Tuesday, January 12, 2010
Macro Man only has time for a quickie this morning, as he faces an hour's journey each way to get fitted for a sports knee brace. At long last, his torn-ACL nightmare is nearly behind him (knock on wood), as he has been cleared to resume sporting activities next month.
Macro Man had to laugh last night at the resumption of an activity of an altogether different sort. Alcoa released "earnings" last night, and while the headline figure registered a slight miss (1c/share vs. 6c/share expected), the company seemed quite happy to pimp the greater-than-expected topline revenue angle. Given that cost-cutting has been a (one might argue the) major driver of industrial earnings beats, the fact that AA missed despite beating revenue estimates by more than 10% might be a trifle worrying. Macro Man also couldn't help but notice that Aloca's true earnings (helpfully highlighted by a white arrow, since Bloomberg didn't see fit to grace 'em with a red headline stripe) showed a loss of 27c/share.
Hmmmm. Is it too early to declare victory on non-prediction number four already?
Elsewhere, China continues to garner plaudits for the radical monetary tightening by the PBOC. The central bank actually let 1 year T bill yields rise 8 bps today, to 1.8434%. Following on from the rise in 3 month yields earlier this week, pictured below, it does seem as if the tightening campaign is underway. Macro Man choked on his cornflakes, though, when he saw that a DB research piece was entitled "Another decisive move by the PBOC toards liquidity tightening."
Let's be clear. Moving bill yields by 4-8 bps when they are at least 8% below sequential real GDP growth is a lot of things....but decisive ain't one of 'em. Still, it's cued the usual frenzy to sell USD/CNY today. The market's pricing less than half a percent move in the next three months, so it's not a dreadful bet from a risk/reward perspective. Then again, in a country where an 8bp in one year yields is deemed "decisive", what would constitute a "modest" shift in the exchange rate regime? Would we need an electron microscope to observe it?