Tag Archives: global macro trading

ETF News, Global Macro Strategy

Backdoor Way to Hedge Crude Oil Bounce; Exiting China: A Very Rareview

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Below fast market update courtesy of Rareview Macro LLC a.m. edition of global macro strategy commentary “Sight Beyond Sight”; MarketsMuse is re-publishing this extract no more than 10 minutes of current subscribers receipt..Our thanks to the folks at Rareview!
• New Position: Long Canadian Dollar versus Short Swiss Franc (CAD/CHF)
• Existing Position: iShares China Large-Cap ETF (FXI) Now Above Strike Price

Something very illuminating appeared on our risk-adjusted return monitor today.

Neil Azous, Rareview Macro
Neil Azous, Rareview Macro

After reading the tea leaves, the conclusion we have drawn from it points to a trend that will have meaningful global repercussions – and will also provide the basis for an investment and hedging opportunity.

Additionally, while everyone else is focused on the weakness in the Euro exchange rate (i.e. the ECB EUR/USD fix on January 4, 1999 was 1.1789 vs. last price 1.1782 ECB Statistical Data Warehouse), or else trying to figure out whether the S&P 500 is half-way through a V-shaped recovery and the bounce is actually tradable, this is genuinely a “Rareview” – one that has not been widely observed in the market yet.

See the below illustration. In yesterday’s edition of Sight Beyond Sight, we highlighted that the release of the latest data on Switzerland’s Foreign Currency Reserves showed thelargest rise since mid-2012 when ECB President Mario Draghi famously said “we will do whatever it takes” to save the euro. Specifically, FX reserves were 495.1 bln vs. 472.0 bln estimated vs. 462.7 bln previously. Put another way, they ended up rising by 32.4 bln versus the expected 9.3 bln. A forecast missing by 23.1 bln is, to put it mildly, a significant event and one that highlights the degree of flight to quality away from Russia in mid-December.

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ETF News, Global Macro Strategy

Macro Trading View: Short Gold v. Long Silver; Long Euro Stoxx 50 (SX5E) versus Short S&P 500 (SPX)

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Below excerpt from a.m. edition of Sight Beyond Sight, is courtesy of global macro think tank, Rareview Macro LLC

Neil Azous, Rareview Macro LLC
Neil Azous, Rareview Macro LLC

New Strategy – Short Gold vs. Long Silver

This morning we sold 3000 GLD 12/20/14 P112 at .63 to close.

We rotated our short Gold bias using put options into a short Gold versus long Silver spread using futures.

The updates were sent in real-time via Twitter.

Below are two illustrations: A “monthly” chart of long Gold versus Silver and a matrix containing our trade construction details.

Note that this is not a short-term “tactical” trade but rather an intermediate term “strategic” trade. As such, it will be managed with greater latitude in terms of risk.

Similar to the 200-day Moving Average (200-DMAVG), we find long-term Linear Regression Channels can be a strong technical indicator.

For those not familiar with Linear Regression Lines, it is a line that best fits all the data points of interest and consists of three parts: more

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ETF News, Global Macro Strategy

Wisdom: Is $HEDJ The New Vogue Trade?

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Below extract courtesy of a.m. edition of “Sight Beyond Sight”, the global macro trading commentary published by Stamford, CT-based macro strategy think tank Rareview Macro LLC.

“…For most of the second half of the year we have seen a surging dollar, and a falling euro.  Nothing seems to be coming that will disrupt that.

Now a lot of US investors have asked why the WisdomTree Europe Hedged Equity ETF (symbol: HEDJ) performance has been sub-optimal. Specifically, why isn’t this “strong dollar/weak euro” play not playing out much like last year’s Japan trade (strong dollar/ weak yen) as we saw with WisdomTree Japan Hedged Equity (DXJ)?

As a reminder, DXJ is a portfolio of Japanese stocks with a currency hedge overlay (i.e. 100% of assets is hedged). So HEDJ is the European version of DXJ. The underperformance therefore is simply stock-related.

For example, HEDJ is a basket of European stocks (i.e. 100% of assets is FX hedged). The underlying basket is a Wisdometree dividend weighted basket. It does not quite have the same weightings as the iShares MSCI EMU ETF (symbol: EZU) which is market cap weighted & large cap equivalent or the iShares Europe ETF (IEV) or any other standard index, but it does have a very high correlation.

If you compare HEDJ vs. EZU (i.e. use Bloomberg COMP function, HEDJ in line one and EZU in line 2 and then change the currency next to EZU to EUR instead of USD) you will see performance come back in line with HEDJ as it displays the effect of the FX hedge.

rareview macro nov 24

So HEDJ is working exactly the way it should given how it is constructed and using HEDJ to get long European stocks and a weaker EUR is correct instrument for that view.

So the question becomes, how do you gain using HEDJ? more

Global Macro Strategy

The US Dollar – Novus Ordo Seclorum

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Below excerpt courtesy of Hedge Fund Insight

Nov 17 2014 by Neil Azous Managing Member of Rareview Macro LLC

Most of us hand over dollar bills every day without ever really looking at them very closely. They are too familiar. But if you pause to look closely at the one dollar bill, you will see, right below the one-eyed pyramid, the Latin phrase “Novus Ordo Seclorum”.

The literal English translation of that is “a new order of the ages.” Taken from a book by the Roman poet Virgil, it first appeared on the Seal of the United States, and made its way onto the currency in 1835, where it has stayed ever since. Virgil was not a man to use words carelessly, so when he wrote it, he must have intended to emphasize “new” and, therefore, put it first in the sentence and in front of “ordo.”

A few readers might find that a slightly esoteric digression into Roman and monetary history, of little relevance to the markets today. In fact, they would be wrong. We started with that overlooked phrase because, over the second half of 2014, the professional investment community has come to believe that the US Dollar has indeed established a “new order” and the trend is now here for “the ages”. Continue reading →

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Global Macro Strategy

Global Macro Trading Update: Euro Short-Covering Inspires US Dollar Profit Taking

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MarketsMuse coverage courtesy of out takes from a.m. edition of commentary produced by global macro trading guru Neil Azous, principal of macro-strategy think tank Rareview Macro LLC.. Editors Note: Aside from the prescience of “Sight Beyond Sight” outlooks throughout the past year (including select/specific and since successful trade ideas i.e. FX, Commodities (e.g. gold) and equities, Rareview’s process is uniquely aligned with the fundamental thesis embraced by the very smartest investors re macroeconomic investing: “mitigate exposure to risk, capture alpha in a conservative way, and never stay married to a position, particularly when the herd of wannabees comes to the party just when it seems like the main course has been consumed and coffee and desert are just starting to be served. 

Risk in Very Near-Term is a Euro Short Covering Rally…Closed Core Long US Dollar Positions

 A Lot of Importance Being Assigned to this Weeks US Inflation Data
 Federal Reserve Following Bank of England a Clear Talking Point
 Model Portfolio Update – November 14, 2014 COB: +0.27% WTD, +0.70% MTD,+17.57 % YTD

A Euro exchange rate short covering rally is the greatest risk going into the end of the week. The speed and degree of that is yet to be determined but our expectation is the Euro-Dollar (EUR/USD) will trade above 1.27 and if the US CPI on Thursday disappoints many investors will find themselves in a very difficult position.

After getting long on the US Dollar before the consensus on July 3rd we have reduced 100% our long exposure this morning. The following updates were sent in real-time via Twitter:

 Sold 1180 DXZ4 at 87.61.

 Sold 100% of USD/CHF at .9590.

The combination of our outperformance, lack of inspiration and our confusion over where the market will go next are the main reasons for that decision.

ETF News, Global Macro Strategy

US Equities: Lower Is More Likely Than Higher: A RareView Global Macro View Point

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Below is excerpt from opening lines of today’s edition of “Sight Beyond Sight”, the macro-strategy commentary courtesy of Stamford, CT-based think tank Rareview Macro LLC. Our thanks to firm principal Neil Azous for the following observations.

Neil Azous, Rareview Macro LLC
Neil Azous, Rareview Macro LLC

Model Portfolio Update:   Significantly Reduced Equity Net Long Exposure

Our inspiration level today is almost as low as the price of gold – that is, close to touching a low for the year.

We are struggling to find a meaningful macro catalyst or new top-down theme. None of the specific ideas we have analyzed recently are an “A Trade” and we will not deploy them ourselves, or ask you to either. The risk-reward in the short-term in many consensus themes are up 1 and down 2, not the profile of up 3 and down 1 that in the past we have always looked for.

In fact, we are finding that the psychology that has driven us all year is dissipating and for the first time we are more concerned about giving back performance in the model portfolio than generating further profits.

In the absence of a new opportunity, and following a period of healthy outperformance, a dilemma has arisen for us – markets/positions by nature mean revert. Now everyone has their own metric they watch for,  and their own threshold for the mean reversion in their portfolio to start with. But let us just say that ours has been breached and it has served us well in the past to pay attention to that.

Now that may not be the case for many of you, and if we were in your position there is little question we would be pursuing the same ideas/themes in order to catch up with our benchmark. For today, we have little to offer you. However, like the Homebuilder seasonality and beta observation made yesterday (reminder BZH reported this morning and is in small cap basket we presented), we will continue to highlight ideas as and when they arise.

So in that spirit, we significantly reduced our net long equity exposure. Continue reading →

Global Macro Strategy, People Profiles

Global Macro View: The Best Bet Based On Mid-Term US Elections, Traders’ Pattern Recognition and Plain Smart Thinking

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Global macro trading perspective courtesy of Rareview Macro Nov 3 edition of Sight Beyond Sight. MarketsMuse Editor Note: Rareview Macro’s model portfolio has gained 16.5% YTD, during which time the majority of macro-style funds have returned less than 5% on average, illustrating why this newsletter is more than just a newsletter.

Neil Azous, Rareview Macro LLC
Neil Azous, Rareview Macro LLC

We start with the global benchmark for beta and risk – the S&P 500. The debate amongst professionals is focused on two big issues:

  1.  An expectation that seasonality will override any negative factors.
  1.  There is historical precedent for consolidation and/or weakness. If weakness were to become the overriding theme, then it could be longer and deeper than expected because a series of market studies that looked at the speed and degree of the recent gains show a poor risk/reward profile in the near term.

So which is it?

After speaking with 10 investors in our circle, all of whom we respect, the current score is that 7 would side with seasonality being the overriding factor and 3 are calling for a 5% pullback in the S&P 500 and expect the market to remain range bound for the remainder of the year.

Personally, we struggle with this debate and the 7-3 scorecard. We pride ourselves on not being dogmatic in our views, especially around bulls, bears, inflation, deflation or simplifying our model portfolio into two polar viewpoints. This is particularly true given this stock market is well-known for behaving in unprecedented ways.

What we would say instead is this: Continue reading →

Global Macro Strategy

Rare Events Taking Hold: Macro View Looking for Upside By Reading The Chinese Fortune Cookie

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Below excerpt is closing conclusion courtesy of Oct 28 edition of Rareview Macro LLC publication “Sight Beyond Sight”

Neil Azous, Rareview Macro LLC
Neil Azous, Rareview Macro LLC

The Federal Reserve (FED) will make its policy announcement tomorrow. The Bank of Japan (BoJ) will make its statement at the end of this week. The European Central Bank (ECB) meets next week. All three of them will be dovish at the end of the day.

Additionally, Jean Claude Juncker begins his presidency of the European Commission next week and that should embolden the call for fiscal help, which is required even more now that both Italy and France have changed their budget plans (see details below in Top Overnight Observations). There is no question that professionals we speak to are warming up to the idea of a larger fiscal announcement and this is tempering their bearish view on Europe to a degree.

Finally, with a positive US employment report, expectations of a Republican win in the US Mid-term Elections, and the positive seasonality associated with the start of a new month, it can be easily argued that the theme for the next two-weeks is global policy support.

The worst part of it is that everyone who was forced to reduce risk in October, and then missed the move back up, knows this is the market’s support structure regardless of the fact that QE finally ended yesterday.

This is not us being overly constructive on US equities or risk assets. After six weeks of one-way negative news flow and the sentiment shifting to extreme levels, there are now three weeks of events that should be supportive for risk. This is just the start of week number two in that period.

And that, combined with the lagging performance in the professional community, is enough to walk sentiment back even further, especially when countries like China and Sweden move out of nowhere to support the market on the upside.

MarketsMuse Editor: For the reader who requires further context re: above, the preface to above-noted thesis is… Continue reading →