Wednesday, February 25, 2009

Welcome to Macro Man's new digs! The site redesign was rather hastily forced upon him yesterday by what seems to have been an issue with servers of the company that had designed the old template. He cannot really complain, given that the template was free; evidently the design firm offers the same guarantee as your scribe.

Yesterday saw speeches from two of the most important people in the world, Ben Bernanke and Barack Obama. People seem to have given BB a modestly positive reception on his performance, though to Macro Man's eye the headlines seemed underwhelming.

In fact, Macro Man has a confession to make: he is getting policy announcement fatigue. For more than a year and a half, we've never been more than a few days away from yet another "important announcement" or "key speech" or "vital press conference." And sure, Macro Man has had fun tossing verbal (if not literal) darts at the likes of Trichet, et al....but it's getting to the point where he is really struggling to see the utility in parsing every passage of key announcements for fresh developments. It would take several pages of 10-point printing to list everything that the Federales have done since August 1, 2007....and in the grand scheme of things, this panoply of programs, proposals, and procedures has accomplished.....peanuts.

Small wonder, then, that when Bernanke...or Geithner....or any of these guys open their mouths....Macro Man is starting to hear nothing but Charlie Brown's teacher.

As for Obama, Macro Man hasn't really seen any market-based critique of the speech, but c'mon! What can the guy say? The State of the Union is: Buggered!

Such, at least, was the message from yesterday's Conference Board consumer confidence data, which printed an all-time low yesterday (going back to 1967.)

The "good" news is that at least the employment components were not at all time extremes- the chart below shows the "jobs hard to get" indicator. The bad news is that it still jumped a lot, is consistent with an unemployment rate at 8%, and shows no signs of slowing down. So if you wanted to draw conclusions from the isolated datapoint of yesterday's trading (warning: may be hazardous to your investment health), you might say that bear fatigue has set in and the market is set up for a bounce. Certainly a few notable bears (Prechter, for example) are suggesting a good chance of a technical squeeze.

Speaking of squeezes, the rally in all yen crosses remains rampant and in force. A number of crosses broke through the upper barrier of "ichimoky clouds" yesterday, fueling more buying from locals. Also not helping the yen were Japan's January trade figures; although the level of the deficit was moderately better than expected, the collapse in volumes was stunning: exports are now down 46% y/y. That's comfortably the worst reading since 1970.
So given the stunning reversal in the yen, and what he wrote yesterday, Macro Man is now on the hunt for other good risk/reward bets on a reversal. "Equities higher" seems an obvious one, though from a fundamental perspective some of the dividend swap products discussed periodically in the comments section look like better value. Gold lower is another one that Macro Man has played with, but frankly he has struggled to construct a trade that offers a solid risk/reward profile. Ditto with "dollar lower against all but the yen" trades.....the cost of transacting options in the marketplace seems very, very high to him; small wonder many banks are reporting record trading volumes so far this year!

Perhaps Macro Man will have to trawl the Second Market website, which appears to be a sort of financial E-Bay for doubt there is plenty of stuff on sale there cheap cheap! Then again, if you're only willing to pay peanuts......

Posted by Macro Man at 9:01 AM  


Hi MM,

how about shorting UST 10s? Are T-bonds and T-notes the next bubble?


Anonymous said...
12:57 PM  

AT, we've looked at this before...I don't think selling UST really fits the bill, because they simply haven't rallied very much and are down on the year. What I am looking for is sort of the screw-you reversal on the first eight weeks' price action.

Macro Man said...
1:14 PM  

specs are all long gold, it had double topped ... and the russia story is behind us as is the pricing in of QE and the potential inflation hysteria ... gold seems the obvious f*** you trade

Anonymous said...
1:41 PM  

i know what it is but im not telling

Anonymous said...
1:42 PM  

Re: gold....I agree, but structuring a trade is tricky. With gold at ~980, I looked at some 950-900 p spreads....and the premium was roughly 1/3 of the strike spread, rather than my preferred 1/4 or better. I tend to use options for this sort of trade...but just about every option price I look at looks high (unless, of course, I want to sell which case it looks low!)

Macro Man said...
1:47 PM  

better to bet on falling gold stocks than gold methinks.

al said...
2:13 PM  

selling stocks is risk negative, selling gold is risk positive ... given where we are (and past negative news flow) a risk positve bounce seems possible.

Anonymous said...
2:39 PM  

The new design looks good.
It's better to buy solid gold than gold paper...

Yohay said...
3:12 PM  

citigroup hits -15% on the session as the market realizes it's been nothing but words for a whole week..

this gets the risk aversions on the move upwards again, us dollar index(DX), gold, silver, and yen futures(JY) perhaps 102 was it

i mentioned the cds for us treasures going way up there previously, today lots of articles on european sovereign cds blowing out

The iShares Silver Trust indicated that bullion holdings jumped 153.35 tonnes on Monday to a record high 8,180.46 tonnes which is up more than 1,350 tonnes since the start of the year.--->none of that silver was liquidated yesterday from SLV

gold instruments are just way to thin to short in this worldwide depressionary environment... GLD has a market cap of $31 billion, which is equal to the 28th lowest dow stock KFT...take 2 dow drug stocks JNJ MRK or PFE and those two stocks have a market cap greater than everything precious metals related in the whole world


Anonymous said...
3:31 PM  

MM, how about short us$, flows are weakening a bit here, euro tends to be on net trading with european cds blow up in spreads, but i mean last week we were pricing in almost a 10% default probability over 5 years for Germany, the common bond offereing idea seems defunct, and ecb can show some initiative into the march meeting with a nice rate cute, euro is a long at 1.23-.124, looking at 1.35 upside almost back to the decemember range where we blew out too.
any thoughts?

Anonymous said...
4:21 PM  

Sometimes it's just better to wait.

Anonymous said...
4:24 PM  

If there were any two words I'd never expect to see on this blog, they would be "ichimoky clouds". Are these used by institutional traders? I assumed they were just the latest 'indicator of the month', but perhaps I was wrong.

Brian said...
6:29 PM  

Brian, you clearly weren't reading in the summer of 2007. I hesitated to link to that old post, which contained some terribly un-prescient comments on US housing...

Macro Man said...
6:52 PM  

Second life is to geeks as second market is to SIV/CDO managers, an opportunity for new beginnings. Who's to question what's real anymore?
Brian, I think that's why he said ichimoky and not ichimoku, but then again...
What about that JPY? Probably a bit too sharp but your post was exquisitely timed.
Fwiw I think EURGBP is a sell around 90 with an 82 target. For all that UK is weak, its not like EUR is much better off, especially given the powerhouse's reliance on global trade and all the worries around spread divergence.
Cheers, JL

Anonymous said...
7:26 PM  

JL, I've had EUR/GBP for some time. "Remarkable unrewarding" would be a fair assessment thus far.

Ichimoky was a typo, actually...

Macro Man said...
7:40 PM  

Buy Citigroup.

Anonymous said...
11:23 PM  


You're right, I must not have caught that old post, didn't get hooked on GoogleReader until Oct' 07. Oddly enough, I was caught in a portion of that USD/JPY selloff, perhaps I should take a closer look at those clouds!

Whatever happened to the hypothetical portfolio mock-up you used to post back then?

Brian said...
4:32 AM  

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