Below is the lead-in to this morning’s edition of Rareview Macro’s “Sight Beyond Sight”; the ‘read more’ link below provides additional extracts that caught the eye of more than a few folks who follow macro-strategy themes..

Three Day Trickle Down Rule in Play…This is Not Same as Late March Correction

• Conundrum Across Asset Classes Leads to Risk Reduction
• Extra Focus on Front End of Interest Rate Curve and the Left Coast Investor
• Underbelly of Professionals Too Weak…Skepticism Suggest Weakness is Bought

Overnight

We apologies in advance for the deviation away from our normal humility level but sometimes frustration get the better of us.

The definition of the word Conundrum is: a confusing and difficult problem or question. While just a handful of examples, and because no one has a good explanation, these conundrums are leading professionals to reduce exposure levels for a third day in a row.

Brent Crude Oil is now down for eight straight days (during which it has lost ~5%) and it’s traded down in 12 out of the last 14 days. It is a similar trend in WTI Crude Oil which is down 10 out of the last 12 days. However, contrary to what one would expect Airline stocks are significantly lower in price and the correlation between Gold-to-Oil has not swung back to being negative. In fact, Gold is showing the largest risk-adjusted return and WTI Crude Oil is showing the largest negative risk-adjusted return in Commodities and the rejection so far of the profile (i.e. Gold dropped -10% over 45-days) that followed the peak in the Ukraine-Russia conflict has Gold bears nervous, including us who remain short it via a longer dated option structure.

The darling of Emerging Markets, India SENSEX is -2.5% over the last two days but the Dollar-Rupee (USD/INR) is lower by 41 basis points (i.e. weaker USD and stronger INR). Historically, in bouts of risk reduction both SENSEX and Rupee would weaken in tandem. Continue reading →