Plus ca change...

Macro Man has been overcome by a wave of deja vu. US 10 year futures are still 108 1/2, give or take a point. Liverpool is once again playing AC Milan in the European Cup final. And just like in April, beta is trumping alpha by a large margin. Plus ca change, plus c'est la meme chose!

It shouldn't come as a massive surprise. While the old saw admonishes us to sell in May and go away, it doesn't exactly specify the day. Clearly, however, the drag caused by short equity deltas in the alpha portfolio is getting to be, well, a drag.

The remainder of the week could provide a bit of volatility, and perhaps finally kick into touch the notion that the US is going into recession. Given that equities have rallied at least to some degree in anticipation of a liquidity injection from the Fed, this could ironically provide a headwind to further equity gains. At the same time, the short dollar and long bond positions might not look so clever, so furthe attention is warranted. Macro Man will stop out of half of his EUR/USD long at 1.3450, a level that will be trailed higher if/when the euro can manage a rally again. Bonds, by virtue of being a range trade, are likely a better sale on strength than on weakness. Anything close to 109 on the TYM7 will likely see Macro Man vacate the premises.
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