tag:blogger.com,1999:blog-34323687.post4161462146568649967..comments2024-03-29T03:19:56.674+00:00Comments on Macro Man: Tuesday morning bullet pointsMacro Manhttp://www.blogger.com/profile/12324967552369915949noreply@blogger.comBlogger12125tag:blogger.com,1999:blog-34323687.post-62207646823297393462007-05-15T22:46:00.000+01:002007-05-15T22:46:00.000+01:00MM-'but at what point does the good news get fully...MM-<BR/><BR/>'but at what point does the good news get fully priced.'<BR/><BR/>The rise of the blogoshpere makes that an even harder question to answer, what with every piece of positive evidence deconstructed instantly. You know of whom I mostly speak - and how immense is his reader base. But he's far from alone. Until fairly recently, Alan Abelson was the only guy doing that for public consumption and, as much as you wouldn't want to miss an instalment, you traded very few pennies on his angle.<BR/><BR/>Everybody now gets to take the other side of his own opinion and most markets show it, as if buying one share has been morphed into long ten/short nine - volatility being maybe no more than difficulties with the execution.Charles Butlerhttps://www.blogger.com/profile/00486529931043507880noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-85134491478345904462007-05-15T20:11:00.000+01:002007-05-15T20:11:00.000+01:00MM: OK, thanks.MM: <BR/><BR/>OK, thanks.Unknownhttps://www.blogger.com/profile/06159059399866680726noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-73305300185795610412007-05-15T19:27:00.000+01:002007-05-15T19:27:00.000+01:00A couple of points: while the current floating-on...A couple of points: while the current floating-on-air environment feels superficially like 1995, it seems to me that the backdrop is rather different. In '95, the Fed cut rates and bonds actually put in a nice rally. Now, cuts aren't obviously forthcoming, and the extent of the rally in the 10yr has been very, very modest in comparison. Instead, we now have Voldemort and co. injecting hundreds of billions of dollars a quarter into the US and global financial system. <BR/><BR/>Buying risk assets and EM is the obvious call, but at what point does the good news get fully priced. USD/BRL shorts were enormous before today; no doubt the break of the deuce has increased those positions by another couple of yards. If Bacen does an RBI or BI and pulls the bid, then great, that trade will work. If not, then the real will continue to grind higher and attract more $ shorts who will want to get out (eventually.) If EM 2007 = NASDAQ 1997, then maybe the party has a ways further to go. The endgame, however, will be the same; even the good stuff will be massively overvalued, and the crap will eventually get found out as such.<BR/><BR/>Dale, it is possible for the Swiss to be overvalued against the dollar and still undervalued overall. The vast, vast majority of Switzerland's trade is with Europe, so the EUR/CHF rate is really the one that matters. I see fair value in the high 1.40's. It's a similar story to the yen, really: not particularly out of whack versus the USD, but ludicrously undervalued vis a vis the euro.Macro Manhttps://www.blogger.com/profile/12324967552369915949noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-70150214901681154692007-05-15T18:53:00.000+01:002007-05-15T18:53:00.000+01:00@anonymous + Charles:Perhaps you are not going bac...@anonymous + Charles:<BR/><BR/>Perhaps you are not going back far enough. I have read comparisons of the current situation to the Panic of 1837, for example.Unknownhttps://www.blogger.com/profile/06159059399866680726noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-78442389273821508352007-05-15T18:46:00.000+01:002007-05-15T18:46:00.000+01:00MacroMan,I find it strange that some consider the ...MacroMan,<BR/><BR/>I find it strange that some consider the Swiss franc to be overvalued, given that there is supposedly a carry trade going on with the Swiss franc, and they have an enormous trade surplus, and Swiss salaries are high in relation to the cost of living. (Unlike the British pound, where UK salaries are low in relation to the cost of living.) I am still trying to get a handle on this. Since I sold my Delphi shares in December, I have been in foreign currencies and cash, waiting for the Great Unwind. I have about half of my portfolio in Japanese yen, and a smaller position in Swiss franc. I am sure the yen is undervalued, but I am wavering on the franc.Unknownhttps://www.blogger.com/profile/06159059399866680726noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-84893800121507894542007-05-15T17:41:00.000+01:002007-05-15T17:41:00.000+01:00anon-The chart similarities between '95 and now ar...anon-<BR/><BR/>The chart similarities between '95 and now are more than evident - and very notable. But the macro environment? The 2003 slowdown was not comparable to the very bad early 90's recession. There is no event corresponding to the 1994 jump in interest rates or the long term lowering of rates beginning in '82. And the trigger provided by tech stocks from 1996 on? EM's don't do it for me in that regard, but I might be wrong. <BR/><BR/>This is only to say that I don't see 2007 converting itself into 1996, if that was what was implied. I've got no problem with continuation of the current scheme, frustrating as it is in its refusal to confirm any belief with conviction.Charles Butlerhttps://www.blogger.com/profile/00486529931043507880noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-91646096256723107732007-05-15T16:33:00.000+01:002007-05-15T16:33:00.000+01:00Dale, I have it at roughly 1.35, though the OECD h...Dale, I have it at roughly 1.35, though the OECD has it at 1.68. My estimate of EUR/CHF fair value is clearly below theirs....Macro Manhttps://www.blogger.com/profile/12324967552369915949noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-34662016495078544412007-05-15T16:24:00.000+01:002007-05-15T16:24:00.000+01:00I think the VIX/SPX dynamic is telling us that som...I think the VIX/SPX dynamic is telling us that something much deeper is happening in financial markets than meets the eye. First, I don't think the VIX developments are similar to the dynamics in JPY-cross risk reversals. The JPY option markets have reacted in typical fashion, with vol selling off with the JPY and risk reversals coming back into the range.<BR/><BR/>The SPX dynamic is totally different and surprisingly similar to the dynamic we saw at the end of 1995. The interesting thing is that the macro environment is also quite similar. My theory is that the VIX/SPX decoupling represents a re-leveraging of equities after a mid-cycle slowdown. <BR/><BR/>This development, coupled with a move into CPI base-effect nirvana for the next quarter, suggests that we could be in for a nice ride in risk assets. MM, you're not alone in feeling that your not short enough JPY... But it doesn't pay long term to be greedy in JPY, better to buy high yielding EM.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-63066042236392058962007-05-15T16:14:00.000+01:002007-05-15T16:14:00.000+01:00Macroman, The other day you said that you thought ...Macroman, <BR/><BR/>The other day you said that you thought that a fair value for the Euro was $1.10. What do you think a fair value for the Swiss franc is?Unknownhttps://www.blogger.com/profile/06159059399866680726noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-57715205744641836952007-05-15T14:53:00.000+01:002007-05-15T14:53:00.000+01:00Yeah, yen riskies have lagged, but at least they'v...Yeah, yen riskies have lagged, but at least they've moved in as spot has gone up. Adjusted for the absolute level of vol, however, you're probably right, in that they are wider than we should expect given where spot and vol is.<BR/><BR/>I must be the only muppet in the market who doesn't feel fully investd in short yen, and I can tell you, it hurts....Macro Manhttps://www.blogger.com/profile/12324967552369915949noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-21809232746665336072007-05-15T14:39:00.000+01:002007-05-15T14:39:00.000+01:00interesting on the VIX/SPX discrepancy. i suppose ...interesting on the VIX/SPX discrepancy. i suppose that's similar to the discrepancy between somewhat elevated USDJPY risk reversals and the subdued realised and implied vols. maybe the feb/march sell-off finally prompted a little insurance buying, as you say.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-26862410825804545682007-05-15T12:46:00.000+01:002007-05-15T12:46:00.000+01:00What an enviable position Germany finds itself in,...What an enviable position Germany finds itself in, sitting astride the great historical chasm separating Rome from the Slavic world. How well France will fare, given its somewhat natural propensity to actively impede European integration, is perhaps being seen already however. The other great beneficiary of the euro(zone) would be Spain, the tremendous success of whose infrastructure companies stems from the Iberian skill as court machinator.<BR/><BR/>Plus ça change.Charles Butlerhttps://www.blogger.com/profile/00486529931043507880noreply@blogger.com