Timing & trends

“The storm comes. Use it to learn how to sail skillfully.”


There is a distinct chill in the air when it comes to markets this morning. Whatever Mnuchin and Powell say, the absence of further stimulus in the run up to a possibly tumultuous American election that may stretch uncertainty till Inauguration day in Jan 2021 is dominating the action in the US. (What kinds confusion might occur as they argue who runs the country..?) The “risks are weighted to the downside” says the Fed. The rising dollar is like a falling barometer telling us a Gale is coming.

The glass is falling… 

Here in Europe, the dominant force is the Coronavirus, recession and jobs. It’s not just a UK crisis. Growth has fled. Recession in a sinking European economy will deepen. Even Sweden is admitting rising infections require a response – which will be measured, minimal and left to individuals to enforce. Something must be seriously wrong in France – they are copying Boris with 10 pm bar closings. France admitting England is right? That is serious m*rde. It’s not just stocks. Bond markets are beginning to sag with credit under increasing pressure. It’s a sign confidence is waning.

What more can governments and central banks do? We’ve thrown the kitchen sink at the virus, but the numbers are rising. Central Banks have cut rates to historically lowest levels ever and economic activity is falling… QE Infinity promises liquidity is not an issue – but holders want to sell….

Full Story


$VIX Uprising

As long time readers know I’m a big fan of $VIX (Volatility Index) technical structures and compression patterns. Often dismissed as non chartable I think we’ve successfully to put that argument to bed a long time ago.

Recently in “Key Charts” I again outlined the $VIX as one of the key charts to watch and it’s been interesting to say the least hence I wanted to outline an update as a pattern is forming that suggests a major $VIX uprising may be in the cards this fall.

Yes, $VIX again came under pressure into monthly $VIX futures monthly contract roll-over, but interestingly it didn’t manage to fill the August gap which would have been standard fare if you will… CLICK for complete article


Why would the mainstream media want all of us to believe that stock prices are about to fall dramatically?  Just like we witnessed earlier this year at the beginning of the pandemic, the corporate media is full of reports that seem to imply that it is a virtual certainty that stock prices are going to go even lower.  Of course it would make perfect sense for stock prices to go down because they are incredibly overvalued right now, but normally the mainstream media does not try to tell us where stock prices are going next.  And the fact that so many news outlets are repeating the same mantra right now is particularly troublesome.

Without a doubt, the momentum of stock prices is taking us in a downward direction at the moment.  All of the major stock indexes have posted declines for three weeks in a row, and it looks like this week could make it four.  Full Story

Amazon takes on Peloton


Peloton falls after rival exercise bike maker Echelon and e-commerce giant Amazon.com reveal a competing tech-enabled bike at a significantly lower price.


Peloton Interactive  (PTON) shares traded lower after rival exercise bike maker Echelon struck a deal with e-commerce giant Amazon.com  (AMZN) to produce and sell a competing tech-enabled bike at a fraction of the cost.

Shares of Peloton were down 4.22% at $90.80 at the start of regular trading on Tuesday after Echelon and Amazon announced the launch of their own exercise bike and accompanying interactive online workout service called Prime Bike.

Touted as Amazon’s first-ever connected fitness product, the Prime Bike will give customers access to hundreds of live and on-demand classes, Echelon said in a statement. It will retail for $499.

Peloton has been on a tear over the past six months as fitness buffs have turned to the internet-connected workout-at-home machines and the company’s online interactive fitness classes as the coronavirus pandemic has kept many gyms closed.

And it’s not slowing down. Peloton earlier this month launched more economical versions of its at-home gym equipment – Bike+ and the Tread – though both retail for $2,495, about five times the price of Amazon’s Prime Bike.

Peloton said it has doubled its connected-fitness-subscription base from a year earlier to more than 1.09 million, while paid digital subscriptions tripled to more than 316,800. The company pegged its total membership base at 3.1 million.

For its fiscal first quarter, Peloton expects connected-fitness subscriptions of between 1.32 million and 1.33 million. It expects revenue to triple from a year earlier, to between $720 million and $730 million.

For fiscal 2021, Peloton expects to have between 2.05 million and 2.1 million connected fitness subscriptions and revenue between $3.5 billion and $3.65 billion.


How the Death of Ruth Bader Ginsburg Affects The Markets


Last week, we noted a list of concerns relating to the market, which could undoubtedly pressure markets lower. One of those, in particular, was the lack of additional “fiscal stimulus” coming from Congress.

Over the weekend, and summed up in the video below, a collision of events brought concerns to the forefront.

The death of Supreme Court Justice Ruth Ginsberg has sparked a replay of the 2016 passing of Justice Scalia. At that time, President Obama wanted to appoint a replacement for Scalia even as the Presidential election was just a few months away. Congress got into a contested debate over whether a justice should be selected so close to an election. That debate is again on display as President Trump wants to appoint a replacement for Ginsberg as soon as possible. Still, the Democratically controlled Congress is fighting to delay it until after the election.

Politically, this is an incredibly important appointment. Since justices get appointed for life, if President Trump adds another “conservative” justice to the Supreme Court, rulings on more liberal causes could be stymied for a decade or more.

A Collision Of Events

Why is this important to the market? Because Congress is facing three different events that have removed the focus from additional financial support for the economy.

  1. With the election fast approaching, Congress does not want to pass a fiscal support bill to help the other Presidential candidate. Such is why there are dueling bills between the House and Senate currently.  
  2. September ends the 2020 fiscal year of Congress. Such requires either a “budget,” or another C.R. (Continuing Resolution) to fund the government and avoid another shut-down.
  3. Lastly, the death of RBG will have the entire Democratic Party, which controls the House, focused on how to stop President Trump from nominating a replacement before the election. All Trump needs is a simple majority in the Senate to confirm a justice that he can likely get. 



With No Hikes Until 2023, Here Are Some Hobbies The Fed Can Pursue For The Next Three Years

Inflation [ɪnˈfleɪʃ(ə)n]


  1. the action of inflating something or the condition of being inflated. “the inflation of a balloon”
  2. a general increase in prices and fall in the purchasing value of money. “policies aimed at controlling inflation”

Hobby [ˈhɒbi]


an activity done regularly in one’s leisure time for pleasure. “her hobbies are reading and gardening”

Hobby horse [ˈhɒbi hɔː(r)s]


  1. a child’s toy consisting of a stick with a model of a horse’s head at one end.
  2. a preoccupation or favourite topic. “Brennan admits that the greenhouse effect is a hobby horse of his”

Yesterday’s FOMC meeting, very much as expected, made clear that US rates are on hold until the end of 2023 at the very least, even as the economic projections were actually upgraded relative to the depths they plunged to in June. (Indeed, Q3 GDP is still apparently tracking above 30% q/q annualized.) For Philip Marey’s coverage of the meeting, please see here.

In short, the Fed, like all central banks, does not understand inflation and cannot control it to either the upside or the downside of any possible target over any credible timeframeIndeed, it no longer seems to have a theory of inflation: inflation just is; or rather isn’t. We can therefore expect rates to be on hold longer than just flagged. And not just in the US, of course. Japan and Europe, the UK, Australia, and New Zealand – all face the same fate. Zero (or lower) rates and zero ideas about how things will get better.

Emerging markets like Brazil have also moved rates to incredibly low levels. Several are already monetizing debt too. The only major central bank that is not openly easing is China, where ‘rates are set’ in three days as per the new normal: but that is only because the level of rates doesn’t matter in traditional market terms (look at the USD500bn in new lending in August); which is now true in the West too, just at a lower nominal level, at least until deflation kicks in, and with none of the same kind of finesse. They have de facto state planning with a market on top: we have state planning with no plan and markets always coming out on top.

Of course, these views are a favorite hobby horse here. Yet after the Fed has made clear what we had long expected to eventually happen, let me offer some suggestions of worthwhile hobbies for central banks and those who watch them to more usefully spend their time on for the next five years:

  • 3D printing (which they do already); Acrobatics ; Acting; Amateur radio (all three are already normal at their press conferences); Animation (they have little of that); Aquascaping (well, liquidity is their thing); Astrology (see their economic forecasts); Astronomy (they are space cadets); Baking (failure into the cake); Baton twirling (for sure!); Blogging (absolutely, and boringly).
  • Building (not so much); Board/tabletop games (Dungeons & Draghis); Book discussion clubs (try Kalecki); Book restoration (their copies of Friedman and Hayek are tatty); Bowling (they can’t pick up that spare); Brazilian jiu-jitsu (they don’t lack muscle, just brain); Breadmaking (for the 1%); Bullet journaling (they are out of them); Cabaret (I can almost see Lagarde open the next ECB meeting with the appropriately fin-de-regime “Willkommen, bienvenue, welcome”: yet note that movie then descends to the always-terrifying “Tomorrow Belongs to Me” **Shudder**).
  • Calligraphy (make their irrelevance look pretty); Candle making (to not light in the darkness); Candy making (for the 1%); Car fixing & building (outsource it!); Card games (3-card Monty); Cardistry (see press conferences); Cheesemaking (so, so much cheese); Cleaning (this is a hobby?!); Clothesmaking (offshore it!); Coffee roasting (more millennial barista jobs!); Collecting (financial assets); Coloring (green, not red); Computer programming (algos!); Confectionery (for the 1%); Cooking (the books); Cosplaying (which is what this whole sham is, just in the drabbest possible costumes); Couponing (which millions are relying on); Craft(y); Creative writing (not the RBA, obviously); Crocheting (see forecasting); Cross-stitch (see FX forecasting); Crossword puzzles (see central bank minutes); Cryptography (see previous); Cue sports (think ‘The Hustler’).
  • Dance (anything that gets actual circulation going would be good); Digital arts (cryptos!); Distro Hopping (fiddling with computers: HFT); DJing (they only have one tune: “The sun will come out tomorrow”); Do it yourself (which is what we will eventually see governments return to as policy); Drama (of the drawn-out, tragi-comic variety); Drawing (see dot plots); Drink mixing (toxic cocktails); Drinking (and boy are they driving us all to that!)

That just covers A-D. But don’t worry, I have five years of the Daily to kill before a rate hike – we will get to the rest.

Of course, the Fed did make clear that the way to avoid me having to write about Zumba is for the government to spend more money, which they will then monetize (even if they won’t say so out loud). On that front, US President Trump is now all in favor of thinking big, reportedly backing at least USD1.5 trillion in further stimulus, and noting “…it all comes back to the USA anyway (one way or another)”.

Which it actually does, apart from the portion that flows to all the countries that produce things that you used to make yourself. So do we have an evolving pro-MMT position from the White House by any other name? That is another hobby horse here, but a discussion with far more relevance to markets than anything major central banks will, or rather won’t, be doing in the next few years. Indeed, imagine the US reflating but not letting those USD flow out to others: and isn’t that what China is trying in some ways and is being cheer-led?