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Stolper Appears In Time Of FX Uncertainty, Provides Fadance

Tyler Durden's picture





 

FX traders of the world have been forlorn for a week or two as the lack of directional guidance from the anti-guru-du-jour Thomas Stolper of Goldman has been sorely lacking. Worry no more. He is back with with his latest 'Fadance' (/fey-dyns, verb/ - "Advice" which Goldman Sachs provides to "muppets") in that he prefers to be short USDJPY from 82.8 (suggesting JPY strength on the back of seasonal patterns and the recent deterioration in the trade balance as being transitory temporary). Given his recent track record, being long the USD against the JPY would seem appropriate and his stop (and therefore the target) at around 84.5.

Trade Update: Go short $/JPY on the potential reversal of recent JPY-negative factors

Thomas Stolper

As we have been pointing out for some time, there is a substantial risk that the sharp move in the JPY will reverse at least partially in the new fiscal year. Seasonal patterns point in that direction. In addition, we have also highlighted that the recent deterioration in the trade balance was likely driven by temporary factors, and our Japanese economists expect the current account balance to remain in surplus in the next few years.

 

The surprise improvement in the February trade balance in Japan supports our view and we are now also coming very close to fiscal year-end in Japan. This news comes against the backdrop of substantial speculative short Yen positions, according to our Sentiment Index and IMM data. Unwinding of these positions could therefore be an important driver of $/JPY weakness.

 

The perception after the February BoJ meeting was that the bank was changing its stance, another important factor for the Yen. The central bank sounded more committed to achieving a re-defined 1% inflation target and in a more front-loaded manner, so we do believe that some real shift has occurred. That meeting also coincided with the beginning of the sharp Yen sell-off. However, the subsequent March meeting failed to follow up with additional easing measures, which led to some re-assessment by markets of the extent of the change in BoJ policy.

 

In contrast, we continue to expect QE3 by the Fed, which would suggest that the Fed remains more dovish than the BoJ. Monetary policy differentials therefore imply the recent move in $/JPY was too large. This is also visible in the correlation with rate differentials, where USD/JPY appears to have substantially overshot the moves in rate markets.

 

We would recommend investors go short $/JPY at current levels of 82.80 for a target of 79 with a stop on a close above 84.50.

 


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Thu, 03/22/2012 - 10:38 | Link to Comment Marge N. Callz
Marge N. Callz's picture

Oh crap, I agree with him.  Sell me out!

Thu, 03/22/2012 - 10:45 | Link to Comment redpill
redpill's picture

So BOJ should intervene at any moment and send JPY tumbling...

Thu, 03/22/2012 - 11:30 | Link to Comment LowProfile
LowProfile's picture

...And Fed will do nothing, sending USD soaring...

Thu, 03/22/2012 - 10:39 | Link to Comment BackOffice Slut
BackOffice Slut's picture

I wish i got paid to be wrong......ALL THE FUCKING TIME!!!!

Thu, 03/22/2012 - 10:43 | Link to Comment resurger
resurger's picture

lol

Thu, 03/22/2012 - 11:11 | Link to Comment scatterbrains
scatterbrains's picture

but Ms. Slut if we paid you you'd be a whore so better to just keep giving it up for free.  Thanks babe

Thu, 03/22/2012 - 11:23 | Link to Comment Acet
Acet's picture

Actually a really good record in giving exactly the opposite recommendation of what actually ends up happening is just as unlikelly as a really good record in giving recommendations that match what ends up happening.

The law of probabilities dictates that when making recommendations on investments with binary outcomes, he should be right 1/2 the time and wrong 1/2 the time. That his record is being wrong almost 100% of the time is pretty impressive.

Thu, 03/22/2012 - 11:31 | Link to Comment LowProfile
LowProfile's picture

 

That his record is being wrong almost 100% of the time is pretty impressive.

...Isn't it?  Things that make you go "Hmm..."

Thu, 03/22/2012 - 11:52 | Link to Comment minsky moment
minsky moment's picture

You're ignoring risk reward...

A) Tom goes short X at 100 (SL=105, T/P=90)

B) Tyler goes long X at 100 (SL=95, T/P=110)

X rises to 105, takes out Tom's short, then prompty falls to 94, takes out Tylers long. They had opposite views, but both lost money. Outcomes aren't exactly binary over the short run when one must also account for volatility. Notice stolper's implied risk<reward

In general its perfectly possible to get the direction right, and still lose money. Especially if you are shooting for the stars. Did you guys like how I made tyler long? Because as everyone knows, tyler is just so bullish on everything.

Thu, 03/22/2012 - 10:42 | Link to Comment SheepDog-One
SheepDog-One's picture

'We continue to expect 'QE3'....wow even more 'fadance'.

Thu, 03/22/2012 - 10:40 | Link to Comment 43 Steelie
Thu, 03/22/2012 - 13:36 | Link to Comment LowProfile
LowProfile's picture

Hendry makes the same mistake that othe deflationists do (Shedlock, Niall Ferguson, etc.) in that they assume there will be some sort of "responsible" action taken by governments and central banks to preserve their various medium of exchange.

Brief deflationary impulses are always met by massive inflation efforts.  Eventually that finds it's way into the hard cash economy and whhhhhhoooOOOSHHHHHH!!!!

Thu, 03/22/2012 - 10:46 | Link to Comment Dr. Engali
Dr. Engali's picture

He may be right on this one.

Thu, 03/22/2012 - 10:57 | Link to Comment LMAO
LMAO's picture

Given his recent track record, being long the USD against the JPY would seem appropriate and his stop (and therefore the target) at around 84.5.

ROTFL, I love Fadance

How on earth is it even remotely possible that anybody can take these Goldman fuckers seriously, let alone deal with them.....I mean WTF?! There is, combined amongst all employees, at least a cool trillion years worth of incarceration at work there. They can count their blessings that the law apparently does not apply to them.

Thu, 03/22/2012 - 10:55 | Link to Comment PEanal_yst
PEanal_yst's picture

Shit I am all in on fxy puts.  Not only is it a stolper trade, this is the kyle bass trade. CDS doesn't work for a country that can print its own money. 

Dumb money will always hit the yen pavlovian response I guess. But they clearly aren't paying attention to Japan's negative savings rate and what that would mean for incremental debt offering, which account for 60% of government spending, and the potential for monetization. Japan has to roll over ~300 trillion JPY in debt this year, with Japanese pensions as now a net sellers of JGB, and less and less working people doing the savings and more and more social security outflows, you tell me how they are going to finance the additional 55-60 trillion JPY in new debt offering without printing massive and "I mean more than bernanke massive" amounts money to keep their ponzi going for one more can kicking. I'll happily take the other side of this trade. 

Thu, 03/22/2012 - 13:37 | Link to Comment LowProfile
LowProfile's picture

Well that would be a surprise, that the first big printing comes out of Japan.  Makes sense though, everybody's focused on the Euro high-speed train wreck.

Whodanode?

Thu, 03/22/2012 - 10:56 | Link to Comment EyesWise Shut
EyesWise Shut's picture

How about Stolper second guessing Zerohedge?

Thu, 03/22/2012 - 11:02 | Link to Comment eBuddha
eBuddha's picture

going long at 82.5 vs 81.0 stop / target 85.5

 

Thu, 03/22/2012 - 11:08 | Link to Comment Peter K
Peter K's picture

That was close. But I'm on the right way:)

Thu, 03/22/2012 - 11:17 | Link to Comment eBuddha
eBuddha's picture

now comes the rumor that a Jap bank may be in trouble......STOLPER !!!!!!!!!

 

Thu, 03/22/2012 - 11:18 | Link to Comment The Axe
The Axe's picture

looking for i little help....TVIX down 2% VXX up 4.3% wtf????

Thu, 03/22/2012 - 11:34 | Link to Comment LowProfile
LowProfile's picture

Decay on TVIX is horrendous, IMO worse than TZA. I would only ever short it.

Thu, 03/22/2012 - 11:37 | Link to Comment indianajohns04
indianajohns04's picture

TVIX is so ruined.....doesn't really track anything anymore. It's trading like 30% at least above NAV because they stopped issuing shares. Use UVXY if you want to trade levered short term volatility. Warning though it's all real jacked up look at what happened from Friday to Monday. The futures changed months and the April VIX was way higher than the March VIX. VXX just got the losses not the "gains" really don't know how it all works I'd stay away just like Zerohedge said when TVIX entered.

Thu, 03/22/2012 - 11:38 | Link to Comment indianajohns04
indianajohns04's picture

If anyone can explain how the levered VIX funds track futures and why what happened this week happened it would be much appreciated.

Thu, 03/22/2012 - 11:42 | Link to Comment 5880
5880's picture

I've explained it before, search

you wont like the answer

Thu, 03/22/2012 - 12:02 | Link to Comment indianajohns04
indianajohns04's picture

Ha I'll see if I can wrap my head around it. Thanks though!

Thu, 03/22/2012 - 11:19 | Link to Comment crawl
crawl's picture

Thanks ZH. Love me the easy trade ideas.

Thu, 03/22/2012 - 11:39 | Link to Comment GFORCE
GFORCE's picture

Fadance- love it!

Thu, 03/22/2012 - 11:53 | Link to Comment spine001
spine001's picture

Being wrong almost 100% of the time is statistically impossible unless you had insider information and were using that information to mislead people and profit from that by making the opposite bets through "testaferros" (useful fools that lend their names to allow people to do things they couldn't in their own names, something VERY very common in Argentina)

 

Untiil next time,

Engineer

Thu, 03/22/2012 - 11:57 | Link to Comment Frozen IcQb
Frozen IcQb's picture

Hate to admit it but I believe he may be right.

Japan’s trade deficit will force a change from a weak Yen to a strong currency policy to facilitate their infrastructure reconstruction through cheaper imported material and energy. This will require repatriation of funds made possible by selling USD assets. Consequently, US import prices will soar to the detriment of overleveraged and unemployed American consumers.This may be the biggest threat to the 2012 US economy.

Thu, 03/22/2012 - 12:05 | Link to Comment Sneeze
Sneeze's picture

I am a newb.

What do you folks think about trading this with something like YCS? 

Thu, 03/22/2012 - 14:28 | Link to Comment Yen Cross
Yen Cross's picture

 Stolper is a worthless meat puppet! I called shorts on aud/usd and the jpy/crosses on Tuesday. I saw that shit storm of economic news coming out of China and Europe last night.

  Yet the tin hat CNBSers still think the U.S. equity markets are a buy. UnF..king believeable! They still don't get the fact that most U.S. multinationals derive 50% of their profits (FROM) over seas. Those idiots can't read volume numbers, or inflation numbers. They live in "tin foil" houses. Crude over 100$ is bad!

   That "dipstick" Mandy on CNBS should move back to OZ and sell her Hopium to the Aborgines!

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