Of rocks and hard places
Wednesday, March 26, 2008
There are a number of people, including Macro Man, who seem to be caught between a rock and a hard place. The problem facing Macro Man is fairly easy to understand....after a couple of months of watching markets as a spectator rather than a participant, it is natural for it to take a bit of time to get back up to speed. He feels as if he's driving up an intellectual sliproad, trying to pick up the speed to safely merge back onto the market highway.
The market environment isn't exactly a forgiving one, either. The macro trends that dominated financial market pricing over the last couple of months seem to have been put in abeyance by the Fed's recent actions; while Macro Man presumes that this is a temporary phenomenon, there's no telling how long it may persist. Recent price action in EUR/USD provides a useful guide to the volume of noise in current market pricing; since Macro Man's first day in the office a week ago, the rate has executed a rather messy round trip between 1.5725 and 1.5350.
So what Macro Man (and others) have to decide is whether the dollar is a big "give ya" right here and now or whether this is the latest bit of market noise pollution.
9 comments:
The dollar is becoming the carry trade currency, something has to replace the Yen might as well be the dollar as Ben is doing his best to make sure that happens.
When the Fed hits ZIRP then the fireworks begin. After this little pullback seems like a good place to enter to me. But then MM, you're the expert, that's why we read your blog...
Hmmm, if you're going to hint at Elliott (3 waves and an overlap) probably a double three (7 overlapping waves down) might be necessary to correct the "too far, too fast" rise in Plat (or any of the commodities 'cept maybe oil).
Slightly off topic, but a very interesting analysis re debt deflation from Pimco's Paul McCulley:
http://www.pimco.com/LeftNav/Featured+Market+Commentary/FF/2008/GCB+Focus+March+2008.htm
Well, Jean-Claude can always try what Bollard (NZ) attempted in the 2006-2008 period, which was to pound the table hawkishly on fighting inflation, and then complain daily that the Kiwi was too high. Didn't work for Bollard. But, Jean Claude could give it a try.
(At least his currency's not nick-named after a flightless bird.)
Find it surprising that you seem to get itchy fingers once too ofen on going long equities when they had not fallen even half (in the US)as much as they do in a normal recession - let alone in a situation like now. This is confirmation, if one were still needed, that equities have not formed a bottom.
Au contraire....I actually want to short equities, but this price action is very diffficult to read, so I am taking my time.
Don't just look at US equities on their own indices. Got to look at them in other currency terms. SPX alread down 35% for Mrs Watanabe. If usd falls fast enough then US indices can go up, (as they are Asset/USD ) yet fall in global terms.
What about equities? Have you ever heard so many prominent people call a bottom less than a week after it truly occurred? Looks like a good place to re-enter short positions, IMHO.