The Black Prince

Farewell, sweet Prince, the hope of chivalry!

-Shakespeare, Edward III, Act III, Scene V

So at long last, Chuck Prince has fallen on his sword and taken leave of Citigroup. Not before time, most observers would say, particularly as Chuck left Citi with a parting gift: another $8 to $11 billion write-down of subprime rubbish. While Chuck may not have been the hope of chivalry, to many Citi employees and shareholders (disclaimer: Macro Man is neither), he was truly a Black Prince.

One might think that global markets would have taken solace in such a high-profile departure, but au contraire: Asian markets were sharply lower on the day, Europe is trading on the back foot, and S&P futures are down 11 points at the time of writing. One possible explanation is the weakness in Hong Kong, where the Hang Seng plummeted 5% today on news that China may delay QDII investment into HK shares.
To say that the HSI has been a bubble is an understatement; the index rose 64.8% from its August lows to October highs, and is still up 45% on the year. Insofar as China/EM remains the predominant source of global liquidity, a meaningful and durable deflation of the China equity bubble could have rather unsettling consequences for markets in the West. With the uptrend firmly broken, risks must point towards further weakness in the near term. Perhaps the DOTW will ride to the rescue again, but in case they don't, Macro Man buys 500 Dec 27000 puts at 1100.

Elsewhere, Friday's payroll number was what we thought it was: inconclusive. The reaction of markets was telling, however, as Treasuries surged on the day and stocks required a strong late-session raly to close in the green. Credit concerns are clearly rising in prominence again, and the problem for markets is that the nature of the beast naturally lends itself to rumour and innuendo at the expense of cold, hard, facts. It's not hard to see more volatility this week, and it will be especially interesting to see if either Fed speakers or ECB/BOE acknowledge the renewed credit jitters.

Finally, we have had ultimate confirmation (well, aside from an Economist cover) that dollar weakness has gone tabloid. Supermodel Gisele Bundchen now refuses to accept payment in dollars, requiring that her contracts be denominated in euros. While Gisele is no doubt an investment heavyweight within the supermodel community, one might reasonably question whether the dollar's grim outlook is fully in the price when her currency views are trotted out alongside those of messrs. Buffet and Gross. Perhaps the most interesting nugget of information in the linked article is that Gisele is managed by her twin sister. Hmmm....wonder if she will accept dollars?
Previous
Next Post »

9 comments

Click here for comments
Jeremiah
admin
November 5, 2007 at 2:25 PM ×

im gonna follow Gisele's every move now.. pretty sure this is the near term top for EURUSD

but the Gisele indicator has not been tested yet. but Bill Gross has a pretty strong track record. all you need is a simple function which transforms his recommendations; that function is

trade = bill * -1

Reply
avatar
Macro Man
admin
November 5, 2007 at 2:39 PM ×

One can only hope for the sake of Gisele's modelling career that her portfolio is the only thing she has that looks like Bill Gross.

Reply
avatar
Jeremiah
admin
November 5, 2007 at 2:56 PM ×

good one :))

but what about ego? they may be pretttty similar on that one..

Reply
avatar
Macro Man
admin
November 5, 2007 at 3:03 PM ×

Oh, I dunno. Having everyone you know tell you you're the best looking-person in the world is unlikey to give you an ego NEARLY as big as that of Bill Gross.

Reply
avatar
OldVet
admin
November 5, 2007 at 3:43 PM ×

On the other hand, remember which piece of Mr. Princes's anatomy was pointed at the audience as he leaves the equity market stage. Machinations in Beijing may explain Hang Seng, but Mr. Prince (and disclosures to come) explain why lots of other investors have the jits.

Reply
avatar
Jeremiah
admin
November 5, 2007 at 4:08 PM ×

re ego
what about ex-Chelsea football managers ? what would the Special One say about the dollar? who would he blame?

anyway, the dollar is hanging in there pretty well for now, so fingers crossed for Gisele and Bill. im staying short EURUSD..

Reply
avatar
Macro Man
admin
November 5, 2007 at 4:15 PM ×

Presumably Mourinho would say the refs have it in for the dollar, and that it is CLEARLY the better currency, n o matter what the screens say.

Then he'd ask Roamn Abramobich for another £50 million to spend on traders.

Reply
avatar
Jeremiah
admin
November 5, 2007 at 4:31 PM ×

:)) excellent stuff MM
this was my first genuine laugh today, as opposed to the cynical half hearted ones I produce. especially after reading about Gisele and Bill Gross and Jim Rogers in the same article.

sic transit gloria mundi

Reply
avatar
Anonymous
admin
November 6, 2007 at 2:26 AM ×

No coverage of CITI or the SIV mess on ur blog ?? Too bad.

Reply
avatar