G And S

Tuesday, July 14, 2009


Yesterday started off so brightly. Macro Man's first trade out of the blocks was to buy some July upside in Eurostoxx as a half-hedge, half-punt. It was 2% out of the money when he bought it, and 2% in the money at the close of play yesterday. That was Good.

Unfortunately, he was greedy, and worked a limit order rather than just saying "mine." So he was only filled on half his desired amount. That kind of Sucked.

Then he did four separate equity futures day trades. Each of them was stopped out, including a cheeky purchase of Spoos at 878 that would have come in handy in the main-session squeeeezzzzzeeeee. That really Sucked.
That's Good, that Sucks. The letters "G" and "S" featured prominently in Macro Man's day yesterday, and look set to dominate today as well. The reason is hardly a secret; yesterday's weak opening was swiftly reversed by a Meredith Whitney research piece upgrading Goldman Sachs to "buy" and raising her estimate for today's earnings to an above-consensus $4.65/share.

That, combined with the NY Times story highlighting Goldman's trading successes, helped spur an equity-markt love-in that was more than a little painful. (Never mind that Whintney's medium-term outlook on the banks in general was less than rosy.)

Now, regular readers will know that Macro Man's standard earnings forecast for GS is consensus plus a buck; eviently Whitney has stolen his model! Ironically enough, on the only occasion over the last 3 years that GS failed to beat consensus, a) Macro Man was having Christmas lunch lasy year with GS and their erstwhile merchant of doom, Jan Hatzius, and b) the stock and the market rallied.

Given the ongoing squeeze, it's hard to know exactly what's in the price for today's GS earnings report at 8.30 local time. Frankly, given the magnitude of yesterday's squeeze (which has thus far carried into today), Macro Man has no idea what to expect. A few banks are now suggesting that the whisper number is as high as $5/share, and that anythign less than that will disappoint. But given the break back above the old head and shoulders neckline, Macro Man wouldn't be totally shocked to see the market rally on a $4 print. (Consensus is ostensibly $3.65)

Elsewhere, the equity recovery ahs had a few knock-on effects that are starting to become interesting. The rally in some fixed income markets is starting to look rather tired, with Bunds offering the cleanest chart. If today's ZEW delivers a strong print and equities hold up, we could be looking at quite a retracement.

Finally, it's worth pointing towards that most frustrating of creatures, occasional nemesis of macro punters everywherre, the flightless bird, the NZD. The kiwi has once again squeezed against the dollar/Aussie/euro et al. ove the last few days, despite the fact that NZDD 2.775 billion of eurokiwi bonds mature tomorrow. That there were substantial redemptions this month has been a very-flagged event; a little too well-flagged, actually, because punters loaded up on kiwi shorts early and often, thus rendering the little bugger vulnerable to a short squeeze....which duly ensued.
But now we're at the sharp end of the stick, with an imminent redemption flow in the next 24 hours, and NZD is near the top of recent ranges against a whole host of currencies, including the AUD, pictured above.

So there looks like quite a nice little opportunity to play for an overnight pop in the cross. Macro Man can only hope that it does not emulate the fortunes of his equity book yesterday and Go South.

Posted by Macro Man at 8:54 AM  


I dud not buy any Paducah-mullah for my dollahs, so this night took a toll on my body and soul. Glad to see you living in the land of chocolate MM, sure wish I could get some sterling like you. It might be worth asking if someone with a whole lot of TALF and TARP mulla so the COT and decided to run every stop on the gbp?


Anonymous said...
10:07 AM  

Anyone know where I can get this Posen guy's cd's, cause I don't even know which group this bird sings with. Maybe some one could tell him to drink a cup of STFUP.


Anonymous said...
10:10 AM  

Cut him sim slack, man, he's just given my EUR/GBP option book a fabled yellow "get out of jail free" card that has partially unwound some of my bone-headed hedging from yesteray....

Macro Man said...
10:14 AM  

I cut out of the eur/gbp about five hours ago with a bit of skim milk. Guess there's always jaywalking for a career.


Anonymous said...
10:16 AM  

MM - your reference to G and S has awoken the inner lyricist in me. Something along the lines of:

In short in matters credit
Algorhythmic and proprietary
This is the very model
Of a bank of notoriety

The possibilties are endless...


Anonymous said...
10:47 AM  

I am so bitter about the painful day yesterday, I am starting to wax a bit poetic (in prose, unlike the previous commentator).

How about this for a headline?

'Ample Golden Showers cause Green Shoots to sprout on Goldman Sachs lawns'

Dimitry said...
11:32 AM  

hate anything to do with GS ... PERIOD

Anonymous said...
12:05 PM  

Oh, I don't hate GS- far from it. I have quite a good relationship with them, and they are one of the very few banks that maintained consistent pricing over the last 3 quarters in the stuff that I trade...they have certainly won market share in my trades, so small wonder they've done so elsewhere. Just about everythone there is smart and works hard, so no beef there.

I do tend to take their research with a heavy does of sodium chloride, though...

Macro Man said...
12:56 PM  

Whenever I think about GS, I think of Pacino in the Devil's Advocate, looking out over the skyline of Manhattan.

"I'm a fan of man!"


Anonymous said...
12:57 PM  

But I do have problems with Madame Whitney front running her trades out of her 2000 sq ft bucket shop.


Anonymous said...
1:01 PM  

so markets are up because GS made loads of money from trading them? so the more GS take out (in bid ask, fees, prop etc) the more the remaining is worth... help me here someone....

Anonymous said...
1:13 PM  

Tape weakening - looks like no one believes this. Thank god HSI doesn't trade 24/7, would have had my gonads ripped off by now. I'm getting flat, got all the big moves right but utterly messed up trading the noise - i'll leave that to you ex currency market makers.

Nemo Incognito said...
1:47 PM  

I blew it too, yesterday, alas....

Macro Man said...
1:50 PM  

hey where is gs pre mkt?
i cut too much of my stuff too. sucks


Anonymous said...
1:55 PM  

148.16, down $1.28.

Macro Man said...
1:56 PM  

its down---

maybe this bradley date is going to call it. if gs beats like this and mkt sells it. we are in for a tailspin

Anonymous said...
1:58 PM  

Guess the beat wasn't enough.. and I am grateful. Blankfiend did not want to use his supernatural powers to conjure all the money out of the US taxpayer this quarter? Maybe he just wanted to keep a few other traders around for sport and skeet practice for the future?


Anonymous said...
2:07 PM  

does GS result mean anything for other banks' results?

Anonymous said...
2:13 PM  

this price action has "last-hour rally into the close" written all over it... discuss?

Anonymous said...
3:02 PM  

I think it has last hour collapse into the close looking more likely? hovering by the highs all day, shorts all stopped out - but no successful breaks to the topside

Anonymous said...
3:39 PM  

i wish the currency market would stop chopping..man give me some decent price action for a change...

Anonymous said...
4:24 PM  

In re GS, I second both notions: that most everyone there is smart and works hard (though one of my favorite coworkers is ex-GS, so maybe I am partial), but reading their research is the 21st-century version of Kremlinology.

In re the tape, I think you're currently at +100 bps off the lows. How much of a closing rally do you need? If I had to bet, I'd say close flat on the day, but very-short-term moves are among my manifold weak points. If anything, you should fade me.

wcw said...
4:57 PM  

Nice to see sympathetic long faces. I put on my Yen dunce cap whilst twitching uncontrollably and kicked myself repeatedly in the nuts.


Professional Gringo said...
5:13 PM  

So GS is nailed to the top of the $150 resistance level. Expectations are high in the market for certain names.
It does seems either misses, poor quality results or great results seem to not matter...
Everything feels very aimless. I mean, you could make a case that Kiwi and Aussie are possibly signalling a weakening against the USD, but that is looking perhaps too hard. GBP, looked to have broken down a few days back but then goosed back up into the range...

Range...sick of that word...

Anonymous said...
6:02 PM  

I wouldn't count the equity H&S move out just yet. A retest of the neckline, after it is broken, is not uncommon and usually my entry point. I'm looking for a move down from here.... we'll see...

hull speed said...
7:16 PM  

Anyone noticed how bid USD/ZAR seems to be trading? - warning sign?

CcyMan said...
9:27 PM  

dont sigh yet.
stay confident. i think the big one is coming.
we are not in a 25 vol world w unemployment at 9.5%. which means the break will be negative. look at tza.

if gs cant rally big after earnings like that, all other fins will get rocked bc they will suck much more

we are going lower

ohhh also, crude is trading like a dog ( which is a negative for the market, i dont care what anyone else says ... its money velocity)

bernanke is at home right now developing the next plan.

mm get ready my friend


Anonymous said...
10:36 PM  

ok the equity H&S definitely went south... or north and hit the stops. Oh well, I'll just have to wait for a better short entry.
On the flip side, kiwi and aussi longs are looking rather fantastic.

boat calculator said...
5:51 PM  

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