I hope it's not too late...

but if this really is the onset of Wave C, then it won't be. Macro Man sells 25 million AUD/CHF at 0.9560 sp0t basis (0.95385 to 04 April.)
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wcw
admin
March 13, 2007 at 7:42 PM ×

I don't know from 'too late' but I have been:
- staying long US-index gamma (mm, tasty gamma)
- covering my homebuilder shorts (hoping for a rally to reenter)
- mildly short carry (both NZD and AUD, but small and not adding)

We'll see how it works. So far, so good, though I have been early on the homeys (I started covering last week).

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Macro Man
admin
March 13, 2007 at 7:56 PM ×

Nice work. Gamma still looks underpriced most places I look. If I'm right on the underlying wave structure, risky assets should make new lows over the next couple of days (the SPX is almost there already, amazingly), followed by another few days of weakness...so it's tempting to let the deltas run for the rest of the week.

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Anonymous
admin
March 13, 2007 at 10:55 PM ×

Positioned short now on EM equties is as good as being positioned Long last year, those long lazy days when everything went up, week after week. If SPX falls through 1300 level we could make some serious money on US stuff too. I want my champagne, and I want it now! :) OldVet

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jill
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March 14, 2007 at 1:47 AM ×

A little fear out there today:

NEW YORK, March 13 (Reuters) - The New York Stock Exchange said on Tuesday it instituted downside trading curbs at 3:04 p.m. (1904 GMT) as U.S. stocks fell sharply on mounting concerns about the subprime mortgage market.

The New York Stock Exchange Composite Index <.NYA>, which is used to determine when to begin trading curbs, was down 176.95 points, or 1.94 percent, at 8,943.91.

The trading curbs require that all program selling of S&P 500 stocks must be on an up-tick.

Bailout already being planned:

March 13 (Bloomberg) -- U.S. lawmakers will have to consider providing aid to about 2.2 million subprime mortgage borrowers who are at risk of defaulting and losing their homes, Senate Banking Committee Chairman Christopher Dodd said today.

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Macro Man
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March 14, 2007 at 1:25 PM ×

Maybe I am a plutocrat, maybe I am a heartless bastard...but I fail to see how someone who committed fraud by misrepresenting their income and/or the value of the proprty to be mortgaged eserves to be bailed out. Not saying that all sub-prime mortgagees fall into that category, but a significant number surely do.

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Gregor
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March 14, 2007 at 1:32 PM ×

Is there something a tad calcified in seeing commodity currencies as textbook high risk? One wonders. This is not the 1980's, with social democrat govs installed in Ottowa, Canberra, and Wellington. Furthermore, it's the US--not many EM--that is indebted out the wazoo. Accorsdingly, all the fresh-faced mutul fund kids on my TV are telling me the follow the old playbook: dial down exposure to all these, and "come home" to US large cap. Sell my AUD and AUD equities and buy US? No. I don't think so. I've been in AUD based stuff for over 10 years.

The fact is, the real risk globally is emanating from here, the US.

Great blog.

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Macro Man
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March 14, 2007 at 1:44 PM ×

The riskiness of commodity currencies is not so much in the political infrastructure as it is:

a) AUD and NZ run current account deficits, which means that foreigners are structurally long the financial assets of those countries.

b) They are also high yielding and subject to any unwinding of carry trades

c) If the US slows enough to significantly impact global growth, the commodity producers and their markets, by virtue of being high beta plays on global growth, will suffer disproportionately.

It's really the carry trade/hot money flows I am targeting here. I am actually more upbeat than most about the ultimate prospects for US growth this year, which naturally implies a broadly constructive view of risk assets in the medium term. For the time being, however, I am playing the downdraft, and will look to switch gears anotehr 4% lower in the SPX, give or take.

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