Friday, August 03, 2007
I read the news today, oh boy
-The Beatles, A Day in the Life
It's US payroll day today, but Macro Man can honestly not remember an NFP release that holds less interest for markets. Given that just about all asset correlations are at 1, markets are (correctly) trying to focus on the ultimate driver, which is the condition of the credit market.
The only way that Macro Man can see NFP being relevant is if the number is negative or near-negative, which could perhaps encourage the Fed to relax its language next Tuesday. Failing that, Macro Man would expect the FOMC statement to retain its relatively tough stance, which could prove to be an ideal catalyst for the start of the next downleg in risky asset prices. Certainly anything close to the consensus 125-130 forecast will represent a continuation of the recent trend.
In the "you heard it here first" department, the WSJ is now reporting that AXA is funding redemptions in its US Libor Plus fund (now down more than 20% from its peak) out of its own pocket. While Macro Man has neither the time nor the desire to morph into a financial gossip-monger a la Dealbreaker and the like, he did highlight the AXA redemption story more than a week ago.
Elsewhere, an anonymous poster pointed out an IHT story describing the internal backlash within China to VIG's to-date money-losing investment in Blackstone. While the premise is somewhat preposterous, given the sums involved (the $500 million loss is less than eight hours' worth of reserve accrual), a couple of things were quite striking to Macro Man. First, it seems that he is not the only victim of state censorship of blogs; secondly, the xenophobic comments from Chinese punters (no doubt cherry-picked to fit the story) sound remarkably similar in tone to what one might expect from unemployed Rust Bowl factory workers. Perhaps the world isn't so flat after all!
The again, maybe it is. The Times has a rather amusing feature on Japanese housewives' currency trading in its supplement today. That such a piece appeared in the style section, rather than the business pages, was somewhat remarkable; that the article concludes with a thinly-veiled invitation for UK punters to have a go was more than a little worrisome. The highlight of the piece, however, is a blow-by-blow account of a day in the life of one housewife:
7am: Ritsuko decides on two currency bets. She has 100,000 yen (£417) in her online trading account and the brokerage will lend her ten times that.
8am: She studies the Nikkei and Bloomberg and reckons the euro will rise
8.15am: She borrows 500,000 yen. (cheaply: the overnight interest rate is just 0.5 per cent), goes on to the spot foreign exchange market and buys euros at one euro per 160 yen.
8.30am: A medium-term bet: she borrows another 500,000 yen and buys New Zealand dollars, which will earn 8.25 per cent interest.
12 noon: Lunch and shopping (there are sales at Furla and Max Mara).
5.31pm: She was right: the euro is up 1 per cent. She buys back her yen, this time getting 176 yen per euro. After brokerage fees, her profit is around 5,000 yen – which about pays for her lunch. (Editor's note: shurely shome mishtake? No wonder she's making so much cash if she can sell EUR/JPY 7 figures above the all-time high?!?!?!?)
2 months later: Ritsuko believes the Icelandic krone will be more lucrative than her New Zealand dollars. She exits her position with one sixth (two months out of 12) of the 8.25 per cent annual interest on the NZ dollars, pocketing around 6,100 yen – which she immediately churns into her next trade.
Not a bad life, is it? Compare it with one of Macro Man's days:
6 am: Wake up
6:05 am: Check overnight action on home Bloomberg terminal
6.30 am: Board commuter train
6.31 am: Receive elbow in ribs from fellow passenger
7 am: Purchase coffee
7.10 am: Spill coffee over desk
7.12 am: Receive barrage of prices for ITRAXX Euro crossover opening
7:30 am: Watch GBPJPY scream higher as Russian agent banks purchase it
8.15 am: Check DAX option prices and consider directional strategy
8.30 am: Read research
9.15 am: Meet with investment bank China economist
10.30 am: Watch GBPJPY collapse as Russian agent banks sell it
11.15 am: Publish blog post
12.45 pm: Lunch at desk
12.46 pm: Spill lunch on desk
1.25 pm: Receive torrent of emails, Bloombergs, and chat posts previewing US data release
1.35 pm: Receive torrent of emails, Bloombergs, and chat posts analyzing US data release
2.13 pm: See US 10 year yields move 6 bps in 3 minutes. Inquire with broker as to cause. Broker says “We’re not seeing it.”
2.30 pm: US stock market opens
2.31 pm: Total system failure requires reboot
3 pm: Engage in modeling research
3.29 pm: Sell a bit of EUR/USD
3.30 pm: Hear from 5 different brokers that China is buying EUR/USD
4.15 pm: Receive multi-asset structured product trade idea from broker
4.16 pm: Deconstruct multi-asset structured product trade idea, find that it is drastically overpriced
4.32 pm: Receive barrage of prices for ITRAXX Euro crossover closing
4.47 pm: Run daily P/L
5.02 pm: Discuss forthcoming sporting event with broker
6 pm: Board commuter train
6.01 pm: Receive elbow in ribs from fellow passenger
6.50 pm: Enter home
6.51 pm: Get tackled by children
8 pm: Check prices on Bloomberg, see positions are doing well
8.10 pm: Play Scrabble with Mrs. Macro: win.
9 pm: Play Gin with Mrs. Macro: lose.
9.45 pm: Check prices on Bloomberg, see that late session stock price move has had adverse impact on positions
10 pm: Go to bed and dream of career as goatherd