Am 2. November habe ich in → „Charting Today’s Minsky Moment Dynamics“ eine interessante Studie der Deutschen Bank zitiert, die die Erkenntnisse von Hyman Minsky auf die heutige Marktlage anwendet. Heute nun die Fortsetzung der Geschichte:
- “According to Deutsche Bank’s Aleksandar Kocic, we live in a reflexive world, one where “the Fed knows that the market knows and the market knows that the Fed knows that the market knows, so everyone knows, but pretends that nobody knows and the game goes on.” That (…) implies that it is impossible to know the value of assets without also taking into account what the Fed thinks about said value, and what it will do in response to the valuation manifesting itself in the form or asset prices.” – bto: Das ist jetzt keine Überraschung. Aber schön beschrieben.
- “Continued pressure on vol is shaping to become the signature mode of this year. Its decline from its post-elections high at 95bp (in terms of 3M10Y) to its near all-time lows of 55bp in less than 12 months has been a function of general distribution of risks and persistent supply of convexity through complacency, transparency, liquidity, and predictable monetary policy. Politics no longer matters — increasing negative newsflow has created political bottlenecks which have eroded the ability to produce consensus resulting in a noisy status quo. Yield enhancement strategies seems to be everywhere.” – bto: Das haben wir gestern Morgen gesehen! Wenn Kreditgeber kaufen, ohne zu lesen, ist es wohl das klarste Warnzeichen, das man bekommen kann.
- “At the same time, this state of affairs is causing a buildup of negative convexity out-of-money by way of continued state of exception, misallocation of capital, buildup of tail risk, and metastablity. The market is vulnerable to bear steepening of the curve with Fed massively negatively convex to inflation risk. One would expect that vol would find support in the face of these risks. However, there does not seem to be any meaningful signs of resistance levels at this point. Investors are aware of the underlying risks, but are implicitly forced to ignore them in order to survive the short-term demand for return.” – bto: Wenn wir dazu noch die Studie vom Montag letzter Woche packen, die zeigt, dass Zinsen plötzlich und deutlich steigen können, haben wir das Rezept für einen Meltdown erster Güte.
- “Markets are caught in a Sachzwang – a factual constraint residing in the nature of things that leaves no choice but to perpetuate the existing conditions. Short-dated volatility continues to probe new lows in tune with other measures of risk premia. There has been hardly any departure from the trend. As gamma collapsed, vol sellers have been moving along the surface and ironing out the calendars. This is causing collapse of horizons and general paralysis which further perpetuates status quo. Time is gradually coming to a stop – this is the real collateral damage of the existing dynamics.” – bto: Die Märkte verstärken den ungesunden Trend, weil es keinen Ausweg gibt. Wohl auch, weil das Karriererisiko zu groß wird.
- “These ominous vol lows are triggering unpleasant memories of the past episodes of complacency and their aftermaths. Every time we asked the question: “How much lower could vol go”, things would become unpleasant.” – bto: Warum sollte es diesmal anders sein?
- “To be blunt, when it comes to future rates volatility, there is very little to be learned from its history at this point. (…) Management of stimulus unwind has now become a major source of convexity supply — Fed’s communication with the markets has been the key reason for compression of risk premia. On top of that, financial conditions have been as loose as ever. Tight fiscal policy, stricter regulations and positive supply oil shocks, together with global QE, have compressed long rates to the point that remaining playground for the Fed has been reduced to a mere 50-60bp range. On this restricted landscape, nothing is super exciting anymore. The Fed’s main concern is how to get unstuck without getting unglued.” – bto: was aber bedeutet, dass das Risiko eben von außerhalb kommt. Ein Schock, der außerhalb des wohl-orchestrierten Notenbankprogramms passiert.
- “In our view, interplay between volatility and leverage is the framework that gives the most straightforward tool for understanding the future path of volatility. (…) To recap, we argued that there is a logical relationship between leverage and volatility. Low uncertainty engenders higher leverage which in turn leads to additional compression of risk premia and a buildup of risks. Ultimately the system becomes unstable and results in a crisis, which in turn forces the system to deleverage in a highly volatile manner. In a way, continued prosperity and stability in itself is destabilizing leading to riskier lending as the asset prices of collateral decline. This is the essence of Minsky’s take on financial markets.” – bto: und je geringer die Volatilität, desto größer die eingegangenen Risiken und desto lauter dann der Knall.
- “To be specific, let’s choose as the starting oint 1999, the beginning of the internet bubble and follow (in the clockwise direction) the subsequent economic trajectory in the vol-leverage plane in the Figure. As the economy is heating up, volatility declines and leverage increases until the bubble bursts sometime in the late 2000. There is a volatile deleveraging for the next 2-3 years when low rates and expansion of the real estate market created conditions for the turnaround and beginning of another cycle. The only difference is that, this time around, the bubble was bigger and the limits were more extreme. Instead of being a periodic object (e.g. ellipse), the trajectory now becomes an outward spiral – in the second sweep, the leverage is higher and risk premia compression more extreme leading, naturally, to a deeper crisis and a need for an even more extreme measures of recovery.” – bto: Dazu gibt es via Zero Hedge leider nur dieses wirklich unscharfe Bild, es gibt aber eine Idee von dem, was er beschreibt:
Quelle: Deutsche Bank
- “(…) spiraling leverage cannot continue indefinitely. At some point, the bubble becomes too big and cannot be subsumed by a bigger bubble – the damage of its burst would become irreparable. Therefore, when that moment comes — and we believe that moment is now – the market is facing a following dilemma.” – bto: Es geht also so lange weiter, bis es nicht mehr weiter gehen kann.
- Szenario 1: Wir senken die Erwartungen: “(…) it implies giving up all the ideas of unlimited growth, something that made US economy look better than the rest of the world. Compared to what we have seen before, this means settling for much less than this country is used to aspiring. Although a reasonable proposition, it is emotionally a difficult choice that is and will remain subject to substantial political manipulation. It is unlikely that populist narrative will not continue to challenge this choice.” – bto: Das dürfte in Europa nicht anders sein!
- Szenario 2: “Deregulation and deficit spending could result exactly due to abandoning the first path, as its direct challenge, under political pressure that American economy can restore its old status and resume its pace of the previous decades. This is a serious tail risk as it is playing against the backdrop of considerable overhang of the post-2008 one-side positioning. Central banks are massively short convexity in this scenario. Any inflationary maneuver, or anything that would be a bear steepener of the curve, could force disorderly unwind of the bond trade and reinforce the trend thus creating another crisis from which there could be no way out.” – bto: Wir wären weiter gefangen in unserer Blasen-Ökonomie.
- Szenario 3: “Forced deleveraging: An overly hawkish Fed forces rates higher and triggers a disorderly unwind of the bond trade, thus forcing the system to deleverage. This is the policy mistake.” – bto: und wird nicht kommen. Zumindestens nicht absichtlich. Eher Szenario 2.
- “The tension created by these three choices is in the center of both economic and political discourse. It will shape the market dynamics in the future, beyond the near term. Taper tantrum and the US presidential elections were the two most recent episodes that have highlighted the risk distribution opened by these choices. Policy mistake appears less likely at this point. The financial conditions are as loose as they have ever been. Fed hikes are only going to tone this down, but it is very difficult to see how they can create overly tight financial conditions and cause economic slowdown. Nevertheless, negative convexity of the central banks in the bear steepening or generally high rates scenarios are making risk of volatile deleveraging alive.” – bto: das wäre der externe Schock.