Huh? The banks are catching an uptick on the 2/10 steepener. You don't really believe we have massive inflation coming do you? And I assume what is good for Goldman is probably good for you or did you miss this move in the 2/10s?
But there stuff is built in China or Korea, so it will be an import tax to encourage them to build in america therefore creating jobs and maybe exports which bring money in. About the only thing I agree with.
Nah, I happen to have done well on the steepening... Not that it matters. And yes, the Donald is going to be awesome for me and others like me. But no, I still don't think that's a good thing. If you think that the performance of financials on Friday was due to the curve steepening, I would strongly urge you to think again.
Gotta love people who complain that we don't have good people working for the government, then advocate we arbitrarily fire a random percentage, cut pay and double work for the rest, and then wonders again why quality people aren't attracted to government jobs! Let's start with the military, since it is responsible for over half of discretioary spending. Those lazy military personnel, just sitting around waiting for the next chance to risk their lives. Let's randomly fire a bunch, cut pay for the rest, and increase workload for all of them. That last bit is sarcasm for the literalists, btw. Turns out the real world is a lot more nuanced than a ranter can grasp.
Friday? LOL. I'm talking about the move the last few months. Come on Marty, my dear friend, clearly the NOB is not going along with this "massive inflation" theory. The yield curve is just not backing this story up. Did the banks come out of a 5 year hibernation? Sure, a little bit. But let's not spill our tea over a few upticks on the short end of the curve.
Firstly, you're confusing me here. You were talking about 2s10s just now, so where did NOB come from? The two have, not surprisingly, moved in opposite directions since the election (last few months), 2s10s steepening arnd 25bps, while 7s20s flattened arnd 15bps. So what precisely is the point you're making about the yield curve? BTW, one interpretation of the flattening further out is, in fact, a temporary bout of inflation, which the Fed will need to act upon. Secondly, GS stock rallied arnd 35% since the election (SPX +7.7%). Are you referring to this as "coming out of hibernation a little bit"? Finally, I have no idea what uptick you might be referring to here. It's reasonably obvious to me that the outperformance of the banks in recent months had quite a lot to do with the expectations of a VERY friendly regulatory agenda coming out of the current administration. Sure, expectations of a steeper curve and broadly higher rates help, but it could be all gone tomorrow. In Goldman's case, the dream team of Gary and the Two Steves is just a sweet sweet cherry on the top.
Marty, you are making all of my points. As I've pointed out on other threads, yes, the 2/10's are diverging from the 10/30's which is why I'm NOT buying this massive inflation theory. I simply asked you to defend why you seemed to agree with the title of this very thread that "explosion" of inflation is under way. Do you agree with this? I don't and the yield curve agrees with me. Yes, the front end moved on the hopes of short term fiscal stimulus but the long end, which is more dependent on long term growth, is not showing this. I think we are in agreement on the YC, but I'm curious as to why you seem to concur that an explosion of inflation is coming. Yes, I'll concede that deregulation or the hopes of it have helped bank stocks, but fixed income volumes have exploded since the election and Blankfein himself stated that the curve steepening has really brought flows into the bank. And yes, 35% is an uptick when you consider they have been relatively quiet for years while the FANGS have exploded in that time period.
I don't recall ever necessarily agreeing with the idea that "massive inflation" is coming. It's is certainly a possibility and the curve has priced it, in fact. Whether or not inflation persists is another matter and is in doubt. From all this, I am not quite sure how you conclude that the curve agrees with your view. As an aside, if you want to specifically look at the pricing of inflation, you can use the TIPS mkt, where 2s30s breakeven inflation curve flattened quite aggressively. This occurred as a result of 2y inflation rallying almost 100bps from the lows of 2016. You be the judge of whether this constitutes an "explosion" or an "uptick". As to bank stocks, I dunno... 35% in 3 months equates to almost 1.5x the monthly run rate of AMZN in the past 5 years, according to my arithmetic. My only point here is that it very much looks like the Donald and his dream team are going to make banks great again. Most of the commentary out there which I have seen is in agreement.
When I said the curve agreed with me it was in reference to the fact that the short end (2/10) lifted nicely after the election. The long end (10/30) also spiked "on election night" and then sold off in the weeks and months to come. Meaning, that the market does believe we are going to see some short term pricing pressures in the economy but long term it's very suspect. Which is exactly my point of view. Regarding bank stocks, don't ya think that "perhaps" there was quite a heavy short position in those stocks going into an election that was pricing in a 100% certain Clinton victory and "perhaps" those shorts had to cover when the very opposite happened? Just an idea. So if you are so bullish on bank stocks, which ones are you long? And if you are not, why would you pass up such an easy trade if you think they are going much higher? I'm sincerely interested.
Excellent, so we're all in agreement on the curve moves... Specifically, while "massive inflation explosion" might be in the offing, it's not clear whether it will persist past the next few years. I have no idea whether the rally in banks is short covering or something else. It's certainly possible. Since I don't do single stocks, I use one of them index funds. For us muppets in the UK, the choices are fewer (at least from my provider), so I can use KBE and a fund which tracks the MSCI global financials index. The latter is the one I happen to be long (but should be longer, probably).