3/18/2020 Wednesday

All currencies fell against the dollar during the session today, and continue to as I type this evening: While the Fed is madly printing, other countries are aggressively printing their own currencies as well. And, clearly, the global demand for dollars is dwarfing the Fed’s attempts to suppress its rise. Thus, even the safe-haven short USD/JPY play, that has worked so well of late, has stopped working. This evening, for example, while U.S. equity futures are selling off by nearly 5%, the dollar is up 1% vs the yen. That is the complete opposite of what markets have grown accustomed to, until literally the past few days.

While we’ve already exited the pound and the euro due to these dynamics, we, this morning, cut our gold position by half (moving ½ proceeds to cash, ½ to UUP [bullish dollar]), we may, as soon as tomorrow, reduce our yen position as well. I.e., the dollar looks to continue its strong upward trend for the time being — which is problematic for the Fed (as well as for markets)…

Equity markets sold off today, at one point breaching the 2018 low; by the close the market had recouped roughly half of its steep losses (tonight, however, it’s testing the cash-session low). 


Treasuries sold off big today, Gold down as well, oil down 20%.. While oil is rallying hard this evening, gold is off another 42 bps and treasuries are continuing lower as well.

Overall asset price dynamics of late clearly reflect a massive global deleveraging.

Today’s problem, vs 2008, is not in the banking sector, it’s in corporates, and the Fed hasn’t figured out how to get liquidity into that space. Begin buying corporate debt directly?? Maybe! Likely, actually.

It’s a fairly safe bet that the amazing moves/whipsaws in both directions of late are largely algo-driven. I.e., momentum in one direction is chased, the market hits programmed levels (in various metrics), funds cover and move aggressively in the opposite direction.. I.e., the market has been largely driven of late by players who lack emotion (computers), have no cash buffers, and, thus, as equities sell off in a hurry, are left to liquidate assets, say bonds and gold (prior winners), to cover those losses — creating unintuitive moves in asset classes that are typically viewed as safe havens.

It appears as though retail investors (moms and pops) have not given up the ghost — which tends to be necessary before we can anticipate a bottom. Still receiving the “are we buying the dip?” inquiries. We’re not…