Good News and Bad News

Monday, February 23, 2009

"The bad news," said the surgeon on Friday, "is that you have indeed torn your anterior cruciate ligament." OK. This was no more or no less than macro Man had expected. "The good news, however, is that it is a very clean tear with no damage to other parts of the knee. All things considered, the joint is pretty stable." An arthroscopic procedure to clean the knee out was recommended, followed by a course of intense rehab. All being well (a big if, mind you), a stronger leg and a brace will hopefully take the place of a full reconstruction.

Evereywhere he looks, Macro man sees good news and bad news. Staying on the "leg" theme, there was good news yesterday as Macro Man managed to hobble about on a 20 minute walk wearing a brace but no crutches. The bad news was that it was startlingly tiring, and the muscles on his leg have withered to shocking degree. (He was told to expect a rapid atrophying of his quads, but could it all vanish so fast?)

Moving to his professional life, the good news for Macro Man is that his portfolio has rallied handsomely in the couple of hours that he's been logged in. The bad news is that he is still well underwater on the day, having been frankly blindsided by the driveby in the dollar that started about 4.40 last Friday afternoon London time.

Macro Man has a funny feeling about this one. While his Bloomberg chats were full of head scratching and "we're not seeing its" and "oh, it's stops" and even a "someone's sold a billion dollar-Swiss", the rally (which carried over into Asian trading" has a bit of a sinister feel to it. It reminds him quite a bit of the dollar's tumble in December, which started out of nothing but was only ex-post attributed to a massive flow from the nice folks at Voldemort, Inc.

Regardless.....after Macro Man was salivating over a potential key technical break higher in the dollar (against the Sing-a-ling), it's not hard to see why a chartist might think the buck is about to break down. Ugh.
Still, once cannot ignore the news in Europe, either. The good news is that Macro Man's chum Jean-Claude Trichet has managed to pull his gaze away from the mirror long enough to see that credit flows are falling as a result of deleveraging, thereby threatening both the Eurozone economy and the financial system. The bad news is that a ten year-old with a Magic 8-ball and a Tony the Tiger Decoder Ring from a box of Frosties could have figured that out two or three quarters ago.

In the US, meanwhile, the good news seems to be that the Federales are going to take a stake as high as 40% in Citigroup copmmon stock. The bad news, of course, is that there remains a further 60% (as well as BofA!) to be wiped out.

Regardless, the market seems to be in the mood to mambo today, with Spoos up nearly 2% in early trade. (Mind you, it's only 15 points, which doesn't actually seem like that much- and indeed, it wasn'y much longer than a year ago that that would have been less that a percent.) In any event, one dollar cross that has remained relatively resilient despite the (ahem) sound and the fury of recent dollar action is USD/JPY, which this morning has traded back up towards its highs of the year.

If the euro continues to trade well, this could mean a breakout from high-octane crosses like AUD/JPY, which have gone nowhere over the past few months (kinda like the S&P).

All of this probably presupposes a sea change in the trend of equities and the DXY; while Macro Man can certainly see the chance of a further correction, he remains relatively confident in the view that both equities and the euro go lower. The bad news is that it might get a bit tricky for a few weeks.

Posted by Macro Man at 8:52 AM  


Yep, that dollar correction did hurt.
I may be paranoia but each time a politician makes a clear statement, I become wary, above all when it contradicts other recent statements by other politicians.
Geithner blames China of currency manipulation and Clinton urges China to keep buying US treasuries, after all they're in the same boat and rowing in the same direction, uggh?
Another statement by Hillary"The US has a well-deserved financial reputation"? I get wary again when someone makes that claim about him(her)self.

Anonymous said...
11:07 AM  

Good news re the knee MM, sounds like can heal pretty cleanly/quickly ....Your legs always were a bit weedy, so good chance for you to work on them both !!!
Don't worry about the Dollar, temporary respite before it zooms off again....hang in there.....

Anonymous said...
11:32 AM  

I attribute the move on Friday afternoon to the fears about the American financial system. Nationalization of both banks is looming over the whole banking system, and this is what caused the dollar sell off. I think...

Yohay said...
11:50 AM  

STGYEN also looks to waking from its slumber. After a 10 week consolidation at very "undervalued" levels....this move above 137.40 could turn out to be very meaningful.

FX said...
12:21 PM  

Your blog would more useful if you spent less time being clever and more time being clear. Half the time, I have no idea what is being said.

Anonymous said...
1:00 PM  

Hi Macro Man!

I send you an email to your gmail account regarding your knee injury, please READ IT! I wanted to share some info on the ACL injury that you will find useful as I have some experience in the field.

All the best!


Mike said...
3:24 PM  

Rumour has it that indeed Voldemort is the culprit in Friday's EURUSD J.A.T. apparently triggered by Reuters' Eurobond piece and with the apparent objective of protecting their precious 1.25 option barrier.

Christian said...
4:32 PM  

Anonymous @1:00 PM

I would disagree... there is a crowd here for the style and wit

btw..the poems have disappeared ? MM - don't tell me that you have become as serious as Hank Paulson

NS Capital Partners

Anonymous said...
4:43 PM  

Poetry is usually reserved for public/bank holidays, which have been in short supply recently here in the UK....

Macro Man said...
5:05 PM  

The euro rally on friday came after the close of london and was on relatively mild liquidity (including the sharp move up last night), that said, euro has been under considerable liquidation pressure from russians in 1.29-1.30 range, as well from polish, I 'd say looking out 2 months, we are prob in 1.22-1.30 range.
If the reason was the common euro bond offering, well that has to be BS, it seem unlikely something like that can not be worked out quickly in Europe, not to mention the all important Masstricht treaty an various other restrictions on bailing each other out. German's are uber uncomfy extending out their meaty wallet as well.

Anonymous said...
5:27 PM  


I wouldn't bet against the Eurobond rumour right now, the wind seems to be turning as of latest Steinbrueck's comment. There also seems to be away around Masstrich restriction...

Christian said...
6:37 PM  

If you want poetry, read a poet. I come here to learn about the stock market from someone I think I can learn from, but half the time his wit gets in the way.

Anonymous said...
12:27 AM  

not that it overlay matters now.. but at quick glance at a eurchf chart tells you it was chf that led the move on friday . While I accept swissy can lead moves i don't understand why it would if it was a CB move. Continue with the good posts MM

Paul said...
2:11 AM  

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