Wednesday, January 31, 2007

Month-end bullet points

* With eight hours to go, Macro Man's month hangs in the balance. The portfolio has recovered nicely over the past 24 hours, primarily as a result of the New Zealand dollar's ejection from its 747 and subsequent fall to earth. Patience is a virtue, and Macro Man has been rewarded for his.

* Today sees the release of the advance Q4 US GDP figures. Two months ago, both one-trick ponies like Nouriel Roubini and the majority of Wall Street economists were looking for a weak number. While Roubini has been strangely silent on the "impending US recession" recently, the Wall Street crowd has been forced to revise up their forecasts to 3%. The initial number is always a crapshoot, as it depends on forecasts for December trade and inventory figures. Frankly, anything between 2.5% and 3.5% should not be terribly surprising.

* Tonight also sees the FOMC announcement. While Jeffrey 'damn the torpedoes' Lacker is no longer a voter, the statement should be more upbeat than those of November and December, given the sharp improvement in the tone of the data. Yesterday's consumer confidence figures point to a solid payroll report.

* Bonds remain perched on a knife-edge, and Macro Man has a long delta via his short Bund straddle position. On breaks of key levels, Macro Man will have to hedge and get back into the short bond trade. He will therefore sell 100 TYH7 at 105-28 and 100 RXH7 at 104.55.

* The FX carry trade is looking wobbly on the G10 side, but emerging markets are strangely well-bid. A pause before the storm, perhaps? Macro Man will look to trim the short EUR/TRY at 1.8350 spot basis. By the same token, he will leave a stop entry at 0.6920 to sell 20 million USD and buy NZD as part of the beta plus carry portfolio. He also leaves a bid at 6.96 to buy 20 million USD and sell SEK.

* The 110 shares of GG in the P/L represent a dividend re-investment.

*In the 'if value is so important, why do you lot buy so many euros?' department: a key Chinese policymaker said today that Chinese equities are overvalued!


Anonymous said...

Rally in the Alley !!!!

Great day to be a bull ... too bad the Big Picture-types can't see a forest or any trees ... they're too busy tightening their Tin-Hats !!!

Macro Man said...

Yes, it was a good day to be a bull. Whether tomorrow will be remains to be seen.

I remain somewhat cautious about equities, particularly as inflation breakevens continue to widen. I'd be more comfortable if they were 2.30 instead of 2.43.

Nevertheless, today has been an object lesson in open-mindedness. Yes, the housing notched its second worst quarter in the last 25 years (last quarter was marginally worse.) But GDP growth was slightly above trend and the Dow hit a record high.

Such is the benefit of examining where one's own analysis may be wrong rather than spending one's time finding new ways to disprove the other fellow's analysis.

Banker said...

Macro Man,

This is a technical question (I am I.T. challenged), how do you save your position sheet and then post it to your blog. I have been a simlar sheet on Excell but cannot up;oad it to the blog.


Macro Man said...

What I do is to copy the excel sheet and paste it onto the 'paint' function (start/accessories/paint). You can then save it as a jpeg file, which can then be uploaded via teh blogger toolbar. Good luck!

Banker said...

Thanks for the information, I will give it a try tonight.....