Tuesday, September 29, 2009

Cow Patties

Which are bigger? The cow patties littering the Cornish moors, or those served on a sesame-seed bun to risk asset shorts yesterday?

Having sampled the "delights" of both, Macro Man still isn't sure. Hopefully they'll both be behind him by the end of the week.

In any event, he's lightened up a bit as we careen into quarter end. No point swinging from his heels when he can't even see the pitch.

Speaking of which, Friday's'quiz was designed to illustrate the lack of coherence in the drivers of exchange rates this year. Country A was the US, with a 0% FX move.

Country B was Mexico, with a 5 % FX move.

Country C was New Zealand, with a 26% FX move.

Country D was South Africa, with a 27% FX move.

Try looking for coherence there....all you're likely to find is a big cow patty!


Skippy said...

Having grown up on a farm in Australia I am familiar with cow patties.

At the risk of gross simplification and making an obvious point the NZD and ZAR are commodity currencies and have some "carry". The MXN also has some carry. They all have higher interest rates than the US.

Of course, carry works until it doesn't. Then you get hosed out of the milk shed.

Anonymous said...

The only thing happening here is what I've seen happen many times. That is people expect tops to form far quicker than they actually do so in the earlier action people rushing to get short get squeezed.
If you want to be short on stocks having a correction you just have to be patient and let these people do the hard work for you.

Anonymous said...

Maybe get a little short here and then some more if it breaks 1035-1040 on the downside, using 1075 ish as a re-evaluation level.

Apart from s&p I think Gold looks like a fairly good short too here. Small specs have their largest long position in several years (usually a good contrarian indicator), the breakout on the upside looks to have failed, so far. If it breaks down through the 985-990 level could be good for a 20 dollar pop, perhaps, if the equities get hammered too.

Steve said...

Skippy can you link to the article you cited y'day by Andy Xie?


Anon @ 10.27 (y'day) said...


Can search for Andy Xie from the top of the page, much of it worth keeping up with

Skippy said...

Steve. As Anon @ 10.27 noted, It is a very useful website for non-CCP endorsed China news and views

Steve said...

Thanks Skippy & Anon, looks like a good one.

My Chinese colleague is very bearish on Chinese stocks, thinks the whole thing is a house of cards, too many loans chasing too few real businesses. And most predicated on inflated real estate valuations.

BXhype said...

With all due respect MM, I would love to see a quiz with more history of traditional drivers in FX. I would venture they tell the story perhaps 1/3 of the time with the rest being noise (eg 2009).

Judy said...


bearish on Chinese stocks is old news, then again, if not property or stock markets, there seems to be little else that Chinese investors (or foreign investors looking to cash in on the chinese miracle) can go. There has been the usual rumour running round that tightening to the tune of 50% (vis-a-vis first half 2009) will hit the economy has been the reason cited for the rollercoaster that is shenzhen and shanghai.Of course when that's ever going to come through... ^shrug^ it's either someone with brass lower anatomy or someone with courage borne of foolhardiness.

btw, anyone knows what is going on with mpettis's site?

Judy said...

macro man

hope the cornish air did some good, cow pies notwithstanding, heheh.

what about the korean won and japanese yen - any views? how long before they croak under current conditions?

how long before they set off a series of currency devaluations?

Steve said...

Judy if you can, overlay the S&P with KRW, it's a perfect fit. A bit unnerving. It's so close that a Korean colleague is hedging his KRW exposure using SPY.

Crisis Management said...

SPX dropping a quick 7 points on these comments:

*DJ FDIC Estimates Deposit Insurance Fund To Be In Red By End Of Month
*DJ FDIC: Could Face Liquidity Crunch In Early 2010 Without Action
*DJ FDIC: Without Steps, Deposit Insurance Fund Could Be In Red Into 2013

leftback said...

Banksters may find themselves taxed here in order to keep FDIC afloat. Now that they have been effectively recapitalized by courtesy of jackass retail and mutual fund inwestors, they should be able to afford the donation. Bears everywhere will appreciate the action by Ms Bair on behalf of the US taxpayer.

Nemo Incognito said...

Saw Pettis recently, basically his site gets hacked often, especially before national day. I figure A shares are a lift here - credit growth is going to filter through to earnings as well as liquidity. Then (q1 10) we'll probably need some more juice.

Skippy said...

Nemo, do you still think that it gets more challenging in China after October 1?

Anyone have any views on why today's news has not been received more negatively? Or is it just the 'positive' news on house prices?

The ongoing weakness in confidence still fits with a
anemic recovery in final demand. It is probably not that surprising that confidence remains low given the weakness in wages and nominal income.

Without end demand the inventory correction will run out of steam. That will likely challenge extrapolation of the "V" in production, earnings and equity prices.

The recovery is a bit like Paris Hilton, looks ok on the surface but lacks a little substance.

PJ said...

Skippy - If the recovery looked like Paris Hilton, I'd have an easier time going long. More like Michael Jackson to me -- all government surgery, no organic growth.

Anonymous said...

Recovery is like Viagra, it chugs along, but what have you got when the stimulus wears off?

Karen said...

Anon@4:39, A headache, I'm told.

Anonymous said...

If it lasts more than four hours, Karen, seek urgent medical attention.

Anonymous said...

"Recovery is like Viagra, it chugs along, but what have you got when the stimulus wears off?"

A "declining and soft" state of affairs? But they also say that there is a chance of effects lasting for more than 4 hours in which case you need to seek medical attention. It seems that we are well beyond the "4 hours" and we still have not taken the patient to the doctor.

Anonymous said...

Anonymous 5:10 I'm not sure it's Karen that would have the headache.

I'm short, now THERE's a headache. And it has lasted a damn sight longer than 4 hours.

--Anon 4:39

Karen said...

Of course you want it to last more than 4 hours.. if not you take a second pill. Although I imagine, the bigger and longer the... the greater and deeper the ensuing headache.

leftback said...

"Although I imagine, the bigger and longer the... "

short squeeze?

Anonymous said...

I was led to believe that size doesn't matter.


Crisis Management said...

So in other news the new Team Japan has apparently pulled back from the brink with Fujii's "recent yen rises a little once-sided" and "watching yen's rise carefully."

Nikkei 225 looks like be a good short, but how can you short something that is already down 75% over 20 years? Long yen seems like the only way to play the resurrected Japan deflation story.

Karen said...

the size of the stimulus? of course it matters, the deeper the impact, and the longer the withdrawal.. don't you agree?

Anonymous said...

Yes I see the thrust of your argument Karen, there could be a penalty for early withdrawal.

Anonymous said...

why on earth has Boeing broken out the last two days...taken out two important pivots...yet the airlines keep cutting and cutting capacity. there must be so much mothballed supply and delayed orders...

nothing makes sense! it is a bullish chart setup now the neckline is broken...you gotta respect it

SPX looks irritatingly strong. i hate being long it but there is nothing else to do now. my time limit has expired.

if that confidence number wouldn't break it, what else will?

recall that MLEs dropped significantly in August.

i wouldn't expect a particularly weak NFP.

obviously the market will now break because i have put pen to paper! haha. c'est la vie. good luck all

Anonymous said...

Re post at 6.50 pm

Cramer has recommended BA! EADS has monumental Forex issues that is giving poor Tom Enders nightmares ( loss of 30% per A-380 in € at these exch rates. PRC is developing a clone of the A-320. 777's and 787's still the airlines darlings but no one has yet asked who will provide the financing - the spectre at the feast.

Anonymous said...

haha....jim cramer

what a t0sser

well, it is still a bullish chart setup

is this entire market now driven by retail desperation on the offer?

Anonymous said...

you guys wanna see the viagra visually
and type in
and look at a 3yr range


Crisis Management said...

An unusual afterhours rally in gold/silver coincides with a story in UK tabloid The Daily Express of the MI6 chief remarks "that Saudi Arabia is ready to allow Israel to bomb Iran’s new nuclear site."

Boeing is the manufacturer of both the "world's biggest bomb," the MOP, as well as the B-52, one of two planes which can deliver this bomb. They also work on the B-2, the other delivery plane.

The MOP is the next generator of bunker busters, offically scheduled for completion mid-2010 but rumored to have been pushed up to December, which is also the possible deadline for an Israeli attack articulated by former Deputy Defense Minister and former Brigadier-General Ephraim Sneh.

Crisis Management said...

Correction, the Daily Express story is dated Sunday 27th not this afternoon. Probably not linked to the gold/silver/dollar move.

Skippy said...

For those that may have missed it, China has announced plans to curb industrial capacity.

The government may have worked out that importing commodities to export energy-intensive commodities does not make sense.

This may be good news for sectors like steel where China has been exporting excess capacity, but the other big picture question is what it might mean for raw material demand, commodity prices and commodity currencies?

Speaking of commodity currencies. I would not be surprised if the RBA hikes aggressively at the October meeting following today's Australian retail data. Most analysts are talking +0.25% in October and November, but remember that Stevens surprised on the way down and he is a natural hawk. His first rate hike was in tyhe middle of an election campaign.

The Oracle said...

Bullish moves on declining volumes amongst great skepticism among us rank and file plonkers I mean punters suggests manipulation. Manipulation must respect technicals or no one will play. If this admittedly ad hoc logic is true, the next big targets for a turn are S&P 50% off (1121) or MM's S&P/gold ratio bounce point of 1.166. I will stay long for those numbers, with a target date somewhere between Oct. 16 and Nov. 6.

Nemo Incognito said...

Skippy is right - Stevens doesn't give a monkey's about what Rudd thinks.

Viz commods, copper staying rangebound. I doubt China shuts down capacity quickly, it will more likely be a phase out over time into a recovery. That seems to be what state council is implying for aluminum. Macquarie have a good note on Chalco.

Anonymous said...

Hello all,

first of all, I am sorry for the off topic question, however, it seems you guys are professionals and can answer me.

Is there a JPYX, similar to USDX?
If so, is it available to public?

Thanks for your kind answer!

Steve said...

Oracle I am skeptical of market manipulation:

--Who is doing it?


No single hedge fund can manipulate, and the US govt would have a hell of a time pulling it off. Foreign entities? Don't see why.

I think people just don't want to play. Retail is burned and buying bonds, value guys are laughing, and that leaves a motley crew of people like us creating a wall of worry.

I don't disagree we can't get to 1121, but it's the greater fool theory in force til then. I know I've missed out but I ain't playin'.

Anonymous said...

The higher this market goes, the more bearish I feel for what is to come. I really think we are going to see an extended down move back to the lows.

I went pretty short risk after the post-FOMC price action, but have covered some and put on some risk-on hedges. I am worried about a stupid melt up in equities.

I think the one thing that made me do it (cover) is the weakness of the dollar. It couldn't rally much last week.

With the flattening treasury curve, a bull flattening, maybe treasuries see something that stocks don't. Perhaps the stock market has a far shorter time horizon (probably).