Wednesday, September 10, 2008

Large Hadron Collider

Today is a momentous day for geeks around the world, from professional particle physicists to science amateurs like Macro Man. Yes, today is the day that the Large Hadron Collider in Switzerland is turned on, and with it mankind will attempt to replicate the conditions that existed at the time of the Big Bang.

Protons will be sent at virtually the speed of light to collide in mega-energy explosions. And with it, physicists hope to find all matter of esoterica: Higgs bosons, the so-called "God particle" that gives matter its mass; symmetric superparticles, massive counterparts to massless force particles; and, potentially, new dimensions in the fabric of spacetime.

One of the side effects may be the creation of microscopic black holes, which some prophets of doom are heralding as the end of the earth. A more apt forecast may involve Lehman Brothers, which appears to be travelling on the road to oblivion at close to the speed of light. Certainly financial markets appear to have created new forces and new dimensions in which to lose money; Macro Man himself has seen part of his portfolio disappear down a microscopic black hole thanks to a series of conflicting headlines about Lehman and KDB this morning.
Before his train pulled into its London terminus this morning, Macro Man had locked in losing round trips in USD/JPY and S&P futures. With Lehman set to announce its Q3 losses (as opposed to earnings) at 12.30 pm London time today, it will be all too easy to feel like one of the protons being sent around the Large Hadron Collider at 299,700 km per second.

The key is to make sure you exit the ride before the collision.


gsm_73 said...

Dear MM:

Equities in UAE, Qatar, Muscat and Kuwait butchered for variety of reasons: real estate scandals and foreigh investment outflow, fears of our sub prime, negative reports, margin calls, domestic instutional selling....
Saudi has been in an lower orbit of its own. (retail participants contribute 93% of the volumes).

I read USD outflows from all parts of the world but which asset is rising (not equity not commodities - gold, metals... not real estate) One place I read USD is held as cash/currency form.

So when does the tide turn?
We will learn that the tide has turned when USD looses strength.
Just like OIL dropped fast before it was unravelled or USD gained strength.

According to me you are placed very high in the pyramid. Your thoughts are welcome.


Macro Man said...

Sadly for me it looks like the money is going into 30 year Treasury bonds...

Anonymous said...

I hope the tide delays turning as long as possible. I have had absolutely the most incredible two months ever (far above what I could have have even imagined) with three simple themes - long dollar, short commodities, and long bonds (and long short rates, as well).

I am paying a lot of attention to your advice - "The key is to make sure you exit the ride before the collision." I know a collision is coming up, and I am getting more and more concerned that the ride is about to end suddenly.

Did you notice that all of the Fed Fund futures through February 2009 are trading above 98.000? It's been a while since the market saw any chance of rate cuts whatsoever, but they do now.

Macro Man said...

I can only congratulate you and say enjoy it while it lasts. I have noticed FF is through my mind, that is now the same trade as buying equity puts, except with less upside (potentially) and more downside (potentially), particularly on a mark-to-market basis.

Anonymous said...

I pointed out the Fed Funds just to show the shocking change in sentiment. On June 13th, November traded at 97.260 (three full hikes before the election). I didn't see any chance of a hike then, and I don't really think they will cut the week before the election, so I have started to dump my holdings as it trades above 98 (as I will October, in fact, I will short those above 98.05).

I bought some March 2009 at 97.600 in early August, but the world finally realizes we won't see any hikes soon, so the easy money has already appeared on the account statement.

So I agree with you about limited upside, but I don't see much downside, especially in the near months. In fact, they look like cheap lottery tickets.

Celal Birader said...

I hope the tide delays turning as long as possible.

to anon @4:10pm:

Nice to hear you're having a fun ride. I would say the tide will turn when (a ) oil hits $80/barrel and/or (b) Israel strikes Iran --- whichever comes first.