Friday, July 13, 2007
The dip-buyers of the world have certainly united, to the extent that "dips" soon look like "blips" on the chart. Once again, traders have been rewarded for closing their eyes and buying weakness, a turn of events which has left many of Macro Man's more seasoned amigos in the market scratching their chins and shaking their heads.
Macro Man himself has locked in a rather costly round-trip on the FX carry trade, as the indicator he follows unsurprisingly swept back into risk-seeking mode overnight. Three days and $700k later, he's back where he started.
Today's retail sales figures in the US will almost certainly show another tepid reading, but that probably won't come as a substantial shock to many people. Thanks to trade, inventories, and business investment, Q2 growth in the US looks set to post its highest reading for some time; Morgan Stanley, for example, is forecasting growth at a 3.9% saar clip.
While that pace is virtually certain to slow in H2, it's still not exactly suggestive of an economy on the ropes, is it? It's difficult, therefore, to construct a secular bear case for risk assets unless one believes that the entire financial system is built on a rickety foundation funded by subprime loans.
Those of us old enough to remember when the Friday the 13th movies went on cinematic release are perhaps scarred by the lurking menace of Jason, and tend to see him around every corner (or dip/blip) in markets. It calls to mind the old Stanley Druckenmiller anecdote of how he was elevated to a senior research position very early in his career because he hadn't been scarred by the 70's bear market. Perhaps Macro Man should just hire an army of 22 year old and Japanese housewives to trade the market for him, as they evidently aren't troubled by the same nightmares as him.
Macro Man will be away on business Monday; normal service should resume on Tuesday.