Wednesday, October 17, 2007

An ancillary benefit of blogging

Regular readers of the comments section of this blog may have observed that for the past few weeks, Macro Man has been engaged in a debate with friend-of-the-blog Cassandra over the nature of certain capital flows. To wit, how much of the recent capital exportation from the US and Japan represents a reduction in home bias (e.g., the preference of investors to remain overweight domestic assets relative to the optimal allocation per modern portfolio theory), and how much of it represents the herd mentality of momentum investors who buy what goes up and sell what goes down?

It seems clear that both of these effects are at work; where Macro Man and Cassandra differ is the relative importance of the two factors. And there's nothing necessarily wrong with that; it is eminently possible for two people of reasonable intelligence and goodwill to observe the same set of data and reach different conclusions. Moreover, there seems litle near-term prospect of either of us being "proved" right; indeed, one could probably argue that we won't know the truth for another decade.

But what hasn't been clear is whether anyone else, other than the Brad Setsers of the world, really care too much about the issue of international capital flows. This is where the benefit of blogging rears its head. An ancillary feature of writing a blog is that one can gauge interest in a market environment or a subject by the amount of traffic the site generates. The more interesting a market environment, post, or discussion, the more visitors and/or links will flow to the site.

And what is remarkable about yesterday's TIC data, and the off-the-cuff post that Macro Man wrote about it, is the amount of traffic it generated. To be clear, this site is small potatoes compared to many of the financial blogs out there, but then again Macro Man is just some random anonymous guy spouting off. He is frankly surprised and flattered that anyone chooses to visit. But he can still distill interest in a particular subject by looking at relative changes in traffic patterns. And somewhat to his surprise, yesterday saw far and away the highest ste traffic since the week of the last Fed meeting, which itself was a record for the site's traffic.

Now, that the issue of the TIC data generated loads of interest doesn't provide any support for either Macro Man's or Cassandra's point of view. But what it does suggest is that this is an issue that is interesting to both market professionals and retail investors; and that, Macro Man believes, is useful information to know. He'd suggest that the level of interest in the subject indicates that, all else being equal, the trends of capital exportation from the US and Japan are likely to remain in place for some time, whether they are based on momentum or a more secular asset allocation. In the event of a benign US CPI figure, that could start half an hour from the publication of this post.

For some reason, Blogger didn't like the P/L sheet today.


Anonymous said...

Macroman -- i would think, from a capital flows perspective, the big event of the day would be the publication of the WEO's balance of payments data for the world, not the CPI data!

Even in brad setser's world, interest in the TIC data is fairly limited compared to say interest in the latest data out of China. So the spike here yesterday is interesting information. On the other hand, the TIC data release really was stunning -- even relative to my expectations.

My subjective sense is that interest also seems to be rising in the GCC. That used to be a clear conversation and traffic killer, now, not so much.

p.s. -- for anonymous blogger, you have a pretty good sense of market flows through london. methinks you are selling yourself a bit short.


Macro Man said...

Thanks, Brad. That insight into GCC interest is particularly welcome from a professional point of view.

Perhaps I am selling myself short...and if I perform like most of my "real job" market shorts this week, looks like my stock is headed sky high...

Anonymous said...

Those 200 extra pages views between yesterday and the day before was probably me, trying put a layman's spin on just what this TIC data will mean for me and my investments.

Actually, I am somewhat surprised by the benign reaction in the U.S. markets, including gold and the dollar today. Is this a case of non-concern of market players, or a case of complete ignorance of how bad this really is.

Macro Man said...

The earnings released today (JPM included) beat expectations and the housing data was horrble (again), which leaves the door open for a Fed cut!

I'm not sure if there's much more to it than I write, though, credit rolling over, so equities and gold and FX carry off its highs....

Anonymous said...


For me, I hit you site more often when the markets seem to be in a "phase change".

During periods of low volatility, I read your entries once. When change is in the air, I come back repeatedly during the day to check for newer comments.

"Cassandra" said...

MM - the apparent muted reaction is perhaps not for lack of want but I might posit, for necessity. You will undoubtedly have noted the behaviour of risky assets a.k.a. the "liquidity complex" or "anti-dollar sensitive group" during periods of apparent de-leveraging. Coming back to beat our old chestnut of a horse, the secular vs. cyclical diminishment of home-bias, I think that while we've clearly seen much diminishment, we've perhaps seen even more leveraged front-running of future diminishment. Back when ahhh was a boy, people sold position to make position, not because they wanted to, but because they had to. All the newfangled MLECs and MLEC-'o-MLECs might forestall the inevitable, or even manage to shift some of the dung to public entities, but even in Japan, there was, eventually the unwanted unpatriotic heaving of white&red asset vomit. In the end , there must be a plausible explanation for what seems like counter-intuitive moves, and the laxity/laziness/over-optimism vis-a-vis the dollar of a market that just sent the liquidity complex of stocks up 40 to 50% in nary a month doesn't wash. Perhaps Voldemorts back, or the market is in aggregate simply too levered on the liquidity trade itself, for lord knows they might need some dry powder if ever price discovery on level 2 & 3 assets emerges from the darkness...

Macro Man said...

Anonymous, that's pretty much exactly the sort of thing I'm getting at. Obvserving traffic patterns provides information on how seriously people are taking the potential for crisis or state change in the market.

C, hope you're wearing a neckbrace....a bit of whiplash today. The skittishness of the "liquidity complex" or "risk complex", would certainly appear suggest further corrections are in the pipeline, though that is of course no guarantee that it will be the Big Kahuna.

One would have to believe that the true depth of level 2 and 3 profit "creative writing" will not be disclosed until after the real earnings environemnt improves and these episodes are disappearing into the rearview mirror.

Anonymous said...

Macroman, I saw a link to your post yesterday on another finance site I visit, that may explain some of the extra traffic. Keep up the good work. I appreciate the time you take to write and share your views. I am just a blue collar Joe that can use all the help he can get with the market.

Anonymous said...

That's how I ended up here too, from Russ Winter's site. See comment 46.

Anonymous said...

"Macro Man is just some random anonymous guy spouting off"

You seriously under rate yourself. Some weeks back I particularly enjoyed a comment you made (abusing the muppets to Chuck Prince's benefit) and forwarded it to an ex-citi ex-colleague.

He responded: "Hahah.. poor, rich executive. That's an interesting blog, I like how he talks in the third person. Reminds me of Duff Man from The Simpsons."

So, take heart! You're much more than some random hack and you even remind people of genuine A-listers! ;^>


Anonymous said...

The number of comments attempting to lift you from your humility may be an indicator of how many new viewers aren't familiar with your writings!


Ben Chua said...

Macroman -

I found the TIC data alarming and I forwarded the information - your link has also been sent to all of my friends who may have any interest in this. A number are in the financial services industry and they are already inundated with information of varying quality.

On my part, you are required reading unless there is something else that is pressing - like an m&a project to work on.