Desk FI strategy into year-end and through Q1 will be tied to the results of Nov/6.
Given a Republican victory we will look for “surprising” strength in both payroll and consumer-related releases. Given a Democrat victory, we will look for “surprising” weakness in both of these series.
Strategy can be constructed in any number of ways; for the purpose of this blog we generally confine our sample to the term structure. Notwithstanding the instrument, the idea is to strike at the extremes.
Recall our last illustration. Given the market-crowd frenzy following the announcement of QEIII, readers were told 9/14 to sell this spread (S – L), then 116, 5 – 10yr, 285, 2 – 30 yr. Those who resort to examination, versus association and sympathy, understood the opportunity. Readers were then instructed to take in this position 9/27 at 100 and 254, a handy little exercise.
The same general approach will apply just ahead, yet based on a vulnerability of a different sort. For example, observers will grossly under-estimate CEO enthusiasm tied to a Republican victory; the same observers will completely miss the giant sucking sound as potential job creators and consumers withdraw, given the reality of 4 more years of what has proved to be a failed experiment.
So the concern for the bottom line is key. But we are also concerned for our Country. How She got this far is a mystery given the lack of scholarship of so many of those who enter the voting booth. We are hopeful that enough have come to understand that our prosperity (and by linkage, that of the free world) does not depend on an expansion of the public sector but on the unleashing of private activity through the elimination of gov’t and central-bank interventionism and the birth of a reformed tax system; and, all of this anchored by the rule-of-law.
Robert Craven
Given a Republican victory we will look for “surprising” strength in both payroll and consumer-related releases. Given a Democrat victory, we will look for “surprising” weakness in both of these series.
Strategy can be constructed in any number of ways; for the purpose of this blog we generally confine our sample to the term structure. Notwithstanding the instrument, the idea is to strike at the extremes.
Recall our last illustration. Given the market-crowd frenzy following the announcement of QEIII, readers were told 9/14 to sell this spread (S – L), then 116, 5 – 10yr, 285, 2 – 30 yr. Those who resort to examination, versus association and sympathy, understood the opportunity. Readers were then instructed to take in this position 9/27 at 100 and 254, a handy little exercise.
The same general approach will apply just ahead, yet based on a vulnerability of a different sort. For example, observers will grossly under-estimate CEO enthusiasm tied to a Republican victory; the same observers will completely miss the giant sucking sound as potential job creators and consumers withdraw, given the reality of 4 more years of what has proved to be a failed experiment.
So the concern for the bottom line is key. But we are also concerned for our Country. How She got this far is a mystery given the lack of scholarship of so many of those who enter the voting booth. We are hopeful that enough have come to understand that our prosperity (and by linkage, that of the free world) does not depend on an expansion of the public sector but on the unleashing of private activity through the elimination of gov’t and central-bank interventionism and the birth of a reformed tax system; and, all of this anchored by the rule-of-law.
Robert Craven
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