Wednesday, August 26, 2009
The fun just won't stop, will it? It's been a bum-clenchingly slow day today, which follows on the heels of similarly uninteresting days over the past week or two. Add in the fact that asset prices don't appear to respond to fundamental news (at least as Macro Man understands it), and you have the sort of classic August meandering that used to characterize the late summer before the onset of the financial crisis.
There doesn't even seem to be much point in short-term trading at this juncture, as the playing field is far from level. The security cordon around US data used to be pretty tight, but yesterday's consumer confidence figure was leaked, to the exact decimal place, several minutes before the official release. Perhaps the IRS will send Macro Man a pair of cotton khaki trousers with his next tax return, because it certainly feels like the US is turning into a Banana Republic.
Then again, given yesterday's budget projections, maybe not. Perhaps Big Ben can underwrite a new pants program sometime in his second term as Fed chief.
Anyhow, given the lack of action, interest, and predictability in today's market, it's perhaps worth looking ahead to September, when punters and fund managers of all stripes will be back from holiday and investment flows will be driven by rationales more compelling than "which stock has the lowest price?"
Now, normally, Macro Man could and would compile a list of favoured themes for the last four months of the year and try and figure out the best way to play them. Perhaps he has been numbed by the Novocaine of recent market lassitude, or perhaps his underlying belief in a noisy Q4 (as Lehman base effects and the inventory cycle wreak havoc on comparisons) is dominating his worldview, but he's struggling to come up with exploitable themes with which to go for it into the close of the year.
Sure, he's on board with the "lower for longer" game in front ends, though he expects quite a bit of vol in the reds in coming months. And while Macro Man believes that there's a good risk that the wheels come off of the Chinese equity "miracle" after National Day on October 1, that's a view that he's content to trade once he sees that it's actually materializing.
Other than that.....there's not much. Currencies are such a wasteland that Macro Man half-expects T. S. Eliot to start covering him. The further out you go in the yield curve, the less conviction he has in forecasting...hell, he can't even explian what he's seeing in real time! Perhaps there's an argument to start paying EM rates in certain sectors, though if Macro Man's "double dip" thesis is correct, that trade won't look so clever. Commodities? Macro Man's always been a tourist there...and given the surprise of the squeezes in, say, the base metals, a foray into these markets looks about as atttractive as a holiday to Flint, Michigan.
Maybe Macro Man just needs another cup of coffee this morning, or maybe he just needs to get August out of the way to focus his attention. But right now, his crystal ball is looking decidedly cloudy. So he throws it open to readers: what are your favourite themes and trades for the rest of the year?