Tuesday, January 20, 2009
Yesterday, Macro Man offered up a view that a bearish sterling conclusion from the banking crisis in the UK and the aoption of QE by the Bank of England was misplaced.
Yesterday, Macro Man was wrong.
Flash Gordon's peso has been the subject of a beating last endured by opponents of Mike Tyson in his prime. Cable has plumbed to its lowest levels since mid-2001 (a time in which EUR/USD was in the mid-80's) , EUR/GBP is up 5% in less than two days, and GBP/JPY has reached new all time lows. Ouch!
Cable is down a big figure even since Macro Man printed out his charts this morning.
Allow him to wipe the egg off his face....
Anyhow, the big news of the day is of course the inauguration of Barack Obama. As an indication of the anticipation, the UK media has been heavily advertising its coverage of the inauguration and speech; Macro Man can only imagine the fervour in the United States.
The world looks grim at the moment, and for good reason; the current financial crisis and the concomitant global recession is shaping up as a once in a generation, if not lifetime, event. Regardless of one's political affiliations, it is in everyone's best interests that Mr. Obama can live up to the lofty expectations for him. In the near term, it appears unlikely.
Nevertheless, from a market perspective Mr. Obama has a relatively easy comparison; the SPX declined an annualized 5.5% during GWB's eight-year term.
An Obama bounce, an Obama-rama if you will, has been conspicuous in its absence. Macro Man has been wary of such a squeeze (to his detriment, given the performance of his early year tactical buy) ever since election day. At the risk of sounding tautological, it seems likely that if an Obama-rama doesn't materialize soon, equities could be in (even more) trouble.