Not The Best Start

Macro Man’s not had the best start to his day. Macro Boy the Elder, giddy that half term school holidays have arrived already, woke up at half past four this morning and decided that he wanted to watch television. He was swiftly dispatched back to bed, but the harmony of the night’s sleep was shattered.

Then, when it came to catch the train this morning, the great British railway system performed its predictable collapse in standards whenever the clocks change by offering a half-length train. There’s almost nothing worse than being crammed into a cattle-shed train at 6.30 am with some guy’s butt three inches from your face. One of the few things that qualifies is being crammed into a cattle-shed train at 6.30 am with some guy’s butt three inches from your face and spilling scalding hot coffee all over yourself.

Another, if you were limit short dollars, was yesterday’s price action in foreign exchange. While USD/Asia has had a bid tone for a week and a half, as recently as yesterday morning EUR/USD was at its highs. Cue a correction, a break of a highly-visible uptrend line, and a lot of head-scratching.

The dollar’s gotten further support from a Steve Beckner article suggesting that the Fed will say that they give a crap about the value of the buck. At the same time, things are starting to look a little wobbly. It’s interesting to note that the star performers of the summer, turds such as Fannie Mae (FNM) and Freddie Mac (FRE), are down nearly 50% from their recent highs. Meanwhile, European banks have been clubbed - ING (ING) is down 25% in the last 2 days- even as the macro data offers little comfort that it’s all sunshine and sweetness in the pipeline. Today’s M3 growth data in the Eurozone showed continued straight-line deceleration…not exactly good news.

It’s not just European banks that are wobbly- the BKX also looks dreadful. Perhaps it’s just a wobble…but maybe not. While it’s certainly not out of character for markets to test the resolve of weak hands, there has clearly been a bit of a shift in the tone of the reflation trade over the past week or two: it’s gone from fairly relaxing to rather bumpy.

In markets, as in sports, it’s not about how you start but how you finish. Macro Man’s month appears to be ending as his day today started, so he’s gotta put his nose to the grindstone to manage risk and turn this sucker around.

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