Focus in the Midst of Noise

Following Up On the Details of my Daily Sheet

Dug the dog from Up. Easily distracted by squirrels.

Welcome to my mind. No matter how determined I would like to be, it is so easy for me to become attracted by something moving “over there”. Especially with markets moving like they have been this last week, I need help. That’s why I do have to have a variety of checklists and daily sheets. As surprising as it may seem, the first item on my daily checklist is “check for meetings” and regularly, to my embarrassment, I forget this. One would think that it would automatically happen as I grab my coffee (yes, I do remember that no problem) and head to the desk, that I start by opening my calendar. I should, but it does not always happen. So that is on my daily list. Which is why Luck Favors the Prepared focused on the importance of routine and readiness.

A reader asked about the meaning of some of the items on the daily worksheet. Any reader that is going to ask a question will get an answer. So, first, thanks! I appreciate your reading and actually taking the effort to get into it. Here is the question:

Let’s dig in. First, I’d like to emphasize that this daily sheet is specific to me and, actually, to me right now. Unless you are doing the same things as me, you are going to have your own set of data to monitor and ensure that you see. Mine is currently oriented around digital assets and their derivatives. Even so, I have decent proportion of global macro market prices for context.

• USDX — I use the DXY spot index. There are others. Originally, this had many currencies (mostly European) in it. So now, it is heavily weighted to EURUSD. There are no emerging market currencies in this and it is not really a metric of the dollar. It is a metric of the USD vs other developed nation fiat currencies. For me, this serves its purpose as a barometer on liquidity. I find it to be the simplest proxy as to whether the funding ability of major banks and corporates is stressed or not. Everyone loves talking about how the US debt is inflationary but forgets to mention that the corporate debt is deflationary. In other words, there is a large outstanding dollar short by issuers of USD denominated debt. Any big move in the dollar is a serious thing, but I think on balance, I’m more concerned if it spikes up rather than down. That is not an opinion on long term purchasing value of a dollar, just that a spike up would indicate to me that there is a liquidity panic.

• 2’s-10’s. I check the US 2-yr note and the 10-yr. I’m old fashioned enough to call all things (originally issued that is!) 10 years and in as “notes” and those longer as “bonds”. Habits from a JPM fixed income trader and I will admit to be a bit of pride in my vocabularly vanity. The history of the yield curve steepness has it being an accurate predictor of future rates & economic activity. Once you measure something, it gets gamed. The Treasury department, for economic and other reasons, is able to directly impact the supply of these securities. Globalization and US dollar reserve status and the “whitest shirt in the dirty laundry” theory have all impacted our yield curve. Still, gotta take it all in.

• 5-yr TIPS. These are the US Treasury Inflation Protected Securities and gives the best indication easily available of where real yields (the Fed’s targeted rate less CPI) are going to be over the next few years.

• Some of these entries are my positions at work that I enter to make sure I have a handle on my position and financing needs (BFNY USD, Firm CFD and the other nearby boxes)

• ETH stake is the staking rate for Ethereum. This is an indication of yield for ETH. It has an impact on the pricing of ETH forwards, so I keep an eye on it. Honestly, has not moved much. Range of 3.0-3.4% APR for a loooong time.

• In the options section, there are 3 columns: Implied, Straddle, and DTE. DTE is “days ‘til expiration” and is no longer needed because I have changed what I wrote. I used to have specific expirations and it made sense to have a sense of how long there was left. Now I use “constant maturity” vols. Meaning I interpolate to get 7-day, 30-day, etc. Implied means implied volatility. Straddle is the at-the-money-forward straddle (not necessarily an existing straddle, but using the ATMF value as the strike) as calculated using the implied volatility. As expiration approaches, dollar value (straddles) are more important and as time increases, implied volatility is more important. Typically, I will look at the straddles overnight, 1-3 day, and then 7-day. After that, unless vols are at an extreme, I typically stick to IV.

• I look at CFD pricing because that is a product related to on-exchange perpetual products.

• The lower left section is reserved for forwards pricing. I fill in the expiration dates manually because they change and because I may have positions that I want to know about. I fill in my position, the basis (the price of the forward less spot), and the calculated implied yield. Last one I did looks like this:

  

• Flows: I check on sosovalue.com for US ETF flows. I also have a python program that checks the outstanding USDT and USDC to get a sense of whether money is moving into or out of the offshore-crypto ecosystem.

• Liquidations are from the Coinglass web site. I like to get a sense of leverage, movement due to liquidations, and what digital assets are in play.

What am I missing on my sheet?

• economic data or other data coming due today and in the next week or two

• credit spreads

• volume and open interest data

• significant flows / large trades / large changes in OI or volume

• ratios: stocks earnings yield or price-to-book, copper-gold, btc-gold, etc.

• there is an endless supply of data and information to detail; how do we say “no” and limit this to the specific things that help us each day?

• please offer one (or more) suggestion! If everyone throws something in the pot, I think we will all be better off

Some of this is cointained in some automated processes that I have running as part of my work setup that I have built over the past couple of years. Others need to be built.

Which leads to a couple of thoughts. One, I think I’d like to extend my daily data sheet to a weekly chartbook. There are time series that may not change on a daily basis or market prices that don’t need updating with daily frequency. It makes a lot of sense for risk takers to take some quiet time — that might be over the weekend when the markets are closed (obviously not crypto) or slow — to review data, read new perspectives and otherwise calmly do a review of the state of things. It is too easy to feel the urgent pull of a moving market and succumb to that feeling of “doing something” rather than doing something constructive, like fully integrating price, data, and narrative into one’s brain.

Second, I’m going to begin putting together a weekly chartbook. It will take a while to get going. Like yourself, I have a number of things going on. I’m going to structure this as a second “section”. I’m thinking about having this ultimately be the paid stream. So, if this is something that you would be interested in and want to voice your opinion on what ought to be in it, then hit me up! I think I’d like to leave this section (the educational writing) of the blog free. We can figure out together whether there are additional services where I can provide value that make sense to charge for. Let me know what you think.

I hope that helped and I definitely want to hear more questions. Please give feedback on your thoughts / appetite for a weekly markets chartbook.