Friday, July 27, 2007

Turn out the lights?

A long time ago, Willie Nelson sang "turn out the lights...the party's over." While the failure of the DOTW to step in immediately makes it tempting to conclude that the party really is over for equities and risk assets, it does of course remain premature to conclude that with any degree of conviction.

Neverthless, it's also important to respect the fact that markets are starting to seize up and that equities are rapidly approaching some very interesting levels. Interesting levels to buy? Perhaps. But, Rudyard Kipling's admonition notwithstanding, in times of financial distress keeping your head (or at least using value as a short term investment criterion) isn't always the right thing to do. The FTSE, for example, is already perched right on its uptrend line of the entire five year bull market.
A break could produce a fair amount of pain (and further asset allocation shifts from the UK pension fund industry.) It makes sense to position for the tail risk event, which would then provide a platform for selective purchases on weakness. Macro Man therefore buys 400 FTSE Dec 5525 puts at 80.



4 comments:

Anonymous said...

MM, I believe Louis-Vincent Gave has uncovered your secret identity today...

avinash goldfish

Macro Man said...

I am not sure what that means! Can you send whatever you are referring to to mrmacro@gmail.com?

Cheers!

"Cassandra" said...

i'm not sure what he means either, but it's an amusing coincidence because I've just slandered sonny-boy LV's dear papa in a post.

Macro Man said...

It's resolved, and my secret identity remains intact. Apparently M. Gave included the very BBG chart of the AXA fund that I posted in this space in his latest missive, noting that it was pased to him by his good friend so and so. Fortuntely, I am not so and so.

Remember folks: no need to pay good money to hear stories of financial distress; I got plenty to go round for free!