Wednesday, January 21, 2009
The bad news: On Barack Obama's first day in office, the S&P 500 registered a decline virtually identical to the average annual return during George W. Bush's eight years in office...a tenure that included not one but two bear market declines of 44% or more.
The good news: Obama has another 1,460 days (and perhaps 2,921) to improve his average.
Whether it was more fo the same (ongoing concerns over the financial system) or the relatively uninspiring oration from the new president, yesterday's price action was far from an Obama-rama; it was much more of an Obama-nation. (thanks, Bobby D.)
Technically speaking, there is basically nothing between yesterday's closing price and last November's 741 lows. Fibonacci-ists might hang their hats on 789 retracement support, but from Macro Man's perch that looks decidedly flimsy.
This has been a pretty frustrating move for Macro Man; while he is/was extraordinarily bearish on stocks for the medium term, his tape-reading abilities have deserted him this month, and he's completely whiffed on this move. Fortunately, he's done OK elsewhere, but still...it grates.
How bad are the financials? Reams and reams can and have been written about them, and still we are all collectively amazed by each fresh casulaty in the sector. Consider this; through Q3 of last year, one of the most popular (and populated) equity trades was the spread that Macro Man labeled "equity market crack"- long energy and short financials. This spread got absolutely mullahed in Q3, even making new lows in October at the height of the funding scare. Since that point, oil has fallen by a further 50%....and energy stocks have outperformed financials by 95%. Yowsah!
Elsewhere, there was a raft of data released in Singapore last night, including the worst quarterly GDP print (-16.9% annualized) sine the Bloomberg data series begin (1975.) CPI and industrial production data were also lower than expected, and the government slashed its forecasts for 2009, looking for weaker growth and a chance of deflation this year. Despite this, the MAS announced that they saw no reason to adjust policy between meetings and no reason for the SGD to be weak. Hmmm...perhaps they've borrowed JCT's glasses?
Other than Brazil (which will cut rates this week), Singapore is just about the last economy out there that hasn't eased monetary policy. This may be a pushback to avoid "rewarding" speculators; if so, Macro Man is perhaps doing himself a disservice by drawing attention to the issue.
Finally, it's worth observing that Mervyn King has essentially declared open season on sterling, noting in a speech that a sustainably weak £ offers a number of benefits (without citing any potential demerits.) Meanwhile, the public sector borrowing requirement for December obliterated expectations, coming in at a tidy £44.2 billion. The pound has peen pummelled (again) as a result.
A rather interesting (if possibly apocryphal) quote has been making the rounds today:
"A weak currency arises from a weak economy, which in turn is the result of a weak government"
The speaker? Why, Gordon Brown, of course, in 1992.
Hmmm. While the new president lowered expectations for immediate (or is that intermediate) relief yesterday, at this point Macro Man would lean towards the Obama-nation emerging from this crisis before Brown's Britain.