The Equity Pain Trade

Unfortunately, it will be another day or so before Macro Man can fully re-engage with markets (or at least the market blogosphere), as he is laid up with some sort of bronchial ailment that he picked up lamentably early in his holiday.

Still, you can't say that he didn't warn you that there would be fireworks in his absence....like Colt .45, the Macro Man Summer Holiday Indicator "works every time."

While Macro Man didn't anticipate that the dollar would look stronger than a 52 kg Chinese female weightlifter (something that's much more impressive than it sounded 2 weeks ago), he didn't do too badly on his 3 themes, either:

1) Mrs. Watanabe gets stuffed. Well, she did for most of the time that Macro Man was away, though irritatingly NZD/JPY only took 2.5 days to recoup most of the prior week and a half's losses.

2) The China trade goes wrong. This one was pretty spot on. Commodities, Chinese equities, USD/CNY....all traded horribly over the last couple of weeks. Macro Man highlighted the AUD as looking vulnerable, and so it turned out to be, helped in part by dovish comments from the RBA.

3) The equity pain trade: a grind higher. Let's put it this way: Macro Man's next door neighbour is in equity derivatives. During a brief chat on Saturday evening, he observed that the equity market has been "impossible to trade" over the past few weeks. Yeah, that sounds like a pain trade all right.

Macro Man has a few thoughts on the dollar which he'll articulate over the next few days. In the meantime, he's just looking for a little light at the end of the tunnel for his August cold.

Comments

[Fabien Hug:]

Be well and best wishes for a good health.

2008 Aug 18 09:01 AM

[mikegre:]

I travel a lot and always take a Z-Pack with me. (Zithromycin).

2008 Aug 18 10:16 AM

[elwind45:]

The dollar trade is more technical than it is fundeMENTAL. Several factors play into recent strength. The need for dollars overseas (asset deflation) to correct U.S. investment losses. Th need for a stronger dollar, so China can have a decent exchange rate after the games. The markets believe U.S inflation will fall in coming months(?) and rates will decline. Toward the end of quarter this view will be nonsense, and dollar will be whipsawed higher, after retest of lows!

2008 Aug 19 01:34 AM

[Coelacanth:]

Yeah.....and aside from a detour or two the pain trade will continue for a while.

Who is the last hold out? The BOE intimated cuts may come even before inflation numbers show easing. Stevens came out and pretty much said cuts will come sooner rather than later and my beloved Stars & Strips is on hold for the near future.

Where will growth come from then? Wait! The EU is ever vigilant about inflation. I'll put my money there!

2008 Aug 19 01:47 AM