20 Questions

It's been a bit of an indifferent start to the week- yesterday's US equity volume was the lowest of the year- and Macro Man is frankly struggling for inspiration. What better time, then, to play another game of 20 Questions?

1) Per yesterday's post, will the US Treasury cite China as a currency manipulator next month?

2) When will the Chinese finally adjust the FX regime (defined as allowing USD/RMB to trade below 6.80 or above 6.85)?

3) What, if any, monetary policy changes will the Fed make this year?

4) Will the FOMC ever be fully staffed again?

5) Who's the first to hike policy rates: Fed, ECB, or BOE?

6) What trades first in cable: 1.30 or 1.70?

7) Man United has won the league three times in a row, been to two straight Champions' League finals, and this year retained a cup trophy for the first time in their long history. What, exactly, are all the fans and the Red Knights bitching about?

8) Have we seen the peak in US 2's- 10's?

9) Are we in for another 2-3 years of slowly eroding house prices in the US and non-London UK?

10) What odds on more QE from the BOE this year?

11) Which trades first in the SPX: 1050 or 1200?

12) Who's going to win the NCAA tournament?

13) Have we seen the last of the snow for this year (fingers crossed)?

14) Is Macro Man going to be wrong about both of his political non-predictions this year (no hung Parliament, no loss of either house by the Democrats)?

15) Has the consensus abandoned the double-dip/W-shaped economic profile in the G4 economies?

16) Do all Americans of "Generation X" vintage and younger regard their Social Security statements with as much scepticism as Macro Man?

17) Will the ECB (and, presumably, others) really start performing their own sovereign ratings, thereby reducing the significance of the ratings agencies?

18) How can anyone be enthused at buying the short end in the US/UK/EMU at these levels?

19) Will the UK get downgraded by the end of next year?

20) When will oil break out of this $65 - $85 range?
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March 9, 2010 at 10:33 AM ×

Re 1) -kinda tough to see the real benefit for the US in doing so given;

i) The actions of the SNB / BIS (ok I mknow in trade terms frankly who cares but the symbolism is there)
ii) The BoJ quietly getaing the missiles ready (without actually opening the silo doors yet)

iii) DXY holding solidly on this break back through the 50% retrace of the move down from last year's highs.

Any senators want a jolly-up? I'm sure the wearther down there is very clement this time of year.....

March 9, 2010 at 10:35 AM ×

5) Fed hikes first.

6) Cable 1.30 first

8) Have we seen the peak in US 2's- 10's? No

9) House prices continue to slide in US and non-London UK

10) 50/50

11) SnP either way, its going to be an ugly range trade all year.

12) NCAA - Syracuse

13) Have we seen the last of the snow for this year (fingers crossed)? - Not where I live :)

15) Has the consensus abandoned the double-dip/W-shaped economic profile in the G4 economies? Not if the readers of zerohedge constitute consensus.

18) How can anyone be enthused at buying the short end in the US/UK/EMU at these levels? I think some people still think they are cheap.

19) Will the UK get downgraded by the end of next year? Yes.

20) When will oil break out of this $65 - $85 range? $90 & 50fib is more likely upper boundary of range.

March 9, 2010 at 10:37 AM ×

Oh yeah. Forgot the most important one.....

iv) China couldn't give a rat's @rse what the US call it. We've been here so many times before.

March 9, 2010 at 10:38 AM ×

Is there any evidence out there of this being MM's supposed inventory bounce? Was wondering if there was a good datasource to crunch working capital ratios for the S&P in aggregate, if this is inventory then you'd assume that the downstream sectors will see a blowout in inventory days, receivable days etc.....

Just trying to put some statistical bones on what a lot of folks' hunch is around here.

Also, if that's the case then how does this fit into the Richard Koo target leverage idea? Would we expect these channels to fill up as stimulus impact wears off over the next few quarters?

Furthermore, who is doing the spending? Is there any good data on people's spending and their personal balance sheet? Are we just seeing those who have hit their target leverage go out and spend again whereas most of country is screwed to very screwed?

Questions questions in need of good data....

Macro Man
March 9, 2010 at 11:14 AM ×

Nemo, the contribution of inventories to growth in the Q4 NIPA data was the highest since 1987; the bounce in H2 was itself sufficient to take the aggregate 2 year growth contribution of inventories to basically zero. While it can of course very from firm to firm and industry to industry, the evidence seems pretty compelling.

March 9, 2010 at 12:03 PM ×

re: 16

Having seen 2 stock market collapses a real estate crash and a credit crisis of some magnitude, witnessed institutional failures, corporate frauds and declining living standards in return for a generation of likely higher taxes.......I think the Gen X'ers have become a bit predisposed to scepticism unfortunately.

Wow, that was a mini-polemic....... as you were

March 9, 2010 at 12:43 PM ×

1) No.
2) Q3.
3) +75bps on Fed Funds. SPF, MBS roll-off and Reverse Repos contracting the balance sheet - monetaris would call that monetary policy tightening even if the Committee isn't.
4) Yes, but it will not be as united as it was in the presence of Kohn.
5) BoE.
6) 1.70.
7) Pass.
8) Yes.
9) No - sideways/slightly up.
10) 20%.
11) 1050.
12) Pass.
13) I hope so.
14) No Hung Parliament, no idea about the Democrats.
15) Yes.
16) N/A.
17) Yes.
18) Accident waiting to happen.
19) No.
20) 2011?

March 9, 2010 at 12:59 PM ×

#20) CLo1 > 85 in 2dH-2010 , with backwardation returning to the fward curve as well.
Good time to take fences on board (-put/+call), or long calls:
dec10 now 30% vol...that's cheap!

Todd Enders
March 9, 2010 at 2:10 PM ×

5) The Fed will raise rates before ECB or BOE

16) Those Social Security mailings are laughable. I hope they're not expensive, and I don't know why they're not electronic for everyone under age 45.

March 9, 2010 at 2:29 PM ×

cable down 7 weeks in a row thus far

$usd this 81 been a major number in history:

euro 134.4 was also a .618 fib

gold the 1110 has the 50/20 MA's and trendline

Moody's Investors Service says in a new Special Comment: expects that -- over the next one to three years -- it will phase out the extraordinary support assumptions currently incorporated into the senior debt and deposit ratings of a number of UK financial institutions and revert to its lower, pre-crisis support assumptions.

March 9, 2010 at 2:31 PM ×


2)H2 earliest



6) neither anytime soon but 1.30 more likely than 1.70

10) I put odds at around 1 in 6 of more QE but will be Aug inflation report not May primarily because of election and secondly because Merve needs to see headline head back to target.

11) - momentum monkeys mean we trade 1200. Couple of largo macros covered yday pm.

18) - How anyone can be getting long Mar 11 Euribor here is beyond me but as this was my personal pain trade this year am not the most objective. Curves priced ok on hold to maturity basis but risk premium way too skinny. People already talking about loading up m/c puts pre Mar payroll.

Well done on the blog adjustment, the no. of comments may reduce but quality of discussion is rapidly returning.

March 9, 2010 at 3:00 PM ×

"16) Do all Americans of "Generation X" vintage and younger regard their Social Security statements with as much scepticism as Macro Man?"

I recently got a letter from Treasury telling me I shouldn't worry as I might get as much as 76cents back on the dollar!

March 9, 2010 at 4:12 PM ×

1) No
2) 2011 Chinese new year
3) NONE to rates but will continur to drain
4) dunno
5) BoE as currency melt cranbks up inflation and they go for the wrong reasons
6) 1.30
7) Dunno about fopball
8) Yes
9) yes
10) 18.232%
11) 1050
12) Wassat?
13) No trip to St anton in a week's time shourl solve that.
14) No
15) No
16) no idea
17) Yes - but get ignored. Same way that they'll protect the Euro for ever. Breaking the Hypocratic oath and "striving officiously to keep alive" even to the point of making it completely untradable and locking it up wrapped in cotton wool in a cellar in Brussels. But it must not die.
18) Are they?
19) No
20) May 25th 2010

March 9, 2010 at 4:52 PM ×

16) We don't think Alan Greenspan is an evil genius any more

March 9, 2010 at 5:19 PM ×

1) No. 2) Q3 2010. 3) None - reverse repos and ending MBS purchases 4) Yes, in 2011 5) BoE as they will experience inflation faster 6) 1.30 [Cable - like that, very Old School]. 7) Debt. 8) Yes. 2s10s has peaked. 9) Bloody well hope so, the faster the better, want to buy rental properties for income (see 16) 10) Evens on more QE by BoE. 11) SPX 1050. 12) NCAA blacked out on Cablevision. 13) No snow London, one more snow NY. 14) No hung parliament, Tory win. No loss by Dems. 15) The consensus never adopted a W or a double-dip, they are playing this as an ordinary recession, not a balance sheet recession with eventual debt deflation. 16) Ho ho ho, SS, that's a good one. LB is buying rental properties in college towns when we get to the bottom. 17) Ratings agencies are already largely irrelevant, 18) Only a panic can induce short end purchases here 19) No downgrade 20) Crude is heavily manipulated by storage which eventually feeds supply and drags down price after the summer "driving season", or even earlier. We see the $50s again this year on dollar strength.

March 9, 2010 at 5:30 PM ×

Ok, so following on from MM's reply viz channels etc and the like:

15: Yes if people are expecting top line growth. If inventories are just recovering to a kind of normal state of the world then any further upside from here will be top line driven (costs suppressed as they can be from 08-09 cuts, pent up demand met). If US retail recovers then I think this is donezo.

Back to the Richard Koo thing, is it possible to get a joint distribution of income / change in reported spending or income / leverage / reported spending? Probably not unless one has the raw data...

9) Yup unless leverage comes back up or incomes do since rates can't go any lower.

1) Hope so.

March 9, 2010 at 5:55 PM ×

Magic Tuesday today. Some of the put:call ratios today have to be seen to be believed, MM. Tech stocks are acting like it's 1999 lately.

March 9, 2010 at 5:56 PM ×

1. No
2. When the US double-dips and global trade continues to contract, they'll let it fall
3. None
4. Yes, they'll reduce the number of people on the committee.
5. BoE -- the UK will default first.
6. 1.70...just to screw with me for visiting "home" in August.
7. They're Utd fans, it's their god-given right, no?
8/9/10. Yes
11. 1050
12. Georgetown; unless they lose to some non-descript side in Round 1!
However, they'll make a mockery of my unemployed purchase of Big-East tickets to all sessions by losing tomorrow.
13. I hope so.
14. Yes; parliament won't be hung...it'll be talked about too much in the final week of the election campaign, and voters will break one way or the other to avoid it.
15. Was consensus ever there? Isn't it a necessity for a W, for people to believe in a V?
16. Isn't old enough to know that :)
17-20 No idea

March 10, 2010 at 2:36 AM ×

LB, they wouldn't be raising rates if they weren't also adjusting FX. That's not how Zhou Xiaochuan or any previous PBOC governor rolls. Its asking for trouble to raise rates and not adjust FX given the wall of cash Chinese corporates will be bringing back onshore given USD yields ~0.

March 10, 2010 at 7:32 AM ×

Nemo, I thought that Chinese Corporate were more likely to be short cash than long cash (to buy these - ahem - "core investments" in developable land and backyards full of copper). Am I wrong on this ? Chinese corporates are already like Japanese Corporates ?

March 10, 2010 at 8:07 AM ×

Depends on the corporate - SOEs with mostly domestic sales and poor capital management etc are long cash, exporters and private businesses less so. Basically, the smarter guys are long offshore cash including some of the less smart (PetroChina, CNOOC, etc).