Caseynotes

Predictions and opinions, oh dear. 😳

S&P straight back into all time highs. Indices up. Bonds, Oil and Gold down. BoC rate decision 3pm, presser at 4:15pm.

Have you ever wanted to be a sell-side economist? Here's 10 rules (tricks of the trade) you need to to master. 21 Jan 2020 - Dario Perkins 1) Economic forecasts: Forecasting GDP is basically a waste of time - no investor actually cares what this backward-looking gauge of the economy is doing. But getting it "right" is one of the few (though dubious) ways you can signal your value as a sellside economist. In the old days you would pretend GDP reverted to some sort of trend but today you can just assume it stays close to whatever the current level is (usually 2% for the US). If you get your forecast wrong, you should blame “unseasonal” weather. 2) Game of two halves: Every year must be divided into two. If the economy is weak in the first half of the year, you should assume a recovery in the second half. If it is strong, assume a slowdown. Whatever makes the average of the two halves - there are always two halves - close to 2%. 3) Economic shocks: Whenever something unexpected happens, like extreme weather or a government shutdown, industrial action or trade tariffs, a financial journalist will always want to know what this means for the macro economy. You need an estimate that is high enough to matter, but not so large that it would force you to change your forecast or look obviously wrong within a few weeks. A good rule is that the event will add or subtract 0.3%pts from GDP. After all, this is invariably the answer you get from sophisticated econometric models (the economists who created these models obviously caught onto this idea long before anyone else). 4) Recession watch: History shows nobody can forecast recessions. Even those that do typically benefit from the ‘stopped-clock’ effect and usually get the causes of the recession totally wrong (see Dr Doom circa 2006). But you can’t admit this to investors and you certainly don’t want to get caught out by a downturn, especially when a lot of time has elapsed since the last recession. So the best approach is to emphasise the dangers of recession but claim this is at least 18 months away. If it happens sooner, you can say you correctly warned about the dangers. If there is no recession you can simply postpone your forecast and hope nobody remembers. 5) How to get attention: If you want to get famous for making big non-consensus calls, without the danger of looking like a muppet, you should adopt ‘the 40% rule’. Basically you can forecast whatever you want with a probability of 40%. Greece to quit the euro? Maybe! Trump to fire Powell and hire his daughter as the new Fed chair? Never say never! 40% means the odds will be greater than anyone else is saying, which is why your clients need to listen to your warning, but also that they shouldn’t be too surprised if, you know, the extreme event doesn’t actually happen. 6) Central-bank watching. For the most part central banks will tell you exactly what they are going to do. But you don’t want to regurgitate this "transparency" because people will accuse you of being *too consensus*. So you must choose to be either slightly more hawkish or slightly more dovish. But as with recession forecasts, you don’t want to make strong near-term off forecasts because market pricing could influence policymakers - they try to avoid shocks. So maybe choose a 6-12 month window. If you still get your CB forecast wrong you have two potential excuses a) you can say officials are making a horrendous "policy mistake", or b) you can say their "reaction function has changed", which is a posh way of saying they are behaving erratically. Just because the central bank employs 10,000 people and has more resources than you can possibly imagine, doesn’t mean they have better information that a sell-side economist armed with Excel and a few Bloomberg headlines. 7) Market forecasts. This is really hard and it's best to avoid this altogether if you can. If you can’t, perhaps because you are an interest rate "strategist", your best option is to choose a forecast slightly higher of lower than the current spot price and then vary it in sync with the latest market trends. If the yields are falling, lower your 12-month forecast slightly. If you look on Bloomberg, you will see that this is exactly what the consensus does. The same approach works for oil prices. 8) Forecasting the stock market. Most of the time the equity market goes up so, to quote a former equity strategist colleague "you need a **** good reason" to forecast it not going up. But you should also think about the response you will get from clients, especially if you work at an investment bank. If you forecast a bear market and it goes up, everyone will think you’re moron. If it goes down, everyone will hate you. But if you forecast a bull market and prices rise, you will become a hero (and if it goes down, nobody will remember because everyone will have got it wrong). 9) Mastering Chartism: It is possible to show a relationship between almost any two variables in macroeconomics as long as you can display them on two axes and are willing to spend enough time manipulating the second axis, experimenting with data lags, inversions or various moving averages. If you still can’t make the relationship work, extend your history to cover the Global Financial Crisis; everything looks correlated during the GFC. 10) And if all else fails, blame "liquidity". Liquidity can explain *everything*, it’s basically a residual. And since nobody can measure it, you can just infer its presence (or not) from whatever is happening to market prices. It's the equivalent of "confidence effects" in macroeconomics. The political right particularly like the term "liquidity" because it is a convenient way to accuse policymakers of ‘distorting’ markets without any actual evidence.

yes but not bad considering the inevitable killer zombie apocalypse we are heading into, Dax doesn't seem to mind 😧

Looking relatively bullish with less than an hour to go in the US session, especially on a day of headlines re; coronavirus, identified in 4 countries outside China including the first case detected in the US reported just a few hours ago. S&P daily;

and they did , Dow M15 chart;

Biden gets a boost over Bernie;

world poverty is all ready being solved, by capitalism funnily enough, down 50% in the last 2 decades 🥳🥳 https://humanprogress.org/article.php?p=1287

early talk from US traders is of fading the panic move which has so far been the case in the London session and usually not a bad idea, especially as after the initial market moving headline there has been little follow up news.

market open is nearly always a problem especially when there are 2 (Frank and Lon), often they will counter each other but today they rather complimented each other.

dax pauses after tagging the daily pivot;

back at 7:30 and the rejection of S1 for a retest of S2?

dax trying to punch it's way up out of the box now;

Useful information for when you catch the virus 👀 🛌🥼🚑 Mr Yen @RealBrianWatt thru human history, when you read stories of influenza deaths in the millions, and people playing cards in the afternoon and being dead by nightfall, it is usually a "cytokine storm" in the body that causes it. A cytokine storm is an overproduction of immune cells and their activating compounds (cytokines), which, in a flu infection, is often associated with a surge of activated immune cells into the lungs. And then you basically drown

no need to worry, people have been telling us for years on end we were about to enter the big bear market, still waiting.

Strong Asia data;

A good beat on the Ger and EU econ senti data could help things along. A strong positive after a long run of negatives. Chart.

I've still not got involved here. the move to catch was overnight, now on the dax price is mulling around S2 and the weekly chart resistance level (red) so recently broken and the next direction is not clear. need to see a break in either direction.

see Admiral markets are one step ahead of IG again in already offering the MT5 platform, the details look pretty good as well, hope IG aren't too far behind.

"The IMF has predicted that the UK economy will outpace the Eurozone in its new forecasts released yesterday. The forecasts, stretching to two years in the future see the UK’s growth accelerate in both 2020 and 2021."

include here for reference;

That reminds me; see Earnings thread.

Frankfurt open looking at an attempt to recover, the second news report on IG as in the daily dashboard post below on Japan seeing receding global risk. The battle of 2 opposing headlines. UPDATE 4 – BOJ holds fire, nudges up growth f'cast on receding global risks 07:30 BOJ keeps interest rate targets, guidance unchanged Board nudges up economic growth forecasts Report says global risks receding somewhat H1 charts;

WRAPUP 1-China virus outbreak spooks global markets as fourth death reported 04:46 * Fourth person dies from pneumonia in city of Wuhan * More than 220 cases confirmed, mostly in China * Asian shares fall amid fears of outbreak's spread * Australia, Singapore strengthen screening measures