#retrace xlv

[fivekrystalpetals]

[I am unable put all of my thoughts in a single post (it is growing to a monstrous size ;-;) so I decided to split it into long-ish posts of utmost three chapters at a time bc I have so much to say about each chapter.]

My thoughts so far: Retrace XLIII to Retrace XLVI

Continuing from my last post, our main trio have started working on tracking the Seal on Glen’s soul that needs to be moved and hidden before the Baskervilles get to it. After the first Seal was broken (and led to the earthquake in Sablier), Oz and co. (+ Sharon this time) are off to find the second seal thanks to Rufus Barma’s information. Everything goes well, the old man accepts that Oz is the rightful owner of the seal because he is the contractor of the B-Rabbit and agrees to hand over the seal to them... when Vincent with his Demios strikes :) happy times 👏

Vincent, this guy, really has the patience and confidence to sit back and enjoy the show, doesn’t he? He gets others to do the job for him, hoping, or rather, watching things fall into place perfectly according to his plans and step in for the final act to reap the rewards. I said here too how he let the heroes run around for him, tracking down Alice’s memories from Cheshire’s domain and all—then simply kidnaps Sharon and gets Break to destroy their hard-earned reward. He has been the puppet master in almost 3 consecutive arcs. 

tl,dr; Oz and co., lose the second seal as well.

Some points about this short arc: 

1] tbh this arc felt less about Oz, Gil or Alice but more about Sharon. After Break was put out of commission because of his sudden albeit developing handicap, Sharon realizes she has to improve herself a lot more if she is to be of any help to Break. In the initial chapters of the manga, I had assumed that Sharon and Break were partners-in-crime, as in Sharon is a sort of plan-from-chair sleuth while Break does all the field work, brain and brawn duo but turns out Break is a one-man army, brain, brawn, diabetes, depression, everything. 

so, thrice within the span of two chapters, reality smacks her right in the face. One, her naivety about the world and how calculating and dishonest people can be:

and two, how weak she is if not depending on her chain:

By the end of the Retrace 46, she ends up coming to a self-realization that she is powerless. And that she was too dependent on her chain (and Break as well)

which is all true, but I have to agree with the latter part of what Grandma Shirley says—

because I don’t think Sharon necessarily has to be adept at martial arts or field work? We already have Gil, Alice, Oz, Break and others doing that. At this point, what we need is more manpower for research and study and only Rufus Barma is actually looking into the history and records of the Tragedy. Since everything started from there, Sharon can devote herself to processing those files, research and planning? Running around blindly would only cause more casualties. We also desperately need someone who can counter Vincent’s masterplans. Whereas on our heroes’ side, nobody is playing against him in his game of chess. Someone has to predict the opponents’ next move if the heroes wanna be one step before the Baskervilles. I’d be so excited if Sharon takes on that role—I feel she is more than capable of doing that but she has been, in her own words, been coddled and guarded for too long. Plus, I’d love to see the look on his face when he finds out that the one to thwart his plans is a woman lol (which Echo already is doing btw, more about this here).

2] Oz, once again, ever since he met the Glen in Sablier, wields the B-Rabbit’s scythe to kill Marie this time. Had it not been for Alice, he might actually have cut off her head. Not chronological but I will simply dump my thoughts about this here—

After how Humpty Dumpty (a chain from the body of a previous Glen), who is always around in the human world to guard the latest Glen, going to the extent of killing at the slightest intent to harm Leo; and how Cheshire was the guardian of the Will of the Abyss, I have a similar theory that the B-Rabbit is not actually Alice, but a chain to protect Alice, because she is the host to the Will in the human world.

I also believe that Alice (the human from 100 years ago) was the actual contractor for B-Rabbit. But then she was murdered. Vincent says in Retrace 59 (and someone else said before but I forget) that a chain cannot exist in the human world without a contractor. Unlike Humpty Dumpty, where the rank of the main contractor passes to the next contractor in line, B-Rabbit had only one contractor. 

So, it’d mean the B-Rabbit must have returned to the Abyss. Which is how we found it in Retrace 1-2. 

Seeing how a lot of Chains are quite sentient—Cheshire, Raven (that continually challenged Gil through the Door of the Abyss), even Humpty Dumpty etc..—it is not impossible that even after her death the Rabbit tried to protect her soul and kept it safe within the Chain? This might also explain why the Chain is able to assume two forms (a human form) unlike other Chains.

But now, inadvertently but of course since he had no choice either, Oz has made a contract with the B-Rabbit. With the new contractor in the present, Alice’s consciousness as a contractor or even as a person is slowly vanishing (in Retrace 65, her body has started to become see-through), because she is already dead.

Whereas the chain is slowly transferring into Oz from Alice; 

that’s why I am pretty sure here (Retrace 57)—

(Okay, this scene was so beautiful that I had to add the whole of it because just look,,,, if someone says something like this to me, I will only cry even more (TT﹏TT))

—it is on the dutiful desire of the B-Rabbit to protect Alice that Oz is involuntarily acting upon. However, he (or the B-Rabbit) is getting more and more violent, the more the hand of the seal moves and immediately goes for the kill whenever something tries to hurt Alice (like in Leo’s case). Must be because Alice’s connection is diminishing faster as it moves by yet another degree; so, the B-Rabbit is trying its best to save what remains of her. So, unless Oz has better control over his chain (getting increasingly difficult because of the moving hand), the B-Rabbit is going to end up killing someone important in its misguided mission to ‘protect’ Alice, a girl who no longer exists. 

Even in the beginning, when questioned by both Will and Jack as to why he wanted so badly to protect Alice,

he couldn’t find any particular reason other than that he had to do it. I guess right from the beginning, the B-Rabbit’s emotions were already seeping into Oz. 

Another point,, in favor of that the B-Rabbit is taking over Oz's body is (Retrace 56):

This is not Oz-kun anymore, it's the Blood-eyed B-Rabbit that's taken over the driver seat. Oz is rapidly losing control of his body.

However, I am not so sure about what role the B-Rabbit played in the Tragedy. That it was there, is for sure now; I guess those were the B-Rabbit’s memories that Oz looked into in the Cheshire Arc where he first encountered the corpse of Alice. Oz keeps getting the feeling that he killed and killed and killed but is that what happened? The Baskervilles have already confirmed that they were the ones that killed the citizens of Sablier so I am not sure what Oz is seeing. Anyway, Oz might be able to retrieve all memories of the B-Rabbit only when the needle returns to the starting point and then, it will be of no use anymore.

(please tumblr let me add this scene (Retrace 57) too because Oz going all BAMF mode for Alice is so satisfying to watch 💕 look at those action lines, he is so fast with his scythe they can't keep up!!)

3] Oz says something interesting here (Retrace 43).

This completely escaped my attention during my first read. So, for the other illegal contractors, the seal, after the chain is used, remains visible only for a while before vanishing and the skin becomes clear again till they use the chain again or the hand moves?

Well, that explains why in Retrace 53 Break was in such a hurry to get Gil to look at Elliot’s seal. I knew, since he was blind, he couldn’t possibly check it for himself... but I couldn’t tell why he was in such agitation and hurry. I simply assumed it’s because he had other urgent problems to deal with as well. This explains it better.

The reason why Break’s seal is always visible is because he had already gotten through one round. But then why is Oz’s seal always visible? Is it because this is the second time someone is contracting the same chain? First, Alice; now, Oz. And how is Oz’s relationship with Alice (B-Rabbit) as a contractor different?

4] But of course, we have yet another little mystery of Oz not being the actual Oz. That Xai Vessalius switched his kid with this Oz—is a theory that Uncle Oscar, Break and Grandma Shirley come up with, something that might or might not be true.

Some other ‘fun’ details: 

1] Rufus Barma is so nosy ahjfksl (I love him, he is a funky little dude) look at that slight eyebrow rise,,, he has to know Things or he will die lmao. How does mochijun draw every character so expressive?? I am just in love with her art fr

2] I know this woman killed a lot of people who came to their house, searching for the Seal

but it's sad that the moment her duties to Rytas were over and she finally got her freedom to live her life was when she got killed. [She looks a lot like Melinda Desmond from Spy x Family btw lol]

3] Pandora’s Contracting method: so they simply dip a mirror into the chain’s blood and keep it on their person to exert the chain’s powers. If it breaks, the contract will be nullified. Seems dangerous. If the Baskervilles come to know of this, ig they will simply break Break's mirror to rid the Mad Hatter, no?

Also this, 

I didn’t think much of it then,, just that Elliot, being a non-contractor, was ignorant of these details. But after finishing this arc, I am all ✨FoReShAdOWing✨

4] Alice hasn’t been doing... much these last few chapters. What with Oz taking on the scythe of the B-Rabbit himself, it seems like Alice is getting shoved out of the story a bit,, but it makes sense (even if it is heartbreaking) bc she is, as I said earlier, dead. And it’s only probably the last piece of soul being protected by the B-Rabbit (and if you take into account the memory/soul found from Cheshire and destroyed by the Mad Hatter), we have even less of her in the real world now. 

By the way, I like this panel a lot. She doesn’t know why she stopped Oz from killing Marie, she is struggling to find a reason herself. but... this seems to be a glimpse of the real Alice from a hundred years ago. 

That’s why I don’t like whenever Gil keeps jumping to— let’s kill Alice to rid Oz of the contract. I get what he says but it... is not fair to Alice, is it? She has, at least, a right to find out the reason why she was killed before she departs for good this time. The B-Rabbit went out of the way to protect her soul, this is the least she deserves.

[zmwrites]

tag: heads up seven up XLV

I was tagged by @rachaellawrites! Thank you!

This is from Just Jane:

Kell snorted and raised his witchlight above his head. The light was still muted, but the imitation stars around them brightened enough that they could see the walls. They were smooth black stone without so much as a crack. No gaps, no paths, not even a fracture that could have been a hidden door.

There was no way out other than the archway they’d entered through. No way back to the surface but to retrace their steps through the maze that ended at a collapsed passage.

“Even better, she could have blown a hole in the wall to let us out of here,” Jane added. 

“Take the Chalice so whoever finds our skeletons in a couple hundred years knows we succeeded,” he said.

Jane and Kell are still stuck in the cave. I swear, they’ll escape eventually. Probably.

I tag @talesofsorrowandofruin, @draculinawrites, @drabbleitout, and anyone else who wants to play! As always, no pressure!

[legendarysmiths]

Tireless Charge

it’s been close to six years when i first wrote that 50 sentence challenge for Slight. let’s see this improvement.

I. COMFORT

Even after the end of the world and the beginning, they could solace on the beach and with each other.

II. KISS

Some nights it’s full of laughter—bright, infectious daylight that’s softer than his stubble—and other times when the nightmares take hold, it’s a desperate need.

III. SOFT

Neither of their hands—they were calloused and hard—held childlike smoothness, but he holds her hand all the same.

IV. PAIN

Before it was all blades and hard magic; now, it’s a simple rose thorn that bites into her palm.

V. POTATOES

His hands are steadier at cutting vegetables.

VI. RAIN

They can’t explain why they sit out in every storm, drenched to the bone, covered by silence.

VII. CHOCOLATE

She expected him to have a sweet tooth, but he’d never find hers.

VIII. HAPPINESS

When he isn’t looking—asleep, golden light in his golden hair or when he laughs with a neighbor, fast friends with everyone he meets—her heart blooms.

IX. TELEPHONE

It’s rare to be out of contact with her for so long and he praises the gods when he hears her voice.

X. EARS

He hides them because he thinks they’re too big.

XI. NAME

Even when he learned her real name, she was his Light.

XII. SENSUAL

Her hands shook as she undressed him the first night.

XIII. DEATH

He has tasted his end more times than he’d like, but she was always there with Raise.

XIV. SEX

It’s her eyes—electric and demanding all at once—and when her lips pull up, he melts.

XV. TOUCH

In the beginning, there was guilt, but now, there is bliss.

XVI. WEAKNESS

What one lacks, the other makes up in stride.

XVII. TEARS

It’s rare to see her cry; it’s not rare for him.

XVIII. SPEED

It’s unfair to try and beat her in a sprinting contest, but by the gods, he fails miserably.

XIX. WIND

The flowers in their garden sway.

XX. FREEDOM

He finds himself helping people and it is in their thanks that he breaths easy.

XXI. LIFE

She didn’t know what it meant to live until she stopped serving everyone and took care of herself.

XXII. JEALOUSY

In another time, his hands hold the waist of a younger, simpler girl; in another life, she’s made of crystal within a tower.

XXIII. HANDS

He holds her hand far too often and absent-mindedly.

XXIV. TASTE

Sparks and roses fill his mouth. Ice and leather trace her lips.

XXV. DEVOTION

He built the whole house for her.

XXVI. FOREVER

Time wore heavy on their shoulders; they did not discuss it.

XXVII. BLOOD

Old habits die hard and they still spar together.

XXVIII. SICKNESS

He catches colds more often than he’d like, yet every time, she is there is nurse him back to health.

XXIX. MELODY

She can’t carry a tune to save her life and learns the violin instead.

XXX. STAR

The sky was alive with light.

XXXI. HOME

Everything was simple; everything was perfect.

XXXII. CONFUSION

He stammers when she finds a stuffed horse.

XXXIII. FEAR

There was a time Chaos ate away at him; now she worries he’ll bruise his thumb hammering a nail.

XXXIV. LIGHTNING/THUNDER

The electrical energy still comes easily to her even when neither of them can cast.

XXXV. BONDS

When the groups reunite, there is more laughter and joy than anything she could’ve wished for.

XXXVI. MARKET

They sell their crops most mornings, happy to help.

XXXVII. TECHNOLOGY

Carrying the whole world in a back pocket was frightening.

XXXVIII. GIFT

He brings a new set of knives and she touches up the sparring targets.

XXXIX. SMILE

Every smile was a victory.

XL. INNOCENCE

She doesn’t know the luxury of eating ice cream on a summer day.

XLI. COMPLETION

He doesn’t have to touch her to feel fulfilled.

XLII. CLOUDS

They always see the same shapes in the sky.

XLIII. SKY

His eyes are the color of pre-dusk light.

XLIV. HEAVEN

Hugging her after the end of the world was all he wanted.

XLV. HELL

Waking him up in the morning is the worst.

XLVI. SUN

They rise with the sun.

XLVII. MOON

They fall with the moon.

XLVIII. WAVES

The sounds lull her to sleep each night.

XLIX. HAIR

He learns to braid her hair and becomes exceptionally good.

L. SUPERNOVA

There is no god destroying the world, nor does the world fall into pieces. Under the night sky, Lightning and Snow retrace their lives in the stars.

[terrancedkennedy]

The Trump Trade is Dead...all hail the Xi Trade

With all of the fuss around yesterday’s Comey testimony, I thought it would be a good time to have a look at the “Trump trades” from the beginning of the year. The charts will show that, as in the pic above, despite continued bluster and gesticulating, the “Trump Trade” has given way to the “Xi Trade”.

After the election, the big one was “Trumpflation.” The idea was that Trump is going to spend a ton of money on infrastructure and defense, leading to more bond supply, higher deficits, higher term premiums and higher inflation.  This lead to an acceleration in global growth expectations, pushing inflation expectations higher around the world.

Since November, 5y5y US breakevens have been trending lower consistently. EUR 5y5y breaks took longer to reach recent highs and have been more reluctant to retrace given a better run of economic data. US breaks have retraced the whole move higher since the election, while EUR breaks are still about 10bps off those levels.

Real yields have a case of the “suppo-sta’s”. They were suppos-sta go higher.

Nominal yields have bull flattened, indicating a quick end to the Fed’s tightening cycle--not exactly a vote of confidence in Trump’s ability to increase growth rates in the US.

Not much to pick from between 10y UST (blue) and the 10y UST/Bund spread (orange).

We were also told USD would stay strong since Trump had finally solved the growth riddle, simply by promising to spend a ton of money to spur domestic demand and business investment.  EUR and JPY depreciated hand-in-hand, but JPY has gone sideways while EUR has been ripping. Jens Nordvig, head of Exante Data and former Nomura FX guru, believes there has been a fundamental turn in capital flows back towards Europe. This ties out to my intuition--in 2016 capital fled Europe due to QE and low growth expectations. Now growth has picked up (a little bit, anyway), and the Trump demand resurgence has been exposed as a lot of hot air. The German export powerhouse flexes its muscle again.

The most famous blast zone of Trump risk was usd/mxn and Mex rates. The peso fell 6% on the day after the election, and after coming back modestly into year end, melted down completely shortly after New Year’s when Trump unleashed a Twitter bomb suggesting he would implement a “border tax” on Mexican auto imports and withdraw from NAFTA. MXN moved opposite of EMFX at large, which was recovering nicely.

MXN (red) vs. EMFX (purple, inverted so it moves the same direction as MXN)

This is a chart of the residuals of usd/mxn vs. the EMFX Index--higher figures indicate MXN is cheap relative to the regression. This shows how MXN has not only closed the gap from November outright but also unwound all of the underperformance relative to the rest of EM complex.

Similarly, TIIE got demolished by Banxico aggressively hiking rates to defend the peso or financial stability, the locals' paranoia about Trump, and corporates with USD liabilities crushing offers in the cross-currency market, leaving banks as huge payers into a market with no bid.  

In late February, Banxico implemented measures to backstop the peso and stabilize rates. Those measures combined with very attractive real and nominal forward rates convinced foreigners to buy duration, and local pension funds chased yields lower after moving aggressively into short duration and linkers in a futile attempt to shield themselves from the selloff in rates. These accounts extended duration as Banxico continued to hike and global curves flattened. 2x10 TIIE officially at zero….Bottom line: the herd turned.

Next was stocks. “Risk on!” Came the cry from equity desks around the world. More spending! Lower corporate taxes! Offshore corporate profits repatriation! Business confidence! Deregulation! Financials and oil/gas stocks led the way, thankful that one of their own was finally back in the White House.  

Since the beginning of the year financials (XLF) have chopped around while oil/gas stocks (XOI) have gotten hammered by the combo of a slothful, inept Trump administration and lower oil prices.

Similarly, small cap stocks stood strong after the election--Trump was going to cut taxes, regulate, cancel Obamacare, etc. etc. Sorry, Charlie.

Alright, but the S&P had a great run after the election--why hasn’t it given back any of its gains? The sectors that underperformed in November and December have reversed course--Health Care (XLV), and here’s the big one--technology (XCI). The 20% gain in tech has plugged the hole in the index left by the sectors that led the big move higher late last year. Thank you, Mr. Beta.  

And lastly from the equity world, there was Trump’s mantra borrowed from populist windbags the world around, “Putting America First.” A funny thing happened on the way to autarky--an avalanche of money flowed into emerging market equities.

Why the reversal? Copper prices rocketed higher after the election because Trump was going to build more stuff. Here’s one that has held up, but credit goes not to Trump but to the resurgence in EM growth and Chinese demand--the Xi Trade.

Copper (HG1)

Lastly, there is credit. IG spreads were already recovering after the brutal start to 2016 and the shock from Brexit. They never really took much of a breather, just continued to grind tighter and tighter.

Vol played a significant role in this as well--was the utter destruction of vol one of his campaign promises?  IG implied vol has clattered through the lows. Like tech stocks leading the S&P higher, this is credit traders juicing coupons and eating their seed corn.

By contrast S&P vol is certainly historically low but hasn’t seen the steep decline of bond and credit vol.

Where does that leave us? I try to avoid crystal ball stuff but here’s how I see it:

Trump and the US political scene at large: I think he’s done politically--and taken together, the market agrees. Trump is going to be fighting with Congress, Comey and Muller until the GOP majorities get liquidated in the mid-terms. After that his agenda is over, and Democrats will be circling like sharks around a wounded tuna.

Nominal rates and breaks have priced fiscal stimulus at zero, which close to the right price given the way Trump has frittered away his modest political capital.  But the flattening of the curve and unwinding of hikes by the FOMC beyond this year shows markets are somewhat complacent about inflation picking up on its own accord. That being said, don’t hold your breath.  

EUR can continue to benefit from a sea change in capital flows after several years of outflows.

Mexico: We come here today to bury the “NAFTA withdrawal” trade. Again, if Trump could have put together a coalition of domestic manufactuers, unions, and xenophobes to rip up the treaty, he missed his chance. The TIIE curve will invert as growth stagnates and the inflation spike fades, but Banxico will be loathe to cut rates too quickly ahead of the 2018 election. Election risk will become salient around the end of the year when polls should start to become more reliable as it becomes clear who PRI and PAN will run against AMLO, but Trump’s ham-handed political circus will take some of the air out of AMLO’s campaign.

Stocks--Can’t stop the Feeling! Just dance, dance, dance…. Seriously, corporate profits will have to “show me the money” to keep this train rolling, but that hasn’t stopped the market before. This probably would have gotten me fired as an equity manager but I believe value is indicative of future returns--and I can’t see how this chart and current demographic and geopolitical trends end in a reasonable return on risk capital, unless 1929, 1966, and 2000 were really good times to buy stocks.

IG, HG, vol--see above.   Taken together, real money is getting squeezed and is increasing risk by buying tech, high yield, selling vol etc. to keep the ball rolling. The longer it goes on, the smaller the exit door gets.

EUR, DXY, EM--the prior two bullets notwithstanding, I think the flows can keep going--I prefer EM rates over EMFX--but I’ll want the hedges I discussed in Wednesday’s post in my back pocket. The resilient copper chart illustrates global demand is still stronger than it was last year. This is the new paradigm for 2017….the Xi Trade.

[peterlharden]

The Trump Trade is Dead...all hail the Xi Trade

With all of the fuss around yesterday’s Comey testimony, I thought it would be a good time to have a look at the “Trump trades” from the beginning of the year. The charts will show that, as in the pic above, despite continued bluster and gesticulating, the “Trump Trade” has given way to the “Xi Trade”.

After the election, the big one was “Trumpflation.” The idea was that Trump is going to spend a ton of money on infrastructure and defense, leading to more bond supply, higher deficits, higher term premiums and higher inflation.  This lead to an acceleration in global growth expectations, pushing inflation expectations higher around the world.

Since November, 5y5y US breakevens have been trending lower consistently. EUR 5y5y breaks took longer to reach recent highs and have been more reluctant to retrace given a better run of economic data. US breaks have retraced the whole move higher since the election, while EUR breaks are still about 10bps off those levels.

Real yields have a case of the “suppo-sta’s”. They were suppos-sta go higher.

Nominal yields have bull flattened, indicating a quick end to the Fed’s tightening cycle--not exactly a vote of confidence in Trump’s ability to increase growth rates in the US.

Not much to pick from between 10y UST (blue) and the 10y UST/Bund spread (orange).

We were also told USD would stay strong since Trump had finally solved the growth riddle, simply by promising to spend a ton of money to spur domestic demand and business investment.  EUR and JPY depreciated hand-in-hand, but JPY has gone sideways while EUR has been ripping. Jens Nordvig, head of Exante Data and former Nomura FX guru, believes there has been a fundamental turn in capital flows back towards Europe. This ties out to my intuition--in 2016 capital fled Europe due to QE and low growth expectations. Now growth has picked up (a little bit, anyway), and the Trump demand resurgence has been exposed as a lot of hot air. The German export powerhouse flexes its muscle again.

The most famous blast zone of Trump risk was usd/mxn and Mex rates. The peso fell 6% on the day after the election, and after coming back modestly into year end, melted down completely shortly after New Year’s when Trump unleashed a Twitter bomb suggesting he would implement a “border tax” on Mexican auto imports and withdraw from NAFTA. MXN moved opposite of EMFX at large, which was recovering nicely.

MXN (red) vs. EMFX (purple, inverted so it moves the same direction as MXN)

This is a chart of the residuals of usd/mxn vs. the EMFX Index--higher figures indicate MXN is cheap relative to the regression. This shows how MXN has not only closed the gap from November outright but also unwound all of the underperformance relative to the rest of EM complex.

Similarly, TIIE got demolished by Banxico aggressively hiking rates to defend the peso or financial stability, the locals' paranoia about Trump, and corporates with USD liabilities crushing offers in the cross-currency market, leaving banks as huge payers into a market with no bid.  

In late February, Banxico implemented measures to backstop the peso and stabilize rates. Those measures combined with very attractive real and nominal forward rates convinced foreigners to buy duration, and local pension funds chased yields lower after moving aggressively into short duration and linkers in a futile attempt to shield themselves from the selloff in rates. These accounts extended duration as Banxico continued to hike and global curves flattened. 2x10 TIIE officially at zero….Bottom line: the herd turned.

Next was stocks. “Risk on!” Came the cry from equity desks around the world. More spending! Lower corporate taxes! Offshore corporate profits repatriation! Business confidence! Deregulation! Financials and oil/gas stocks led the way, thankful that one of their own was finally back in the White House.  

Since the beginning of the year financials (XLF) have chopped around while oil/gas stocks (XOI) have gotten hammered by the combo of a slothful, inept Trump administration and lower oil prices.

Similarly, small cap stocks stood strong after the election--Trump was going to cut taxes, regulate, cancel Obamacare, etc. etc. Sorry, Charlie.

Alright, but the S&P had a great run after the election--why hasn’t it given back any of its gains? The sectors that underperformed in November and December have reversed course--Health Care (XLV), and here’s the big one--technology (XCI). The 20% gain in tech has plugged the hole in the index left by the sectors that led the big move higher late last year. Thank you, Mr. Beta.  

And lastly from the equity world, there was Trump’s mantra borrowed from populist windbags the world around, “Putting America First.” A funny thing happened on the way to autarky--an avalanche of money flowed into emerging market equities.

Why the reversal? Copper prices rocketed higher after the election because Trump was going to build more stuff. Here’s one that has held up, but credit goes not to Trump but to the resurgence in EM growth and Chinese demand--the Xi Trade.

Copper (HG1)

Lastly, there is credit. IG spreads were already recovering after the brutal start to 2016 and the shock from Brexit. They never really took much of a breather, just continued to grind tighter and tighter.

Vol played a significant role in this as well--was the utter destruction of vol one of his campaign promises?  IG implied vol has clattered through the lows. Like tech stocks leading the S&P higher, this is credit traders juicing coupons and eating their seed corn.

By contrast S&P vol is certainly historically low but hasn’t seen the steep decline of bond and credit vol.

Where does that leave us? I try to avoid crystal ball stuff but here’s how I see it:

Trump and the US political scene at large: I think he’s done politically--and taken together, the market agrees. Trump is going to be fighting with Congress, Comey and Muller until the GOP majorities get liquidated in the mid-terms. After that his agenda is over, and Democrats will be circling like sharks around a wounded tuna.

Nominal rates and breaks have priced fiscal stimulus at zero, which close to the right price given the way Trump has frittered away his modest political capital.  But the flattening of the curve and unwinding of hikes by the FOMC beyond this year shows markets are somewhat complacent about inflation picking up on its own accord. That being said, don’t hold your breath.  

EUR can continue to benefit from a sea change in capital flows after several years of outflows.

Mexico: We come here today to bury the “NAFTA withdrawal” trade. Again, if Trump could have put together a coalition of domestic manufactuers, unions, and xenophobes to rip up the treaty, he missed his chance. The TIIE curve will invert as growth stagnates and the inflation spike fades, but Banxico will be loathe to cut rates too quickly ahead of the 2018 election. Election risk will become salient around the end of the year when polls should start to become more reliable as it becomes clear who PRI and PAN will run against AMLO, but Trump’s ham-handed political circus will take some of the air out of AMLO’s campaign.

Stocks--Can’t stop the Feeling! Just dance, dance, dance…. Seriously, corporate profits will have to “show me the money” to keep this train rolling, but that hasn’t stopped the market before. This probably would have gotten me fired as an equity manager but I believe value is indicative of future returns--and I can’t see how this chart and current demographic and geopolitical trends end in a reasonable return on risk capital, unless 1929, 1966, and 2000 were really good times to buy stocks.

IG, HG, vol--see above.   Taken together, real money is getting squeezed and is increasing risk by buying tech, high yield, selling vol etc. to keep the ball rolling. The longer it goes on, the smaller the exit door gets.

EUR, DXY, EM--the prior two bullets notwithstanding, I think the flows can keep going--I prefer EM rates over EMFX--but I’ll want the hedges I discussed in Wednesday’s post in my back pocket. The resilient copper chart illustrates global demand is still stronger than it was last year. This is the new paradigm for 2017….the Xi Trade.

[patientflips]

$AET - 3.2.2017 entry analysis

Setup: below ATH Flip combined with base Flip (described in the post about my Flip strategy)

Long-term view: In 2015 it finished its huge uptrend and since then we’ve seen a 1,5 years long correction in time, rather than in price. After ranging this long, price tested the prior uptrend trendline and then exploded higher to attack the ATH.

Price action: Price violated the weekly upper band on huge volume, signaling strength to the upside. Then pulled back to to the prior range upper edge around 125 but continued lower with the whole $XLV sector. It stopped at a not that clear S/R level, which however, acted as a resistance many times in 2015 and in early 2016. That large volume breakdown of 125 was followed by a double bottom at the daily lower band and a strong reversal price action. At that moment, price also broke the trendline. That failed breakdown and an immediate turn is a very strong signal.

Entry signal: Because this pullback was deeper than I expected, I needed to see a close above the trendline (that’s why the blue color). I didn’t want to be aggressive this time. The trendline cuts through the wicks, but for me, closes are more important. When price closed above the trendline on large vol, I just set my stop order above its high and got filled 2 days later.

Money management: Stop below the AOV. Which, in the hindsight wasn’t that necessary because if price reverses this strong, it shouldn’t retrace back into the pattern. First half off at RRR 1:1, 1/4 at RRR 1:2 which is at the ATH. With the last 1/4 I’ll play for a breakout.

[drowsydraws]

Retrace:XLV — Queen of Hurts

[fivekrystalpetals]

So, I was trying to figure out a bit of the timeline for a fic and found this interesting (to me) something here: (this is a fun analysis and probs won't go in the direction you expect lol)

The events between Retrace 42 to Retrace 45 happen over one and a half day at the most. Something in this order:

Break wakes up after being bedridden for three days, finds that he is almost fully blind,

Oz and gang have a discussion in his bedroom,

They prepare to find the second seal at Rytas' place, Sharon insists on joining them

They arrive at the village as per Duke Barma's orders and meet up with Gruner

Next day: The fight between Marie and Oz goes down, Rytas acknowledges his right to be shown the seal

Finally the Head Hunter attacks, kills every one present and destroys the Seal.

Next, in Retrace 45, we find Vincent and Ada on a date and they discuss the Head Hunter as well. (which is being discussed at around the same time by Leo and Elliot)

He asks her to tell everything about herself, her father, her uncle Oscar whom he is targeting for the Key to the Door of the Abyss. And this, if you remember, he mentions as part of his plan to obtain the Key in his discussions with the Baskervilles in Retrace 46.

Which means... the Vince-Baskervilles discussion happened before his date with Ada, or let's say, sometime after the Head Hunter attacked Rytas Mansion. Or, maybe, even on the same day cuz, of course, news spreads fast, you know.

Same day, the day the Seal got destroyed, which if you keep count of, is 3/3.5/4 days after the Sablier Arc, the day after Break woke up.

So here, the second seal has already been destroyed and Lottie is questioning why the chain Head Hunter, having some involvement with the Nightrays, is destroying the seals (supposed to be the Baskervilles' job)

Well, we know the answer to this, but that's not the interesting thing I wanted to point out.

It's that Lottie was mad af right from the start of this conversation. She is so grumpy here and even slams the seat to silence the group, which.... is so unlike her.

Because, she is usually the noisy and talkative one in this group. Back in the Lutwidge arc, Fang was struggling to keep her under control when they kidnapped Oz. (It's only after Fang died, she became full-on depressed.) But here, Fang, who is the voice of reason in this little ragtag group, is carefree and chatty and playing with Lily. Even the silent Doug is playing chess with Vincent.

It's strange that only Lottie should be so serious and frustrated here.

On reading this for the first time, I assumed this conversation is happening a week after the Seal was broken. annnnd, so, it didn't make any sense to me why she should be mad for so long either. She generally gives me the impression of being cool headed over most things.

But this is just utmost four days after Sablier.

So, my (not so) secret headcanon is that she is still mad, not at the Baskervilles for not getting to the second seal fast enough, not at the Head Hunter for breaking the seal either..... but at Break (lmao) cuz she is still not over what happened to her. As in, she is still confused frustrated because she couldn't get why and what the guy was aiming at?

As I said, this is interesting to me cuz I wanted to see her reaction after Sablier. I thought we never see it cuz the next time we see Break and Lottie interact again is at Isla Yura's place. They never ever openly react to anything nor openly give their inner thoughts that I have to pick up from small things like this.

Anyway, to continue, I imagined the Vince-Ada date in Retrace 46 and the dungeon scene happens as a continuity to the one in Retrace 45. that is, Vince and Ada roamed around the park for some time, visited the opera following which she takes him home.

But, their clothes are different in both? I suppose these are different dates they went on.

So no clear timeline of when the Opera Hall date happens. But the one in the park is definitely after he discusses his problem and solution of targeting Uncle Oscar through Ada with the Baskervilles.

These scenes happen a week later, though.

[fivekrystalpetals]

PH MASTERLIST

(aka I wrote a lot of stuff about this series now trying to put all of it in one place so I find Things when I search for it)

CHAPTERS

retrace i | retrace ii | retrace iii | retrace iv | retrace v | retrace vi | retrace vii | retrace viii | retrace ix | retrace x | retrace xi | retrace xii | retrace xiii | retrace xiv | retrace xv | retrace xvi | retrace xvii | retrace xviii | retrace xix | retrace xx | retrace xxi | retrace xxii | retrace xxiii | retrace xxiv | retrace xxv | retrace xxvi | retrace xxvii | retrace xxviii | retrace xxix | retrace xxx | retrace xxxi | retrace xxxii | retrace xxxiii | retrace xxxiv | retrace xxxv | retrace xxxvi | retrace xxxvii | retrace xxxviii | retrace xxxix | retrace xl | retrace xli | retrace xlii | retrace xliii | retrace xliv | retrace xlv | retrace xlvi | retrace xlvii | retrace xlviii | retrace xlix | retrace l | retrace li | retrace lii | retrace liii | retrace liv | retrace lv | retrace lvi | retrace lvii | retrace lviii | retrace lix | retrace lx | retrace lxi | retrace lxii | retrace lxiii | retrace lxiv | retrace lxv | retrace lxvi | retrace lxvii | retrace lxviii | retrace lxix | retrace lxx | retrace lxxi | retrace lxxii | retrace lxxiii | retrace lxxiv | retrace lxxv | retrace lxxvi | retrace lxxvii | retrace lxxviii | retrace lxxix | retrace lxxx | retrace lxxxi | retrace lxxxii | retrace lxxxiii | retrace lxxxiv | retrace lxxxv | retrace lxxxvi | retrace lxxxvii | retrace lxxxviii | retrace lxxxix | retrace xc | retrace xci | retrace xcii | retrace xciii | retrace xciv | retrace xcv | retrace xcvi | retrace xcvii | retrace xcviii | retrace xcix | retrace c | retrace ci | retrace cii | retrace ciii | retrace civ

some Serious posts: may-reads-ph | some Fun Posts: ph musings

MY ANALYSIS POSTS

1.] Lottie | (add: re: real reason why Lottie changed sides in the last arc)

2.] Noise | (add)

3.] Alice(s)

4.] Lacie

5.] Glen, Children of Misfortune, Juries and the Baskervilles | (Part 1 : Glen, Jury and Knowledge of Abyss) | (Part 2 : Choosing a side) | (Part 3 : Oswald and his sin of passivity) | (Part 4 : Oswald and Lacie)

6.] Core of the Abyss and "her" Children of "Misfortune"