Tuesday, May 05, 2009
It's happy days again for the green shoots crowd, as the SPX finally completed its gut-wrenching round-trip to close up on the year yesterday. Man, those early January days of Macro Man loving risk seem like a long, long time ago.
In any case, yesterday's Fed Senior Loan Officer survey provided another arrow in the quiver of the recovery crew, suggesting that the worst of the credit tightening is behind us.
Throw in a solid Chinese PMI figure, and it's not hard to see how and why the reflationists are getting excited. USD/BRL is just one of many "risk asset" prices that appears to be sustaining a technical breakout.
At this point, readers may justifiably ask why Macro Man, a self-professed "data guy", has yet to exchange his bear claws for a shiny new set of bull horns. Well, it's a truism that we are all shaped by events from earlier in our careers. And Macro Man recalls the last recession very clearly, a time when he was serving as a buy-side economist as well as a portfolio manager.
And he vividly remembers looking at data such as that presented in the chart below and in February 2002 writing a big piece entitled "Happy Days" about the onset of a more vigoruous economic recovery.
Unfortunately for him, the chart above was punctuated by a very sharp downdraft in stock prices and a period of economic growth that was sufficiently tepid that the Greenspan Fed (including a certain B. Bernanke, esq.) was pooing its pants about potential deflation more than a year later.
So perhaps Happy Days really are here again. But you'll have to pardon Macro Man if he reaches for his hardhat whenever he hears the phrase; experience (and living in England) have taught him that the first sunny day doesn't mean that you can pack away your warm clothes until the next winter.