Vitaliy Katsenelson, CFA

=> The U.S. labor market report produced a knee-jerk reaction among major FX – but MXN, COP, BRL, and ZAR are bucking the trend => MXN clearly likes the idea of a stronger growth in the U.S. Further, President Sheinbaum continues to send orthodox policy signals (including the post-election fiscal adjustment), and there is now a possibility that parts of controversial judicial reform might be revised => BRL/COP/ZAR’s outperformance is even more interesting – Domestic factors still getting noticed? (chart’s source - Bloomberg LP)

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Türkiye’s pivot musings: => Türkiye’s manufacturing PMI dropped to the post-pandemic low in September - yet another sign (alongside positive net reserves, improving external balances, lower gold imports and FX-protected deposits) that the policy U-turn is working as intended. => But is it enough for a monetary policy pivot and a rate cut already this year? A lot will depend on the central bank’s ability to meet its year-end inflation target of 38%. Quick calculations show that for this to happen, monthly CPI should average 1.15% or less in September/December. The September print (on Thursday) will show whether this is feasible.

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What's the best time to extend duration when rates start to come down and curves start to "disinvert"? Should you "T-bill and chill" until the central bank pulls the trigger and starts cutting, or is the juice all squeezed out of longer yields at that point? It’s a relevant question as more and more central banks start cutting rates, particularly for economies such as Iceland where policy rates are probably some distance above neutral. Thankfully, there’s a highly relevant and recent case study. A group of mostly EM economies with a thorny inflation history hiked rates early and fast in 2021, which helped bring inflation under control fairly quickly and allowed for rate cuts as early as last summer. I tried to search for clues based on the experience of these EM early hikers in a note to clients earlier this week (see link for a great summary by the editor of Innherji Hörður Ægisson: https://lnkd.in/ggNiP9sV). The average policy rate in these economies rose by 960bps, but has been cut by 290bps since last summer. During that period, 10Y yields rose on average 630bps, but have since rallied by 210bps. In other words, there is pretty strong transmission up the curve from the policy rate, leaving some interesting ways to play duration… which just leaves the question of timing. Here’s where things get interesting: On average, most of the rally in longer term yields takes place in around 300 trading sessions *before* the first cut. So far, there has been very little tightening of long yields *after* rate cuts commence. In other words, the rally tends to be driven by the end of hiking cycles, more than by the start of cutting cycles – when the cuts finally start, chances are there’s not a whole lot of juice left in longer term yields. Of course there’s no guarantee this pattern will be repeated, but it does support my gut feeling that the way to play policy normalisation is to be fairly discerning about placement on the curve, rather than blindly loading up on duration (even more so in markets where term premia have been eviscerated by QE).

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"Conditional Betas": "Changing firm attributes and economic conditions lead to time-variation in betas... We compare several econometric or machine-learning methods...The 'individual LASSO'' method performs [best]." https://lnkd.in/erGHdbbM

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Our new series: “CONVERSATIONS FROM THE @CBOE FLOOR” will be all about EDUCATION. THE 🥐RUMBS… We will look to pull back the veil on the options industry, DEMOCRATIZING & DEMYSTIFYING what’s actually going on behind the scenes. I couldn’t think of a better place to begin than @CBOE’s exclusive, industry-insider-only RMC conference. In this initial episode we’ve curated some of the most important topics going on in Optionsland right now, brought to you by some of the foremost experts. ————————————————— ⁃The election & what option markets are seeing ⁃The boom in options based ETF’s + structured products ⁃The evolution & opportunities in 0 DTE trading ————————————————— 👂 IN & ✅ IT OUT…👇👇👇👇👇👇

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Bravo, Corey Hoffstein and Steven Braun of Newfound Research for writing an excellent paper on replication of #cta #hedgefund returns. The big conclusions that build on our research: - Manager skill in managed futures exists but is evenly distributed and lacks persistence; hence, diversify. - Top down replication works as a repeatable, adaptable investment process to capture the drivers of returns of bona fide #hedgefunds. - Fee #alpha is real. Or in hedge fund language, “give me a 400 bps head start and I win 80% of the time.” The paper spends a good deal of time on tracking error. Tracking error to an uninvestable hedge fund index may not be the right question. Isn’t the right question, shouldn’t there be a practical, actionable, investable index that approximates the returns of the space? If only….

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🗞️ NEWS -- Nord Precious Metals (TSXV: NTH) | (OTC: CCWOF) a prominent exploration company specializing in silver and cobalt, is thrilled to announce the discovery of a significant new silver zone at the Castle East property, named the "All Stars" zone. This exciting discovery marks a pivotal moment in the development of Castle East and underscores the potential for substantial silver resources within the project area. ⚒️ ☑️ New high-grade silver mineralized “All-Stars” zone discovered 400 – 500 meters from the high-grade silver Robinson zone . ☑️ Two separate vein structures grading 5,441 and 3,730 grams per tonne (gpt) silver discovered in the former Capitol Silver mine, now on Nord mining leases ☑️ Potential for a massive, mineralized silver – cobalt discovery in an area where only 25 percent has been historically explored and developed to produce 60 million ounces of silver 🗣️ “The opportunity here in Gowganda is significant. We must remember that only about 25 percent or less of the Miller Lake Basin was mined - almost all of which was in the northwestern edge of the basin ’the low hanging fruit’ . Extensions from the Capitol Mine system are an important part at expanding resources,” commented Matthew Halliday, P.Geo., President of Nord Precious Metals. "We have multiple targets to explore, and a big system to do it in.” 🔗 https://lnkd.in/gnhcnftP #stocks #trading #invest #silver #cobalt

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I did a great podcast session with Adam Gregory Goern on the forgotten patterns of global demand that are now catching folks out in the #criticalminerals space. For example, copper demand has shifted greatly in the last 25 years. The USA used to dominate, now they are a distant second. US copper demand growth has been flat for twenty years. China now accounts for 50% of final demand and accounts for almost all of global growth. The position in rare earths is even more marked. Why *does* China dominate Critical Minerals supply? Simple. They actually dominate demand. They need it to supply their manufacturing industry. #DemandChain #SupplyChain

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S&P 500 Index...As I expected at the time, there remains little question as to whether the price action since mid-December break of the Lower Parallel (solid violet line) of the Schiff Modified Pitchfork (violet P1 through P3) was a correction of a larger degree and that a potential distribution pattern was building. Prices have broken the cluster of key short-term support at the Lower Warning Line of the Pitchfork, the belly of the Cloud and price support at 5,855. There is nary a clue that there has been a let up in downside price momentum as witnessed by the oscillators. I now mark key support at the 5,715 / 5,730 level. More detailed analysis in this afternoons Market's Compass Substack Blog....https://lnkd.in/gMqMV9a

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THREE BIG AUTO OEMS TARGET NEW MARKETS FOR FUEL CELLS (Part 2 of a post looking at how Toyota, Hyundai and GM have expanded their fuel cell focus beyond passenger cars) HYUNDAI - In January of this year, Hyundai announced the expansion of its HTWO fuel cell brand focused on autos to encompass the full hydrogen ecosystem including production, storage, transportation and utilization. - As part of that announcement, Hyundai announced that it would develop a PEM electrolyzer product and would also participate in localized production projects in Indonesia and the US. - In May, Hyundai completed an acquisition of fuel cell related assets from its affiliated parts supplier Hyundai Mobis. The stated rationale for the transaction was to consolidate hydrogen related R&D, product design and marketing under a unified management structure. - In conjunction with the reorganization, Hyundai formed a new “Hydrogen Fuel Cell Process Quality Office” focused on maintaining Hyundai’s “leadership in the hydrogen ecosystem” and better defined the Company’s new market focus as expanding beyond vehicles to include hydrogen production, power generation, trams, port, ships and advanced air mobility. - Hyundai has been testing its Xcient Class 8 Trucks in Switzerland since 2020 and currently has 48 units on the road there that very recently surpassed 10 million kilometers in aggregate distance traveled. - 30 Xcients were deployed in California in May and Xcients have also been operating in Germany, Israel and Saudi Arabia. GENERAL MOTORS (GM) - In January of this year, a 50/50 JV between GM and Honda launched an $85 million fuel cell manufacturing facility in Michigan. - Honda will use fuel cells from the factory for its CR-V passenger car that will be available for lease in CA later this year and recently unveiled a concept Class 8 fuel cell truck with a fully loaded range of 400 miles. - With funding from DOE, GM is separately introducing a medium duty truck that will use the Silverado pick-up frame and has an agreement with a Georgia Utility to incorporate the trucks into its service fleet for testing. - GM is further developing fuel cell applications for the trucking, aerospace and rail markets in partnership with Navistar, Liebherr and Wabtec, respectively. - GM has licensed its PEM technology to Nel ASA for incorporation into Nel’s PEM electrolyzer product that is manufactured in the US. As part of the partnership, Nel will provide hydrogen and fueling equipment to the Georgia utility that is testing GM’s fuel cell trucks. #hydrogen #fuelcells #toyota #hyundai #generalmotors #gm #hyliko #vdlgroep #corvus #paccar #kenworth #hexagonpurus #fuelcellenergy #daimlertruck #beijingsinohytec #honda #navistar #liebherr #wabtec #nel #ANDnotOR

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SO APPARENTLY NOW IT'S MY WORD (1X CUT) AGAINST JOSEPH STIGLITZ (2X CUTS +) IN THIS CNBC ARTICLE. https://lnkd.in/d3-AgaR2 #markets #economies #Fed #wealthmanagement

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If you think portfolio risk management is just about diversification, think again. This article sheds light on some surprising strategies that challenge common perceptions. Here are some thought-provoking takeaways: - Did you know that reducing the number of investments in a portfolio can sometimes actually decrease risks? It's all about strategic selection. - Contrary to popular belief, actively managing risk doesn't necessarily mean more frequent trading. In fact, a hands-off approach can be a smart move. - One of the key points discussed is the importance of understanding the correlation between investments, a factor often overlooked in risk management strategies. - Asymmetric risk and the role it plays in portfolio management is explored, offering a fresh perspective on balancing risk and return. - Ever considered tail risk hedging? This article dives into this lesser-known strategy that can enhance risk management effectiveness. Share your thoughts and feelings on these unconventional risk management strategies. https://lnkd.in/ecgSpH93

Winter weather in June getting you down? Well, maybe an optimistic take on Iceland‘s upside inflation surprise in May can lift your spirits. Icelandic inflation came in at 6.2% in May, two decimals above the consensus forecast for 6.0%. Many analysts and policymakers have lamented that the uptick in inflation was “broad based“ and speculated that this may be an early sign of price hikes following wage increases in Collective Labour Agreements signed in March. I have a slightly different take. Yes, the uptick was broad-based in terms of *product categories*, but in terms of *pricing dynamics* it was actually entirely concentrated in imported goods, which saw a very unusual drop in prices in April reverse out, and in air fares, which tend to be volatile and have very limited signal-to-noise. I don‘t know that either of those are reason for concern. As my clients are well aware after the number of notes I‘ve written on this, I think the most relevant signal for the underlying progress on disinflation in Iceland right now are the prices of market determined domestic goods and services ex-air fares. They constitute a third of excess inflation at the moment, are not distorted by volcanic effects in the same way shelter prices are, and are most sensitive to labour cost increases and domestic price pressures more generally, as they tend to be non-traded.   On this measure, disinflation actually continued in May, slowing from 5.9% to 5.8%.   That‘s not to say I‘m not concerned about inflation. Even my preferred measure is showing a slower pace of disinflation than during the first four months of the year, which doesn't entirely preclude that some firms have started passing on labour cost increases. And to be clear, wage growth is still running too hot for comfort and inflation expectations are elevated, both of which suggest that getting inflation down to target is going to be long and arduous.   But until we see domestic prices hit a real bump in the road, I hesitate to worry we're going off track.

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Türkiye’s impressive but uneven macroeconomic adjustment - Progress in some areas, challenges in others: => The country’s current account posted a larger than expected surplus in August signaling that earlier improvements are not one-offs => Türkiye’s disinflation progress, however, has been more bumpy - the latest inflation print overshot the consensus and 12-month inflation expectations were largely unchanged at 27.44% => Fast disinflation is Priority #1 for Turkish authorities, and a slower progress can easily delay rate cuts until 2025

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DBi seeks to find the simplest, most efficient path to replicate the pre-fee returns of #hedgefunds. Allocators often question whether it's too simple. Here's an astonishing quote from Nick Patterson, a pioneering quant at Renaissance Technologies LLC: "I think the most important thing to do on data analysis is to do the simple things right. So, here’s a kind of non-secret about what we did at Renaissance: in my opinion, our most important statistical tool was simple regression with one target and one independent variable. "It’s the simplest statistical model you can imagine. Any reasonably smart high school student could do it. Now we have some of the smartest people around, working in our hedge fund, we have string theorists we recruited from Harvard, and they’re doing simple regression. Is this stupid and pointless? Should we be hiring stupider people and paying them less? And the answer is no. "And the reason is nobody tells you what the variables [are] you should be regressing. What’s the target? Should you do a nonlinear transform before you regress? What’s the source? Should you clean your data? Do you notice when your results are obviously rubbish? And so on. "And the smarter you are the less likely you are to make a stupid mistake. And that’s why I think you often need smart people who appear to be doing something technically very easy, but actually usually not so easy." "Do the simple things right" and "don't make a stupid mistake" sums up what Mathias Mamou-Mani and I have sought to do for fifteen years. #hedgefunds #ctas #ucits #etfs

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