The Equity Pain Trade

Includes: FXI, PGJ
by: Macro Man

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 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.