Tough Times

Friday, May 15, 2009

Sigh. Just when you thought it was unsafe to get back in the water, it turns out that things are just swell, after all. Or so it feels after yesterday's little afternoon squeeze in equities. Italian GDP shrinks 2.4% (non-annualized) in Q1? No problem! German GDP collapses by 3.8% (non-annualized) in the same period? Who cares! It's all about the second derivative, baby!

While there are no doubt macro punters who have embraced the dark side and done well out of this, in aggregate it appears that Macro Man has plenty of company in his bewilderment. If anything, the negative correlation between the HFR macro hedge fund index and the SPX has intensified recently.
Macro Man is under strict orders to minimize his movement as much as possible, so he's missed out on the usual circuit of investor roundtables and after-work beverages where macro punters convene to exchange views and, on occasion, commiserations. On an exclusive basis, he is able to bring you a photo (thanks to reader Tiago) of one such gathering last week...

Tough times indeed...

Posted by Macro Man at 9:22 AM  


am i being stupid but i find your first chart confusing....picture and comments would suggest hedgies long risk but you've inverted one of the axis.....i still see macro hedge returns neg correlated with s&p..

Anonymous said...
9:56 AM  


Macro Man said...
10:04 AM  

So yesterday you feared the sky may fall down, and today... Well, let's call it off?

Not sure if I understand what is going on...

Nevertheless, I can se the following:

1. Oil prices are on the rise, and it is probalby not due to real market conditions. A new oil bubble is getting traction.

2. Trade data are still horrible, which supports #1.

3. Last year we saw something like an inverse oil-standard. When oil went up, the dollar went down, and vice versa. There is, however, little sign of that relationship now. Something ahve changed.

4. Gold had a weak month in April, but seems to be getting hot again. Who are getting into gold, and from where?

5. we've seen a lot of strange market moves lately. You, out of many, have noted that several times. I wonder how much of these inexpliccable moves are initiated by cheap credit due to QE? Could it be that this cheap credit is only available to speculators, hence the real result of QE is a rollercoaster-ride that turns out as a zero-sum game?

Just wondered. Looking forward to be enlightened on monday.

Tord Steiro said...
10:32 AM  

Is the move in to Gold not going to become more and more attractive as an inflation hedge going forwards? CBs have pumped in all this liquidity which they won't remove at the same pace (for fear of just reigniting the recession) so under the velocity of money principle we should experience stronger inflation that in the past?

Would've thought people were getting in to the trade as early as possible....

Anonymous said...
10:52 AM  

There is no catalyst for earnings growth in the economy generally, with the green shoots having been stepped on with this weeks data. Wildly high levels of leverage at the financial companies will not return for our lifetime and that takes a big chunk out of the S&P. Anyone who expects a reversion to the mean on S&P earnings is delusional.

This feels a lot like last summer where it was obvious where the economy was headed, but the equity market was in denial until the fall. There is a lot of dumb money out there. Seems to me like the readers of this board are generally a few steps ahead of the rest of the crowd. Accordingly, patience will be rewarded.

12:17 PM  

would someone enlighten me on the price action pattern into the closing 30 minutes in US equities virtually everyday - which a$$h*!@s can't wait until the next day and rally spoos - destroy otherwise nice down patterns? It's like money is burning a hole in their proverbial pockets ... any technical rationale behind this b/s?

Anonymous said...
1:13 PM  

I believe it's known as "government manipulation."

Macro Man said...
1:16 PM  

I think pension funds and SWFs are buying into this rally, along with the momentum crowd. In other words, the rally is supported by stupid lunatics with lots of money. Pensions and SWFs will get slaughtered when the market goes to new lows, and it will have devastating long term consequences.

Anonymous said...
1:21 PM  

I don't give a sh&t about "devastating long term consequences" - for in the end we'll all die - but they are having a devastating impact on my short term pnl! Damn these m@th**f#^*%s, I say, damn them!

Anonymous said...
1:47 PM  

MM - hope the ACL surgery is getting you where you want..anyway..

this strikes me as a very confused market on a snipe hunt, puzzled, dazed and confused by the lack of clear signals... (hypothesis 1) but

...the signals are actually very clear - on a YoY basis the 2nd derivative is NOT positive
even for consumption when you look at monthly data (and now confirmed by retail sales)

p.s. - where does that "meeting" snapshot come from...priceless :)

dblwyo said...
1:54 PM  


Quick Q - Are you typically as technically (200dma) driven as your post on Monday suggested? Was surprised to see you long copper, nzd etc so can only assume it was a partial hedge to your more core bearish possies that were not divulged to the masses?


Anonymous said...
2:28 PM  

Tord Steiro: i think that 'oil bubble traction' is not happening yet. Oil has had recently a remarkable high (80%'sh) correlation ( basis:daily returns )with equity.
Today, the headlines say over 100million bbls of oil + products in floating storage. That is in addition of all 'standard' stock in tanks. Global '09 oil demand could be yoy off by > 2mio that is not supporting a new oil bubble either. IMHO, wti will have trouble to break thru 60 for a while .... Q3-09 perhaps?

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2:31 PM  

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Keyword said...
3:00 PM  


If there is government intervention, there must be evidence of it somewhere. I'm not sophisticated enough to know where to look, but surely market participants should be able to come up to some evidence to substantiate that claim, if it is true.


Anonymous said...
3:36 PM  


look at the blog called zero hedge.. there is plenty of "shady" actions in the mkt

sometimes a bit too conspiratorial for my taste, but the author is a bright guy

tom said...
3:59 PM  

Wow, I never thought I would be in a crowd described as embracing the dark side, but here I am. Bear-market rallies are wonderful things. As noted before, I have scaled way back and am dollar-neutral again, but I enjoyed the ride.

As for who is buying, I believe that pure retail money is still scared, but that almost-retail advisor/fund money started going long in early March and hasn't looked back. This is why I assert the rally may well continue; I wouldn't be shocked if it lasted another quarter or two. Equities can be dumb that way.

After all, the second derivative really does look a lot better: Me, I want to be levered long equities eventually, but not until equities investors recognize the L-bottom economy and start pricing as if it will never end.

That'll take a while. Patience.

wcw said...
4:45 PM  

I'm a stupid lunk in (temporary) possession of dumb money who is just as surprised at this equity rally as the apparently "sophisticated and educated" crowd seems to be (based on the blogs I've run into and have enjoyed reading).
as such I only have this to offer:
since the "smart money" all seems to be leaning in the same direction, haven't they, by definition, outsmarted themselves?
Thus, they would not be running the herd anymore, but have become the herd.

just a stupid guy's idea.

mind you, it the smart money crowd that created and nourished this economic fiasco in the first place.

Anonymous said...
5:03 PM  

I would concur that "dumb" money is unneccesarily pejorative....if you've made money, you've made money. For the last two months, that's more than I can say.

As for the 'government intervention' in equities, I am sort of half-joking and half not. I am not sure if I really believe that the government is directly intervening in equities (though this is a common strategy in asia)...but I wouldn't be surprised if they did.

Macro Man said...
6:16 PM  

A small bounce off resistance for the S&P 500 and everything else keys off that. It doesn't mean it won't continue on down for a while yet, until wishful thinking wins out over reality again.

Anonymous said...
4:48 AM  

Never saw Geithner in a green hat before.

Market's a bull.

pebird said...
12:13 AM  

R u portuguese to put a picture of a "pega"? cool!

Anonymous said...
3:41 PM  
natasha said...
5:30 AM  

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