The Pause that Refreshes

As all of you know well, trading the Macro side of the market requires absorbing a tremendous amount of bullshit as things unfold. Yesterday was one of those kind of days, a day to reassess and move forward.

Following up on the Big Picture Ratio

ON June 2 we posted a chart that showed the evolvement of the ratio between assets and financials. That ratio clicked on again last Friday.

The probably final stage of the deflationary move that started in January 2018 is at hand. This original trade which was put on in October 2018 had a key add on point last Friday. This is the long bond and gold / short stocks and commodities (oil) trade. Chart added here is diff version of the chart presented on June 2.

You will note that the ratio moved from the 0.200 area in October 2018 to a crecent high in 0.760 area on April 21, 2020. Currently the ratio is around 0.580 and we would expect an upside target in the 1.100 area.

This move of the ratio since October 2018 is up around 290 %. We now are at a point where the search for value and an economic paradigm that goes beyond artificial measures will reassert iftself.

COVID 19 is a factor only in that it forces facing reality.

This phase of the ratio move should culminate in mid to late October. At that point we would expect the effect of debt to start asserting itself in terms of a long cycle of higher interest rates extending for years.