Thursday, March 04, 2010

Greek Marathon

Man, this Greek saga (myth? legend?) just rumbles on and on and on, doesn't it? The last 24 hours has seen a raft of developments, from

a) yet another austerity package announcement (insert joke about the newly Spartan lifestyle of Greek civil servants here.)

b) The IMF (Greece's future partner in reform) welcomed the announcement.

c) So did Moody's, but they also said Greece still needs to show that it can raise funds in the capital markets.

d) The ECB's Nowotny said that it was "unacceptable" that Greece's fate (at least in terms of collateral eligibility at the ECB window) was in the hands of one ratings agency. (The phrase "don't shoot the messenger" springs to mind here.) In any event, rumours have begun to swirl that the ECB will start issuing its own ratings to member sovereigns. Somehow, Macro Man suspects that Greece will sneak in under the "tenderable" bar.

e) The authorities have launched a probe into sovereign CDS, with some reports suggesting that they would ban naked ownership of protection.

f) Quelle surprise! Greece announced the launch of a new 10 year issue this morning.

Whew! That's a lot to digest...and we still have the ECB announcement/press conference today, where punters will want to see whether the bank returns to competitive tenders on its refi ops. Lost in all the kerfuffle about Greece is that, despite the veritable Everest Olympus of negative headlines over the past several weeks, that (in)famous Greek 5 year issue is trading above par.

Still, Macro Man wonders if demand for the new issue will be quite as strong as that for the 5 year, given the extraordinary number of Maalox moments that owners of the latter have had to endure. Still, the prospect of a ban on naked ownership of protection could generate a bit of demand for fresh Greek paper; 'twill be interesting to see if the indicative spread (current mid swaps plus 310) narrows as the book builds.

After all, it's not exactly like fixed income markets are trading what Macro Man would call "sensibly." 10 year swap spreads, a trade that looks right on so many levels, is performing horribly on the only one that matters: actual market pricing. Perhaps it's the weight of positioning or perhaps it's simply a dearth of convexity hedging; either way, it's looking depressingly like these puppies have a date with a negative destiny.

Macro Man thinks they should still work in the long run, but hey- you know what they say about that. At the very least, the trade has turned into a marathon: a test of endurance and stamina instead of a measure of quick-twitch speed.

Speaking of painful ordeals, health care is now a banned topic, except as it impacts financial market pricing. There is really no point having (or in my case, hosting) a debate in which a significant portion of the participants essentially stick their fingers in their ears, close their eyes, and shout "the government are morons so there's no point even trying to change anything!!!"

They are of course welcome to that opinion, and should they wish to express that view, they should feel free to visit the appropriate venue to vent. But after another day of being told "ooh, you Europeans just don't understand anything" by people whose idea of exotic travel is a visit to Bob's Country Bunker, I've had enough.

Off topic health care posts now incur the risk of deletion.


Rossco said...

Am I the only one that finds it bizarre that given the spectacular failings of the ratings agencies they still wield such an enormous influence in the capital markets ? I guess it says a lot about the inadequacies of certain bond investors.

Can anyone give me an economic justification as to why they still exist ?

Anonymous said...

Because one could stuff one s overrated turds /via subsidiaries/ into ECBs BS?

Anonymous said...

Greek thing provided a bit of excitement for a while,but markets get bored very quickly.They'll work it out even if it's with the IMF rather than EU funds.People will now be looking for something new to worry about,but the bigger picture looks fairly boring with a push pull between so called lower and higher risk assets.Think if I go to sleep for 6 months I won't be missing much.

Anonymous said...

What are the odds of parity on EUR/GBP going forward?

Owe Jessen said...

@ Rossco: I think rating agencies exist, and will continue to exist, out of institutional inertia - no one is there to step into their place, and the markets just need someone - anyone - to put a rating on risks.

Another point, obviously, is that they did not have to pay anyone for their terrible performance in forecasting true risks.

Anonymous said...

financial turing test

Anonymous said...

Anyone want to discuss the support of small magical hominids with pointy ears?


Anonymous said...


Would be interested in a discussion in where the flamingos reside.

In my opinion they are as follows:

1. Short eur - vs $/em
2. Long reds
3. Short equity gamma/VIX



Anonymous said...

i thought the ppt only traded e-minis..clearly not

But What do I Know? said...

And just remember, at Bob's Country Bunker, they have *both* kinds of music--Country and Western. . .

Anonymous said...

sung by some bloke from Preston?

Anonymous said...

Re swap spreads --- when equity guys are recommending going long (and that was 7bp higher in 2y spreads), you know the position is crowded!

Anonymous said...

We got both kinds of music: country and western.

Gary said...

A message from Country Bob's:

The US and EU GDP are roughly the same size (depending on how you count peripheral EU "sort of" members).

Greece is 2% of EU GDP

US health care is 15% of US GDP, or roughly 7-8 times as important in a macro economic sense

Hence, some people think the subject is important.

But its your blog, so we'll focus on the trees instead of the forest

Macro Man said...

Gary, some people think that it is so important that it is worth looking at serious ways of fixing it, rather than lazily dismissing any conceivable role for the public sector as part of the solution. But hey, it's my blog, and I'm tired of dealing with it.

Nemo Incognito said...

Yawn..... anything else aside from Greece/healthcare going on? Equity/credit punter in need of inspiration.... seriously thinking of just going back to doing value stuff because this all feels v played out short term.

Macro Man said...

Good-by, chaps. I am already debating how much longer I want to do this, and frankly dealing with crap like this is making the decision easier. Let's see how I get on with out you.

leftback said...

Yield curve back to 271, gentle flattener in progress. The much maligned US dollar and Treasury markets refusing to die, once again.

Gazza, back in yer cage !!! I told you not to feed him red meat before noon, Macro Man....

You know, Gary, health care is a killer for US small biz. LB has had to pay ridiculous premiums for two healthy young 24 year-old employees out of his own pocket, so he knows of what he speaks.

Since they never went to the doctor, presumably all that money ($450/month) was just siphoned off by some disgusting HMO to pay their greedy scumbag CEO (think Richard Scrushy here for a poster boy). Tell me how that is good for US business, and how we could possibly have a worse system.

wcw said...

Gary, I'm with our host: let's shush, except for trading. While I am waaaaay to the left of both of you politically, that didn't keep me from trading UNH long last year (under a very successful the-market-is-discounting-single-payer-which-was-never-in-the-cards thesis) -- or taking my profits around the time the Ds were handed their 59-vote minority in the Senate. Now, the timing is lucky here, but I believe I espy UNH down 4% and fading as we speak. So that trade has worked very nicely for me, with no ideology involved.

To my mind, the market is about to overshoot the other way. Insurers will do *just fine* under Obamacare. If anything, they'll make *more* money. But the market, inexplicably, disagrees. I am waiting for another nice entry point to go long these names, probably again focusing on UNH with its large and successful Medicare business and its relatively (only relatively, mind you) better management.

The short play here were the dopers, especially PFE, but I bailed early on that one and missed yesterday's crunch. So be it -- there will be plenty of room to short pharma again some time.

Gary said...

LB: "Since they never went to the doctor, presumably all that money ($450/month) was just siphoned off ... to pay their greedy scumbag CEO"

Since you are a young 24 year old, let me try to educate you how insurance works. You pool your risk with thousands of other 24 year olds -- most of whom have no health complications, but a handful get in car wrecks because they were yapping on their cell phone or twittering the person sitting next to them about what Lady Gaga just did. And the resulting surgeries to put those careless 24 year olds back together again runs $40,000 apiece

That is where your premium went.

The insurance CEOs might be overpaid compared to what you make day trading -- but last year Jerry Seinfeld made $5 million off *re-runs*. Supermodel Giselle made $12 million because she has perky tits. Brad Pitt made $16 million per movie. Baseball player Alex Rodriquez made $75 million (ditto for David Beckam, Rinadlo, Michael Schumaker, etc). But politicians and TV pundits (the ones that make as much as the insurance CEOs) don't try to vilify the entertainment moguls.


Macro Man -- good luck to you in your future trading, but I can't blame you if you decide to drop this blog.

I initially followed your blog because comments included a lot of institutional traders, but that doesn't seem to be the case anymore. I don't want to waste time arguing with 24 year old day traders who don't grasp simple insurance company basics never mind derivative trades

Good luck to you, and lets hope the financial markets return to professionals sometime soon

I-Man said...

I thought we were done with healthcare!!!

Just drop it, and...

Get over yourself Gary.

Dont throw in the towel just yet MM, this is about to get really fun again!

Mannwich said...

"Professionals"? What's that?

Thanks for the chuckle.

leftback said...

adesevDB downgraded by Moody's to Aa3 and the German authorities are considering a short sale ban. Mutti Merkel wants to stop those nasty HF speculators from participating in price discovery.

Credit Anstalt?

deniz said...

how about the kiwi vs aud ? bad data finally taking its toll?

Anonymous said...

Leftback: statistically speaking, the risk of casualty (injury or death) is substantially lower for 20 somethings on military patrol in Iraq or Baghdad -- compared to the same risk driving around the greater New York City metro area.

Consider enlisting in the military. Lower your risk and learn something about how the world works outside college

Anonymous said...

There are times when I want to strangle people on the internet too, MM, people who regurgitate the Gartman letter with no additional thinking ability chief among them.

This is why no cool people are ever (ideological) conservatives; even when they have good ideas, they miss the forest for the trees, ie the existence of the blog, and the energy it demands.

Don't go, MM. I shifted to a more macro desk because you showed me how much more interesting it could be. Seriously.

cp said...

I am sure I will not be the only one who will greatly miss your blog. As we have previously discussed, I am amazed that you find the time to write this daily and am disappointed to see that some of your readers don't recognise the effort you put into this.

I am similarly amazed with your patience. I hope it has not been tested too much.

Best wishes,

Bob said...

Mannwich: "Professionals"? What's that?

Professionals were the people who dominated Wall Street before Bob Rubin, Jon Corzine, Henry Paulson, and Lloyd Blankfein.

Professionals were the people who understood tail risk, even if they couldn't model it.

And professionals were people who paid their dues learning from older generations, instead of figuring they knew all the answers at age 24

Can't believe Leftback is started managing money before he even had pubic hair

DL said...

Leftback @ 4:35

Perhaps you personally would be better off under Obamacare. But to the extent that that is true, it is only true because someone else’s taxes and/or premiums have been raised to pay for it. Obamacare would be a zero-sum game if it weren’t so expensive. But anyone with a modicum of cynicism will recognize that the aggregate cost estimates are way too low.

Nic said...

"But after another day of being told "ooh, you Europeans just don't understand anything" by people whose idea of exotic travel is a visit to Bob's Country Bunker, I've had enough."

I (heart) macro-man. You are way better than Madonna, you now have sarcasm nailed.
Please don't stop, he is right, things are about to get really fun.

Macro Man said...

Back to the fun stuff: I think DC's list of flamingoes early on in the thread is a good one, particularly the short eur and the long reds; the latter in particular offers a looming disaster, it seems to me.

As for UAD/NZD, it seems like a combination of an active RBA and somnolent RBNZ are finally delivering what the good Doctor Bollard has desired for so long- a weaker NZD on a TWI basis. Hard to see what will stop it outside of a China/gold meltdown, short term....

Anonymous said...

Looks as though the blog has lost focus, no relevant speculation on current market events. A classic example of a blog owner thinking it's All About Himself. It's not, it has always been about the community. Attack the community and you destroy the blog. See LGF.

Nic said...
This comment has been removed by the author.
Nic said...

I like AUDCAD potential breakdown better.

DL said...

Anonymous @ 5:52

FWIW, I do think that some degree of diplomacy should be applied when disagreeing with the host of a blog.

leftback said...

Anon @ 5.52PM,

A blog only exists because of its author, and reflects the author's preoccupations, interests and personality. The rest of us are guests, and should behave like grown-ups - so bring ideas and humour and please refrain from fighting and peeing on the floor.

deniz said...


that's the pair what i had in mind too :)


not sure if this will help but as a 24yr old day trader -alright, actually 28yr old wannabe who can't day trade- i went over your entire blog. Your approach and take on things + your handy tools taught me a great deal. so your blog is the savior for ppl who don't have a mentor handy. Not to come across sentimental but don't go (double explanation point)

Anonymous said...

its scary that there naive 24 yr olds managing other people's money -- and these 24yr olds think government health care will be "free", no cost to anyone. Magic money falling from the sky. They are too short sighted to connect the dots between taxes and government spending.

These same sorts of people couldn't connect the dots between 105% LTV no-doc loans and banks going insolvent.

Its no wonder the financial markets are in a mess.

MacroMan wants to cultivate these sorts of readers, while pissing off more experienced traders?

Here's your next trade: sell the Macro Man Blog short

Anonymous said...

@leftback, @DL

I concur. That said systematically consigning dissident viewpoints to the Memory Hole risks creating a Cult of Personality.

Health care is the topic du jour. Nobody can change that. If you meddle with the discourse you get a distorted signal.

DL said...

Anon @ 6:11

“Magic money falling from the sky”.


Boundless prosperity, courtesy of the wealthiest 2%.

(Or at least, that’s what Obama said during the 2008 campaign).

Macro Man said...

Anon @ 6.18, while I have historically exercised a very light hand in moderating the discourse, that's because the standard of discourse was very high. Sadly, this health care palaver has brought the level right down- observe the pisspoor logic of your commenting predecessor, who somehow manages to conflate LB's anecdote of employing a couple of young jubbos with the notion that this is my "target audience."

In point of fact, all this non-productive noise is alienating both me and the core audience- i.e. people who want to discuss global macro trading. While US health care might be the topic du jour amongst the chattering classes on Main Street, USA, it is well down the list on the radar screens of most macro traders I know...which is where I would like to relegate it to in this space.

Bob said...

Tax the rich, feed the poor, till there are no rich no more...

After that, there is no have/have not divide. No rich people to tax. You have a perfect Venezeulan utopia

But by that time, current politicians will be retired on public pensions and universal poverty will be someone else's problem

Now we know why the Founding Fathers wrote into the US Constitution that Presidents must be at least 35 years of age ... no half wit 24 year olds who believe in something for nothing fiction

Anonymous said...

Oh, right, because you and your clique of "macro traders" are completely omniscient. Reality is your posts are consistently behind the curve, you run with the herd most of the time.

It is the readers who have actually provided ahead of the curve knowledge in this comments space. Sorry to burst your bubble.

Anonymous said...

MM: "While US health care might be the topic du jour amongst the chattering classes on Main Street, USA, it is well down the list on the radar screens of most macro traders I know...which is where I would like to relegate it to in this space."

Actually, firms like Soros Fund management, Tudor, Tiger International, SAC Capital, etc have all been active players in health care stocks and continue to be active

But they covered their shorts in the Euro and finished the Greece story weeks ago. By the time a story makes the mainstream press, the real money has already been made

Maybe 24yr European retail traders still follow Greece -- real Macro traders have moved on

wcw said...

Yes: back to the fun stuff, please. I'm suddenly sorry I even mentioned UNH and pharma. I shall ignore the whole sector for comment purposes from here on out.

Here's a macro question: who else wonders why the US economy isn't even more punk in light of the analysis in this NBER paper?

Macro Man said...

Please...and I mean this from the heart...if you don't like what you read here....just fuck off. Really. Don't waste your time reading the text. Don't waste mine by insulting me in the comments.

I don't give a rat's ass whether your eyeball is lost for all eternity, because I don't do this for advertising revenue.

This nascent troll's theme of 24 year olds, coming as it does from either a basic logical fallacy or an elementary breakdown in reading comprehension, leads me to believe that its proponents will be missed like a bad case of the clap (which, because I'm a gentleman, I won't deign to wish upon them.)

So please, get Steveie, Georgie, or Paul on speed dial and yukk it up about what a cretin I am.

But just fuck off.

Macro Man said... twopenneth is that the US recovery has largely been an inventory phenomenon, which isn't really impacted by considerations of government fiscal stimuli (other than perhaps cash for clunkers.)

Macro Man said...

Might I also point out the irony that BH, Moore, and Paulson- all funds that have publicly 'moved on' from Greece long ago, per Mr. Donut Anonymous's encomiums- as well as Tudor, are all down on the year? (Data for Soros, SAC, and Tiger are unavailable.)

Mr. Donut said...

Doesn't it seem a bit odd that a person with such obvious animus towards common people also believes it correct to proscribe forced health insurance onto said yokels? They just don't know what's good for them, eh?

Anonymous said...

MM: Brevan Howard and Moore both focus on the fixed income space, trading Treasuries against 24yr olds and corrupt Treasury secretaries- which is why they are down.

Soros and SAC are more equity focused, while Tudor is all over the place (commodity and forex lately?). Their results aren't in, but their 4Q positions (based on data from SEC 13F filings) show active involvement in health care stocks

Doesn't it seem a bit odd that these big macro funds had a private pow wow at the Townhouse in NYC, and it accidently "leaked" that they all had big short Euro positions?

The 24yr old day traders have been scrambling to mimick these short Euro positions -- and despite all that selling, the Euro is range bound around 1.36 +/- ... hmmm... somebody is covering their short positions that they accidentally "leaked" to the press last month.

The Greek story is over. Germany already said no bailout, the rest of the EU is irrelevant. The IMF doesn't have any money- they get their money from big economies like the US, Germany, China, etc ... countries that already said no.

If Greece cuts spending and lives within their means, they don't need a bailout. It they don't cut spending, no one with actual money to lend is willing to bail them out. The story is over, and so is the trading opportunity.

Karen said...

MM, thank you, thank you, for swatting away the biggest bee in my bonnet with regard to today's dialogue, namely that there was "either a basic logical fallacy or an elementary breakdown in reading comprehension..." LOL, I thot I was losing my mind! (not really!) Now back to the short euro - long usd theme that could upend more than a few eurolongs to my delight and knock the premium out of crude at the same time.

Anonymous said...

anonymous at 7.14, and to all the folks who still keep rabbiting about health care what part of FUCK OFF don't u understand?

Macro Man, ur efforts/insights are very much admired and appreciated. keep up the good work. even in being giving of ones thoughts/time requires thick skin and that's a real shame.

in my humble opinion, the Greek story is just the beginning ... just like bear stearns was before ... aig ... fannie/freddie and lehman. the dominoes have just changed.


Anonymous said...

re: Greece and the comment that "real Macro traders have moved on": I disagree and would argue that the real story is about the periphery restoring competitiveness relative to the core. That will take years, not months, and it's not clear whether the periphery will be successful or not. Thus there is still potential for default, ejection from EMU, break-up of the euro etc, and so the 'real macro trades' may still be to come. Just my 2 New GRD.

Anonymous said...

why its just the beginning and why so many countries will face the same issues as greece and why so few really understand the depth of the issue ...

yeah it takes time and effort to do research rather than just read some news headline. or follow the heard/crowd.

Anonymous said...

Tough day, MM. You start a blog post and it turns into Ultimate Wrestling. Be aware you have many fans who tune in for your cerebral take on macro trades.

Keep on keepin' on... the Anons will get bored eventually and go elsewhere.

Robert said...

Good to have an opportunity to drop in on MM after an absence. I took a job out of town and am traveling every week until we can complete the move.

I had to rush home for a medical emergency for an aged household member. Fortunately, due to the superlative care at the local US government run Veterans Administration hospital, all is well and I have time for a little Web browsing..

I also appreciate all the MM does, though I do not understand it all.

Anonymous said...

"The president very pointedly talked about how important this is historically," said Rep. Raul Grijalva, D-Ariz., "how he needs our help." Obama told them that "'this is an opportunity, it'll give us momentum'" on other issues, the congressman said.

... get it yet?

Anonymous said...

I get it... if we pass a stupid health program that 62% of voters do not want, it will give momentum to all the extremists nut cases in Washington to ignore the voters on many other issues

Majority rules, no matter what. Obama is just making odious debt that will NEVER be paid -- something for the Chinese to think about before they lose more money

Obama is not the people's president -- he represents special interests only. Special interests that will not and cannot pay for the costs

Nemo Incognito said...

Macro Man - I have one suggestion. private blog or registered comments from people with a google/blogger account. LB might have to sign up but it will make it a lot more easy to regulate away unhelpful pests....

Rossco said...

MM - I for one would be particularly disappointed if you were to discontinue your blog, though looking at some of the comments on here I could understand why.

In the spirit of the blog though, I am wondering whether the seasonal bias of Japanese exporters repatriating Yen into fiscal YE is once again reasserting itself. I also tend to think that a number of people are the other way round due to buying a great deal of 105 - 110 calls sold by IB's in Q4 2009....GS was furiously preaching Yen weakness but has since gone quiet.

Anonymous said...

Would it too far fetched to think that someone is just trying to fuck with you MM?

Could also certain interested parties be trolling blogs trying to kill off any semblence of intellectual discource on the current American Healthcare System?

Just my questioning head wondering aloud...


Anonymous said...

Killing off the discourse? You have Obama trying to force through a bill using "budget reconciliation," a technical procedure never meant to be used to pass new legislation.

Even Obama said before election: "We're not going to pass universal health care with a 50-plus-one strategy." So you see, the lies and dirty tricks are coming from the administration and its supporters, not the opposition.