Announcements:

I’m pleased to announce that the regime change article I wrote for Automated Trader magazine has been published.  If you want to read an excerpt, the link is here.  Subscribers to AT should be receiving the issue shortly.
I’ve also started writing again for the CA web site.  Read my latest post titled “Widen Your Trading Horizons” where I discuss thinking about different types of trading commentary.
Watch for new features in coming weeks.

Quotations:

Apparently, that 2.5% CPI that I thought was a “punch in the face” was a baseball bat to the head for the FOMC.   (CA, Mar 5, 2017)

If you were a business and you knew tariffs were coming, or a trade war, or whatever, wouldn’t you accumulate additional inventory or engage additional labor to otherwise prepare?  On a more personal note, it seems to me that accumulating some French wine or even coffee pods might be a “free personal option.”  I mean if there is no trade war, you lost nothing except save yourself trips to the store later in the year.  If those prices skyrocket because of tariffs or taxes, you just saved yourself some money.  Whether you are a business or an individual, it seems to me the “smart” thing to do is to prepare ahead of time.  In effect, we may be pulling economic activity forward, which may mean less economic activity later.  So if we do start seeing the hard data turn around, it may not be as strong as it appears.  Maybe – or it can just be strong data.  Anyway, I’m going to mull this over some more.  (CA email, Mar 9, 2017)

Weekly Essay – Fed Takeaways:

When things don’t go as planned, I think it’s always good to take a step back and reflect.  Was the March hike something that could have been expected?  Maybe.  You just needed to think CPI would have lit as large a fire as it did under the FOMC.  I thought they would have needed some PCE corroboration.  But I suppose PCE inflation was firm month over month, even though it was in-line.  We learned a number of things from the events of the past week:

CLICK TO READ THE REST OF THE ESSAY FROM MARCH 5.  One of the things I discuss is this chart from last year:

Next Week: I discuss and update to my Six Pillars of Long Rates post from three months ago.

Other Delayed Market Comments from the CA Newsletter:

From the News Takeaways Section

  • March hike is 86% priced.  After Yellen’s comments, it’s not a surprise that the March hike is now priced in, pending payrolls.  It’s a little shocking for the Fed Fund pricing to have moved so much when there was no appreciable change in the data in the past few weeks.  Well, other than the 2.5% punch in the face.  This leads me to the essay topic this week.
  • A Bovada poll showed that Trump is only about 55% to finish out his term.  That seems very low.  I feel somewhat badly for him.  I think if his presidency doesn’t go well, he could take a large financial hit.  Ivanka’s merchandise was taken off for “poor sales.”  For all that is made about foreign dignitaries staying at his properties, the fact of the matter is, I would guess most of the people who used to frequent his properties didn’t vote for him.  A large chunk of those people probably find him so offensive as to never stay at his properties again.  And I doubt Joe Mechanic whose manufacturing job he just saved is going to shell out $600+ a night to stay at his hotels.  I suppose foreigners who like the novelty may stay.  But if things don’t go well and he quits, it’s going to suck to be in the hotel business.  But since he is the captain of the ship all of us are riding on (or being pulled by), let’s hope things go well.
  • The open interest on FFJ7 has decreased 148K contracts since a week ago.  Well, nice call Mr. FFJ gorilla [Sometimes you just have to tip your cap]… if you didn’t have insider info!  I’m not bitter.  Eh hem.
  • The contracts roll in one week.  If you look at short term historicals/technicals, you should adjust accordingly.  The roll will look make some of our structures look more attractive.
  • On the week, we had selloff led by a 24.5bp move in the blues.  We had a hawkish Fed, a more “presidential” Trump, a promise of a “massive” tax cut and stronger Chinese data.  And you know the long end is going to puke when a dove like Brainard starts talking about ending portfolio reinvestments.  Increased curvature was led by the greens, as would be expected.

Trade Summary from the Delayed CA Newsletter:

FLIP TRADE UPDATE: I discuss some Flip trade themes you can look at if you are bearish or bullish.

OFFICIAL TRADE UPDATE: I give an update on a number of the trades on the Trade List.  I added a new trade that didn’t work well, but has some potential from the current levels.

TO PURCHASE THIS ISSUE, CLICK HERE.

Forum Update:

The most notable posts from the Forum were:

I help a member understand what Fed meetings are being priced by the ED and FF futures.  As I’ve mentioned in the past, many people trade interest rate futures without knowing exactly which Fed meetings they are taking a position on.  CLICK TO READ THE REST OF THE POST ON THE CA FORUM

I answer some viewer mail on the “directionality” of structured trades.  Non-linearity is key.  CLICK TO READ THE REST OF THE POST ON THE CA FORUM

Let me know if you have any feedback on the format or content.
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