Off To The Races

Monday, November 09, 2009

On your marks...get set....go!

Markets are off to the races so far this morning, as all manner of risky assets on Macro Man's screens have roared higher. It almost feels as if markets, having successfully survived the murderer's row of event risks last week, exhaled over the weekend and decided that plan A (liquidity-driven uber-rally) wasn't so bad after all.

For if markets "wanted" to head lower, they surely could have. Friday's payroll report was an ugly one beneath the veneer of a largely in-line "number of jobs" figure. The household data, for example, was pretty appalling, continuing the divergence observed in this space on Friday. Sometimes, it's useful to look at data in its simplest form; readers are invited to reach their own conclusions as to what the chart below implies moving forwards.
Similarly, the latest Krishna Guha article with the impressive St. Louis Fed president, James Bullard, suggests at least some voters do not wish to repeat the mistakes of the not-too-distant past.

On some days, that perhaps might have been enough to send markets reeling. Not today, however, which is instructive. Perhaps markets are relieved that the G20 accomplished nothing of consequence? That Gordon Brown's proposal to tax the very air you breathe financial transactions received short shrift from Lil' Timmy?

Or have they been swayed by the IMF report that the US dollar is potentially being used as a funding currency? (A little-known codicil to the weekend report also noted that the sun would rise in the east, observed that ice cream is cold, and forecast that the Pittsburgh Pirates would not win next year's World Series.)

In any event, it is worth observing that among the star performers in recent days have been Asian currencies; the ADXY is nearly back to its October highs. Macro Man notes this because Asia was really the first "risk asset market" to roll over, a week before the fateful Guha article appeared in the FT on Octboer 23.
You don't have to be a chartist to think that after a healthy correction, if we make a new high then it really could be off to the races....

Posted by Macro Man at 8:39 AM  


Nemo is long "moderation going out the window". A Shares are looking to retest the insanity of early August it would appear, and we are getting very close to new highs in a lot of Chinese property names which are the ultimate bubble trade.

In stark contrast, no one seems to be that punchy on the bid for credit.

Its all going to end in tears, just not quite yet.

Nemo Incognito said...
9:19 AM  

after huge short covering in asia fx, we do have the ingridents for a new high in asia fx

Anonymous said...
9:55 AM  

Anon 9.55

the word is ingredients not ingridents.

Grammar Nazi

Anonymous said...
10:15 AM  

The ursine towels have been chucked. Unfortunately I think that just leads to a collapse in gamma now as burnt fingers mean that everyone stops trading for the rest of the year. Certainly feels like Xmas markets in FX today.

Richy Rich said...
10:51 AM  

Nemo - sidebar when you get the chance. Had some responses to our socio-political exchange in the last post.
Think your right about the tears and of course everybody will be able to bail before then, right?
The classic definition of a market collapse ala Krugman, assessment of the 97/98 Asian crisis.
There's a lot of $carry trade floating on a see of CB money plus chewing gum and baling wire holding this up IMHO. Trying to trace it back has made me more brain-damaged than usual but FWIW:
You might disagree entirely but the shopping list of screwy and fragile linkages is worth considering.

dblwyo said...
1:42 PM  

I'm back......

Nemo Incognito said...
2:04 PM  

And can be found at

Nemo Incognito said...
2:10 PM  

The bond markets are extremely quiet... it's eerie.

leftback said...
3:04 PM  

No doubt I'll sound like a conspiracy theorist, but I think it's curious that we had a 2+ month spell with apparent market goosing by the Treasury/NYFed in the late summer as the Democrats hoped to push a health care bill through, with especially egregious intervention on days when bad data came out, and now we've had two days of similar activity with the health care bill making a final push and bad employment data on Friday.

I have to disagree with you, MacroMan, I think this run-up in risk assets lasts only until the health care bill's fate is decided this session.

Senate meets Mon-Tues this week and next week.

With the Fed buying $1.5 trn of risk assets and the Treasury holding a $150 bn slush fund of leftover TARP money, you can't discount the possibility of big market moves from manipulation timed to political needs.

PJ said...
3:26 PM  

PJ, I am afraid you do. But weirder things have happened in the last 24 months so don't let me stop you.

Nemo Incognito said...
3:52 PM  

Gary and his investment committee can breathe easily today and enjoy one more day of shared responsibility. Meanwhile, LB endures another day of self-loathing and second guessing - like The Silent Scream.

leftback said...
4:37 PM  

Big weekend for Goldman Sachs...

First, Blankfeld claims Goldman is actually doing God's work. Sorry Osama Bin Laden, you have been replaced

Then the political satirists on Saturday Night Live ask the very inconvenient question of how come Goldman employees got H1N1 swine flu vaccination before schools and hospital workers

To hell with women and children - save Goldman Sachs!

Anonymous said...
4:39 PM  

Far be it from LB to point out the obvious, but this DXY level of 75 is technically rather important, and a break below this might cause some phone lines to get a little overheated between Beijing and Washington. Wednesday's upcoming auction of 10s and 30s comes after the end of the Fed's buying of Ts. If it doesn't go very well because of DGDF, there may be problems. When does Voldy become Foldy?

leftback said...
4:51 PM  

what this market needs is a serious long end butchering. 10Y BEI marchimg higher. fair enough core inflation will be 0 or negative but headline surely must march upwards with oil back over 80$ and DXY commensurately below 75

fed has its head buried in the sand. sure, lets get nominal GDP going but watch the savings rate reverse pronto as folks disposable income is erased. bring on the consumer bust and the squeezed middle classes. i wonder if obama will even make it through his first term at this rate thanks to all the great help.

Anonymous said...
6:02 PM  

Nobody ever sees anything coming because the wolves are guarding the hen house. This can't end well....DGDF yadda yadda yadda.

Professional Gringo said...
6:39 PM  

Off to the races anecdote of the day: I closed my gold short down fifty or sixty bps. I kept my Canuck junior, which is up over 25% on the day. My dollar-neutral portfolio, alas, is not.

wcw said...
7:10 PM  


Agreed the Fed has its head buried...but think somewhere other than "in the sand".

Old Trader

Anonymous said...
3:06 AM  

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