Wait Til Next Year!

Monday, December 07, 2009

Well, that payroll figure put the cat amongst the pigeons, n'est-ce pas? A headline figure close to zero, the best household figure since late '07, and an unemployment rate that knocked on the door of single digits: what wasn't there to love?

The short answer, of course, was the impact on your author's P/L, where his wretched run sadly continued. He is one one of those miserable stretches where he feels like he cannot buy a win; even formerly reliable strategies seem to have turned against him, knives drawn.

And so it came about last night that Macro Man wearily set himself down on the couch in front of the TV, hoping for a little escapism by watching some NFL with his father-in-law.
Now, just before Thanksgiving, he wrote a little piece that compared to sports to finance...in that that case, the undeniable existence of "too big to fail."

Sadly, last night brought about fresh revelations about the linkage between sports and finance, as his favourite team, the Pittsburgh Steelers, dropped another excruciating game to extend their losing streak to four.

The ephinay, as it were, centered not on the last month or so, but rather how Macro Man's peformance seems to have tracked that of the Steelers for the past several years. In 2005, Macro Man had his best year at his previous shop. The Steelers won the Super Bowl. In 2006, Macro Man had his worst year at his previous shop; the Steelers slumped to a 0.500 record and missed the playoffs. In 2007, Macro Man rebounded with a good but not great year; the Steelers made the playoffs but fell in their first game. And last year, Macro Man had a very good year at his new shop, and the Steelers once again claimed the Lombardi Trophy as Super Bowl Champs.

Now, the hallmark of Macro Man's 2009 has been the knee injury that he suffered in February. Strangely, one of the Steelers' (and indeed the NFL's) best performers, Troy Polamlu, has also been sidelined for most of this season with a knee injury.

And so, when the Steelers' once-vaunted defense when into their patented "Swiss Cheese" formation against the execrable Oakland Raiders, Macro Man had a foreboding of doom for whatever flamingos rremained in his portfolio. Sure enough, EUR/USD has confirmed the break of both the trendline and the 55 day moving average that bulls have keyed on for the last several weeks.

Now, Macro Man isn't fatuous enough to suggest that there is actually some sort of Vulcan mind-meld going on between himself and 53 rather large gentlemen in the city of his birth. But their twin struggles of late provide confirmation that in trading, like sports, the margin between victory and defeat can be very thin....well, at least if you are playing a fair game.

And so, it looks like the Steelers' season is, for all intents and purposes, over. With just over three weeks left in the year, Macro Man's is too, more or less; there's not enough time to regain the heady heights of his high water mark, at least not without gambling recklessly.

You still have to play the games, of course...but at this point in the season, both Macro Man and the Steelers should be doing so with one eye on next year.

Posted by Macro Man at 8:49 AM  


MM, look on the bright side: you aren't a Nets fan. 0/18, which I think is a tie for the worst ever start to the season.

Anonymous said...
10:01 AM  

Putting aside the market impact, one must not take the latest payroll data too seriously. The previous months' data was raised by 159k, and the drop in U6 was statistical. The payroll data is fraught with ghost figures, like the "adjustment for the estimated creation of new businesses", "births and deaths" and most of these work to reduce the headline unemployment percentage. It is estimated that it takes around a positive 175k new jobs a month just to keep the 10% unemployment ratio where it is. The US is mired in widespread joblessness with all that implies. And it will persist.

Donlast said...
10:19 AM  

Can't say I liked Friday's action, but something like this was long overdue. Now if the SPX would roll over too, for a change.

Gregor Samsa said...
11:33 AM  

I actually saw the risk of a better than consensus payroll number on Friday, and somewhere read a warning that seasonal effects made such an outcome far more likely than people expected.

So early Friday (before the report), I:

1. Sold Eurodollar futures (later covering them twenty basis points cheaper)

2. Sold two year futures (later covering them a quarter point cheaper).

3. Flipped from long to short on long bond futures.

4. Sold most of my gold, silver, and platinum, and flipped from long to short on palladium.

It wasn't enough. I still ended up losing money for the day, but I did prevent a complete disaster.

Anonymous said...
12:02 PM  

Anon @ 12.02, that's the thing. Any market where you can do great trades like those, and still lose money, is not a place where I want to take much risk at all.

Macro Man said...
12:19 PM  

MM, You forgot to mention your footie team - West Ham. Zola and his men are struggling this season.

Darren said...
12:27 PM  

The payroll data was great, but it's weird that it wasn't confirmed by any of the private readings. ADP was down, the NFIB survey shows employment weakening, ISM surveys showed the same, Challenger surveys showed more layoffs and fewer hires, and TrimTabs shows income tax withholdings declining sharply.

I've noted before that we seem to much better than trend data whenever the health care bill is approaching crucial votes: see the other previous decline in the unemployment rate, from 9.6% to 9.5%, in the late summer when they also hoped to get a bill passed. Coincidence?

I think that the rise in Fed funds futures /Eurodollar rates is going to be undone within a month or two.

PJ said...
12:44 PM  

I share your pain about the Steelers, MM. It is incomprehensible to me that a team could beat San Diego and Denver and lose to KC and Oakland in the same season. . .

But What do I Know? said...
12:45 PM  

omg, steelers. Thats your problem. Go Ravens!

N N said...
1:06 PM  

On that basis MM,

the 49ers should have only lost their first game this weekend.

Although the Lions sure reflect the motor industry at this time.

Maybe you might be on to something, here.


Anonymous said...
1:47 PM  


My question to you is 2010 the year of sovereign collapse?


somewhat interested to hear your views MM.

Anonymous said...
1:58 PM  

On the bright side, DGDF does seem to have been arrested for the time being, and we have had some light entertainment of late.

Tiger apparently just racked up his ninth birdie this morning, heaven knows what he'll do on the way back to the clubhouse.

leftback said...
2:08 PM  

You sure all your bets don't contain some implicit "NFL Steelers" factor exposure? I know that's one in my risk model. Maybe a boatload of intrade contracts you forget about purchasing jan 1 of each year?

Anonymous said...
2:37 PM  

Don't look now but [The Instrument that Cannot Be Named - Because People of a Sensitive Disposition May Be Long It and Are Likely To Throw All Their Toys Out of The Pram] is down again today, as the dollar rallies....

leftback said...
2:44 PM  

Like US equities this year, the Vikings, the team I grew up with, are having an awesome season, 10-2.

For the 3 games I've randomly caught on TV, the Vikes have gone 1-2. Just like how I've done dipping into S&P500 this year.

Last night the star linebacker broke his femur during the game. I can't imagine what that portents for my portfolio..

Anonymous said...
2:51 PM  


This blog is great, but who is this leftback character? He really brings the whole tone of this place down. You really should have a word with this guy.

I have been watching the debate with "thetrader" and have to say I agree with thetrader.

Leftback comes across like some kind of delusional, hyperactive schoolchild.

But hey it's your blog...

Anonymous said...
2:54 PM  

Hi MM,

I often read your blog and find it very interesting and informative. Thanks for taking the time to write it so regularly and keeping it light hearted and entertaining.

I was hoping yourself, and the other chaps who use this board could offer some advice: I'm currently 15-months in to a grad career in sales at a large bank. I've got an offer to move to a smaller bank onto a grad programme where I could focus more on trading.

From your perch, would you do it? Why did you move about from different bits of the business?

Dazed and Confused said...
3:10 PM  


At least you arent a Redskins fan.

Not sure about any Macro Steeler correllations though... you may need to unplug for a bit, or go beat the piss out of an everlast bag.


Another day, another Leftback hater. Cheerio.

The jobs number on Friday struck me as, well, a lie. At best, slightly dishonest.

I-Man said...
3:14 PM  


When I'm down and behind I tend to go long. That cost me 300bp at least this year.

Sounds like you have a game plan, with your eye on the next game.

Steve said...
3:22 PM  

I'd like to selectively reiterate what MM stated on Friday - especially to LB, Anon posing at thetrader, etc.

I find it most discouraging that on a blog of this quality this message needs to be repeated.

Lads (and lasses),

While I am quite glad that we've established a lively little community here, please try to remain gentlemen (and ladies.) We've established a discourse here on all things macro that I think is pretty good, and I want to ensure that we avoid the "yahoo message board mentality", i.e 10y ROOLZ! GLD SUX!!!

So please try and keep it civil and retain a collegial tone

I also think it's important that different viewpoints are encouraged;

I don't want this board labeled....I'd much rather have it be known as a "smart" place where different viewpoints can be debated.

So in sum, play nicely, avoid the emotional rollercoaster, and don't get personal. To paraphrase the immortal Ice T: hate the argument, not the arguer.


Pax said...
3:26 PM  

Perhaps 'thetrader' might have got more traction with a less overblown moniker...I mean, not just any old trader, but rather THE trader. That leaves the rest of us feeling a little, well, left back...

VandalsStoleMyHandle said...
3:29 PM  

Just wait until next year...

According to the US Treasury, slightly more than 25% of home "owners" who refi'd under the government's programs are already behind on payments.

Just wait until next year: down goes FHA... down go GNMA bonds... the ostrich approach to managing bad loans just doesn't work

Anonymous said...
4:11 PM  

Next year will be interesting, indeed.

2010 will bring many new challenges: one or more quarters in which the banks report earnings that will include limited trading profits (for Q4, 2009 and Q1, 2020), retail earnings reflecting weak or flat holiday sales, another dead winter in the malls as consumer savings continue to increase, another spring of dead (North East US) or lower priced (West) housing sales and then the first complete set of corporate earnings reports (for Q2, 2010) for which there are no easy comps.

So given Mr Market's ability to see into the future, one wonders when these factors will begin to be discounted? Note that this analysis assumes an entire winter and spring devoid of external credit shocks, muni defaults, bank reorganizations, bondholder haircuts, sovereign defaults or other swans of whatever hue.

leftback said...
4:58 PM  

"So given Mr Market's ability to see into the future, one wonders when these factors will begin to be discounted?2 ..the banks have made no headway since Sep options expiry and the financial secondary's have been sidways as well from Oct. In that sense they may already be discounting some future reporting.

Anonymous said...
5:32 PM  

Certainly appears that Greece is the fly in the Euro's ointment. Nary a day goes by without the anarchists setting off an explosion or burning something down.

Their ideological cousins in the PASOK seem to be following a similar course of action from inside the corridors of power.

Socialist basket cases like Greece and Spain are indeed threatening the stability of the Euro, and it might be best for all of us if they would one day hit the eject button.

Crisis Management said...
5:42 PM  

Treasuries have already made up a significant fraction of their Friday losses as Helicopter Ben highlights continued weakness in the economy. Clearly many traders agree with the point of view espoused above by Donlast.

leftback said...
6:33 PM  

Crisis Management,

How would they pay back all their Euro denominated debt in their newly created and extremely devalued currency if they elected to leave?

I'm sure Italy is longing for the days when it could just devalue the lira....alas no longer an option.

Anonymous said...
6:41 PM  

Anon 6:41

Its actually very easy for all the basket cases in Europe to eject.

They each make a new currency (peso, lira, seashells, whatever) that is equal to a Euro at launch. This isn't crazy, as the current currency of those countries is equal to a Euro (by definition). Their debt is denominated in Euros ... next minute it is denominated in Peso-Liras.

Like all sovereign debt that is "risk free", if you don't like those terms -- a bureaucrat will be pleased to tell you how little your opinion matters. Also, its greedy capitalists like yourself that made the poor people of this country have to take these measures; perhaps we should arrest you and pay you nothing?

Once the "Replacement Euro" (by whatever name) is launched, then they start hurling money out of helicopters until it is worthless...

Unfortunately, this is FAR from the first time we have seen this movie. Sovereign defaults are a common occurrence throughout history.

To paraphrase Peter Lynch, governments need to be set up so that any idiot can run them -- because sooner rather than later any idiot will.

Gary said...
6:52 PM  

Anon @ 6:41, they could always pull a Dubai if things get dicey...

Crisis Management said...
6:53 PM  

Spain, Italy, Ireland or Greece is in the same position as California. They have a local depression and are dependent on the largesse of others within the ECB, just as Nevada depends on the rest of the U.S. But the European monetary system will not collapse, any more than Florida will secede from the U.S.

leftback said...
6:58 PM  

think the comments are having technical difficulties...

Anonymous said...
6:58 PM  

LB, the last two World Wars completely rearranged Europe, redrawn borders, new countries and all. Now the EU/ECB has discovered the magical combination that will forever keep Europe united a stable?

J. Stalin: "A nation is a historically constituted, stable community of people, formed on the basis of a common language, territory, economic life, and psychological make-up manifested in a common culture."

US is basically a homogeneous entity unlike the EU. No army, no unified bond market, it's basically being held together by Trichet's mellifluous fables.

Crisis Management said...
7:13 PM  

CM, if we do have a break-up of the EU there will be many more things to worry about than the portfolio.

US as a homogeneous entity? Cone on, even California isn't homogeneous. The folks in Eureka, CA have more in common with the inhabitants of Maine and Quebec than they do with people in LA.

leftback said...
7:29 PM  


Wrong. It's actually being held together by the ongoing illusion that they are all still independent nations. They aren't at any important economic level any more or less than is California. The coin flip over whether it blows up or not is two headed. Don't get on the wrong side of it.

Charles Butler said...
7:32 PM  

Well I appreciate the disagreement. My take away from today's news was that Greece is likely to be downgraded to BBB+, which would put it in the company of Mexico and Sprint-Nextel.

ABC had a quote that summed up the EZ situation perfectly: "Fighting between riot police and protesters left the streets around central Syntagma Square littered with chunks of broken masonry and burning piles of garbage, which was not cleared away due to a strike by refuse collectors."

Crisis Management said...
7:46 PM  

OK... so here's a ponzi scheme for you all.

Obama is now proposing that the US government use some TARP money (which is borrowed money, "off budget") to pay down the deficit.

I think some dim-witted home owners already tried paying off their Mastercard with their visa card.

Evidently, Obama thinks most bond traders are too slow to remember how that ended.

Gary said...
7:57 PM  

"Fighting between riot police and protesters left the streets ... littered with chunks of broken masonry and burning piles of garbage, which was not cleared away due to a strike by refuse collectors"

Not unusual, happens a lot in Europe. Millwall v West Ham, for example.... just ask Macro Man.

leftback said...
8:07 PM  

LB, haha, yes but we in the Anglosphere have the decency to clean up the burning rubble once it has accumulated outside the Parliament, not allow it to smolder there until the strike has completed.

Crisis Management said...
8:37 PM  

the problems in europe are not in the EU itself ... think hungary, latvia, UK ... the real basket cases

8:38 PM  

".. allow it to smolder there until the strike has completed"

Comes in handy when they fancy a swift kebab on the way home, though.... Seriously, CM, a spot of rioting and burning is standard operating procedure in Europe. Anyone would think it never happened in the US. Oh yeah, Detroit, Chicago, Washington and LA...

..... just keeping the "Anglocentric" world honest.

leftback said...
8:43 PM  

"I think that the rise in Fed funds futures /Eurodollar rates is going to be undone within a month or two."

How about a day or two? EDM1 went from a low of 97.885 on Friday to a high of 98.150 today, reversing virtually all of the reaction to the payroll numbers.

I bought a lot of Fed Fund futures on Friday (my favorite is May) post NFP (I didn't know that Ben was going to give another "lower for longer" speech, or I would have bought even more). I don't know when the Fed will start hiking, but it won't be at the January, March, or April meetings.

"Spain, Italy, Ireland or Greece is in the same position as California."

I object to lumping Ireland and Greece together. Ireland is taking (very painful) steps to solve their problems. Greece, on the other hand, is in total denial about what they need to do to fix things.

Anonymous said...
8:13 PM  

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