Monday, April 13, 2009

Easter Monday Poem: It's Raining Yen

"Inspired" by a four-day Easter weekend in which the sun has not appeared once, here's the first bank holiday poem of the year:

Spot has started rising,
Downside interest's getting low
According to our sources
There's panic in Tokyo

Cause in Q4 for the first time
GDP was worse than minus ten
For the first time in two years
It's gonna start raining yen

It's raining yen
It's raining yen

I'm gonna go out
I'm gonna let myself get
Absolutely soaking wet

It's raining yen
It's raining yen
Every specimen

Oz, rand, the B-R-L
Even Turkey too- wow, bloody hell!

God bless mother nature
With some help from the Kampo, too
She took a call from the MOF
And did what she had to do

She taught the market who's the boss
And put a bid under every yen cross

It's raining yen
It's raining yen


Tim said...

Happy Easter Mr Macro, you have made my Bank Holiday much happier!

Do you ever look at correlation (yes I know it is a somewhat flaky concept)? I manage an Asian "asset neutral" (not market neural which is bollocks - the equivalent of going long/short 2s10s in the same nominal and reckoning you have no rate exposure). I tried to design the book so that when correlations go to 1 (ie a crisis) the P&L is minimised, this generally worked well last year (the other main protection being avoiding like the plague stuff other peoples trades). In the last month or so the book has suddenly unlocked and done nicely. I have tried to figure out why (it is not direction as trades which are notionally short have made money) and tentatively feel this is because correlation is being pushed down by cb intervention - The assets they most want to support being the senior tranches of underlying shite ie the stuff that is most short correlation. By supporting these prices they are causing others to unwind correlation hedges pushing correlation down. Is this apparent in Macro? Regards Tim

CV said...

Splendid Macro Man! That was just what I needed on an otherwise dull Monday.

It does indeed look as if the Yen carry may soon be well up and running again (i.e. sell JPY buy NZD,AUD,EUR and the other usual suspects). At least as long as we have the current spring sensation in the market. However, what about Bernanke ... won't he be attempting to dethrone the JPY as a the main carry funder?


PureGuesswork said...

It is displays of talent such as this which make me confident about the survival of western civilization.

Donlast said...

Fantastic video and A+ to the versifier.

But if the rally is suspect how can the Yen carry-trade be on the rise?

Macro Man said...

Tim, lots of macro correlations have broken down, to my and others' chagrin. My take is that there are too many crowded trades, so it's positioning rather than sinister forces that explain a lot of what I see. That having been said, in other markets such as equities there are perhaps more reasons to suspect something more sinister at work.

Don, for now the one correlation that has held has been equities and USD/JPY. I suspect that if/when stocks roll over that the yen will catch a small bid again, though the dire state of Japan's economy suggests to me that we won't revisit the lows and the the longer-term risk is indeed skewed towards a weaker trade weighted yen.

Anonymous said...

you da man, now i know what to sing when i check on my carry trades.. thanks!


Bagsnatcher said...

haha. fantastic lyrics. You sure have a future in that should you ever consider a change. You made my day so much happier :)

Anonymous said...

excellent lyrics. You know well about Japanese market and yen maybe more than people in Japan know. It was very interesting.