we feel markets will likely take cues from central banks, chiefly the Fed.

Deutsche Bank: "We See No Further Upside For European Equities..."

Deutsche Bank: "We See No Further Upside For European Equities..."

It seems like more and more of the big names are turning bearish on risk. Day after day of directionless trading, huge intraday swings in the equity markets, and a very confusing macro backdrop has bred a lot of frustration amongst investors and traders, ourselves included.

We ardently advocate staying on the sidelines because we just don't know what is going to ensue. Yes, we have our own biases (with whatever we discussed about here, here, and here) but these biases aren't going to be beneficial in anyway unless the markets start trending again, which at this point is highly unlikely.

The number one principal for both small and big players would then be to preserve capital and ride out the volatility.We prefer to stay very lowly exposed or not exposed at all.

Expect Nasty Volatility & Shocks This Summer

Expect Nasty Volatility & Shocks This Summer

With the stock market heading no where for the last 4 months of this year, it is high time we took a step back and view things from a systematic angle. As we approach the "sell in May and go away" phase of the year, equity returns are looking more vunulrable to adverse shocks, and flares in volatility.

YTD, the S&P 500 is almost unchanged, down marginally. Bonds (quality) and commodities (short USD) have been the best performers for the last 4 months. Vol of vol (VVIX) has remained elevated but is not yet deemed to be at alarming levels. What's in store for us may be a surprise. Or actually maybe not.

When we piece this puzzle back in a way BofAML calls the "3P's of Positioning, Policy & Profits", we can come to the conclusion that the risks are skewed south, and things could turn uglier very promptly. Therefore, it may be wise to expect very moderate returns from equities. One may wish to overweight cash, bonds, and gold while avoiding equities and non-IG corporate credit.

Bill Gross: About Helicopter Money

Bill Gross: About Helicopter Money

Technology and mass robotization are probably the single biggest threats to our jobs. Jobs of both the blue and white collars are gradually being replaced by robots that are much more cost efficient and productive. Plus, robots have no want for minimum wages, or hold strikes in protest for what is now a huge skill deficiency in the labor force across the world.

So will politicians and central planners dabble with the risk of upsetting the status quo for a potential change in direction? Unlikely.

Rather, Janus Capital's Bill Gross believes central planners will stick to what they have always been best at: Printing money (QE), lowering interest rates or bringing them sub zero as we've seen recently, and fiscally stimulating economies with debt funded programs thereby creating a false impression of prosperity when there isn't.

What The Smartest Minds Think Of The Current Rout

What The Smartest Minds Think Of The Current Rout

2016 is shaping up to be like the latter half of 2015 but with a lot of additional dynamic forces warping and twisting the financial markets. Higher than average volatility has been the common theme so far but we're also noticing an incredible rapid shift in cross asset correlations. All this means that the current market environment is extremely rough, giving traders (ourselves included) a hell of a hard time.

It is no surprise that this is indeed the case. Policy uncertainty amongst central banks, oil prices that are stick in a moribund rut, very idiosyncratic technical flows that have caused traditionally lower beta assets to trade like mad donkeys, and of course the deep polarization of sentiment across the board.

It is on this note that we turn to JP Morgan's quantitative desk for answers, albeit nebulous. The desk analyzes markets in a less traditional manner, approaching this landscape with mathematical and technical tools most retail traders have zero access to.