Friday, February 06, 2009

Let's Call the Whole Thing Off!

To quote Hannibal from the A-Team: "I love it when a plan comes together."

Although the outcome from yesterday's European policy announcements was not particularly surprising- 50 bps from the BOE, nowt from the ECB with a heads-up on 50 next month- the market outcome was gratifying.

Sterling roared against the euro and particularly the CHF; if this keeps up, he'll only have to re-mortgage his house (as opposed to his soul) to afford the odd piste-side vin chaud next week.

Similarly, the front end of the sterling curve got bushwacked (though in fairness, no part fo the curve did particulary well); there would appear to be further downside in store, given the rather tepid reaction of 3 month LIBOR to the rate cut.

Today, of course, sees the release of US payroll data. What is there to say? It will be crap, though exactly just how crap is frankly ungameable. Porbably more itneresting than the headline print will be the revisions from April '07 through March '08; these are typically revised lower during economic downdrafts.

Elsewhere, Macro Man feels caught in a global sentiment cross-current; punters seem desparate to play a reflation/recovery rally in certain markets and sectors. Meanwhile, while the various moving parts in his diversified book seem to oscillate on a daily basis but, in aggregate, end the day somewhere close to zero.

It's as if markets can't seem to decide whether the reflation trade is real or not. And it brings to mind the old Gershwin tune, "Let's Call the Whole Thing Off."

You say either and I say eyether,
You say neither and I say nyther,
Either, eyether, neither, nyther
Let's call the whole thing off!

You say China and I say zloty,
I say peso and you say Aussie,
China, zloty, peso, Aussie
Let's call the whole thing off!

I say Korea and you say Baltic*
You say rally and I say uptick
Korea, Baltic, rally, uptick
Let's call the whole thing off!

* Baltic Dry Freight Index

No doubt there are plenty more couplets that illustrate the dichotomy of views at the moment; under ordinary circumstances , he would be happy to delve into them.

But he's been tied up this morning and has quite a few things to do beore payrolls, so he'll leave it to readers to furnish their own. Good luck to all for the payrolls and the market aftermath; as for Macro Man, he can only hope that in looking at his book a few hours from now, he doesn't want to call the whole thing off.


Yohay said...

Why call the whole thing off? It will be a blast!
I believe that NFP will be better than expected...

spagetti said...

Yohay: from your lips to G0d as they say in some circles.. :)

im much more short term thn i'd like to be these days; and think that short term the reflation fantasy will prevail

Damcanu said...

Hey MM I see Clarkson has been having a go at your at your favourite PM and ex-Chancellor ol' Gordon :-)

Speaking in Sydney, the BBC presenter reportedly called the British prime minister a "one-eyed Scottish idiot".

The controversial presenter compared Mr Brown to Australian Prime Minister Kevin Rudd, shortly after Mr Rudd had addressed the country on the severity of the global financial crisis.

According to The Australian newspaper, Clarkson said: "He [Rudd] genuinely looked terrified. The poor man, he's actually seen the books.

"[In the UK] we've got this one-eyed Scottish idiot.

"He keeps telling us everything's fine and he's saved the world and we know he's lying, but he's smooth at telling us."

Yohay said...

Spagetti, I do hope so, and after seeing the ADP figure was somewhat better than last month's ADP data, I'm optimistic. We'll see if my guesstimation was right in one hour...

Macro Man said...

Damancu, I don't udnerstand what the "controversy" is. What did Clarkson say that was factually inaccurate?

Anonymous said...

You say Geithner and I say Volker,
I say Change? and you say Yes We Can,

I do believe he has 2 eyes, however.
Ta, JL

Macro Man said... of them is made of glass.

Damcanu said...

MM, you hit the nail on the head !!!

Everything Clarkson said is true.

Anonymous said...

On the lighter side, some people with skill, courage and initiative are still rewarded for their work:

So, within sight of two nearby U.S. warships, the pirates counted the cash — air-dropped by parachute — then took off in motorboats, pirate Aden Abdi Omar said, speaking to The Associated Press by satellite phone after arriving in the central Somali town of Harardhere.

They counted the cash Hahahahaha - Go Somali Pirates show NATO what pussies they are!

Anonymous said...

This piracy lark is a profitable gig!!

Anyone want a few months off to hoist jolly rogers??

Anonymous said...

Haha, thought that was typical Clarkson exaggeration!
shitty technical rally, looks like it could continue into next week's bill vote on spooz break of 850 area.
Here's a query why does a macro focus always leave one so permanently bearish / pessimistic (self included)?
Heard a good one t'other day from a large and experienced player: "I'm such a perma-bear that I sold my house in the 80s thinking we were overdue for a crash."

Anonymous said...

"why does a macro focus always leave one so permanently bearish?"

Erm...because it's a bear market...?

Anonymous said...

Enlightening anon at 4.56, think you missed the "permanent" word, i.e. macro players are perma-bears even when markets are rallying. Sheesh

Anonymous said...

Maybe it's because real money in the macro game is made during hightented volatility across interest rates/ currencies/ and subsequently in stock markets. Also, one is always inclined to be long the bond mkt than short it, because again its tough to make money shorting the bond mkt. One could argue interest rates will be higher in next 10 years, how many traders will short treasuries and walk home. On the other hand, if one had the foresight that inflation genie will be brought under control, then collecting 14% coupons was prob not such a bad idea in the early 80's

SD said...

MM - when you mention "sterling curve" are you talking about Gilts, Libor curve, Swap curve or something else completely? Thanks for the education!

Macro Man said...

SD, I was referring to the short sterling strip.

While it is certainly the case that the biggest money in macro (at least relative to other asset classes)is to be made during times of market stress, in my experience it is a very, very costly exercise to to be "perma-" anything, whether bovine or ursine.

While there are obviously very long term secular trends (e.g., the bond bull from '82 onwards), economies and markets move in cycles, and it is these cycles that are the stuff of everyday trading existence. To wit, 1994, for example, was a catastrophic year for anyone who "bought and held" govvies.

And within the space of three years, FX markets were faced with a crisis of yen strength (1995) and yen weakness (1998.) Maintaining an open mind and a flexible outlook is critical to long-term success, at least the way I manage money.

So why am I pooh-poohing the BDIY and Chinbese equities and the whole reflation trade? Well, from a structural perspective, I think they are noise, not signal; too many ancillary signals are flashing red. While some may take them to be the "green shoots" of recovery, I suspect they are more likely to be weeds.

That having been said, I am not in the business of ignoring trading opportunities, so yeah, I have a bit of pro-risk, pro-reflation-y stuff on, including (gag) tiny long positions in the Antipodean currencies.

But it's important not to lose sight of where this love in (which, in the grand scheme of things, has taken the SPX precisely nowhere)ends: in my book, with more pain.

Anonymous said...

Agreed that market swings necessitate flexibility of positioning and therefore perspective, but in my admittedly limited experience I have found that those focused on the bigger picture, including myself, tend to me more cynically contrarian and thus more usually bearish - perma cynic if you will. Anecdotally, I've never heard of a "bear-tard".
Thanks for the discussion and have a good weekend all, JL

Anonymous said...

biggest number of jobs since late 1974...

have you looked at what happened the spx from late 74 onwards? the chart is actually quite similar to the current spx (line them both up in excel and you'll see what i mean).

if this analogue model was to play out...spx 1200-1300 in 2-3 months.

have a look...

Anonymous said...

genauer says:
SGD = 0.316 + 1 EUR + 0.06 CNY

everything else and more digits are
completely irrelevant !
That fits the last 3 years with an average error of less than 1 %
Somebody saying "currency manipulation" ? :-)