Why January “Is Like Breakfast”

"Calendars shouldn’t in theory matter, but they sure do"...

It’s lonely at 4:30 a.m. without former FX trader and Bloomberg columnist Richard Breslow to entertain you with his daily market musings.

Richard takes what seems like a damn sabbatical (as opposed to a short vacation) at the end of the year and let me tell you, I’m always glad when he’s back in my inbox.

Today’s column is about the trials and travails of trading in January. Enjoy the first “Trader’s Notes” of 2017 and remember to pray that this January doesn’t turn out anything like last January – well, unless you’re long 10s, in which case you hope it’s just like last year. And the year before that. And the year before that…

From Bloomberg’s Richard Breslow:

It’s been a long year. Feels like it anyway, even though it’s the first week of the year. And a short one at that. Many strong trends have already been in place for a couple of months. Depositing us, as the calendar turns, at interesting levels. Nothing to discredit the moves, yet tough places to jump in with abandon.

  • And of course, we’ve been living with the overly confident year-ahead forecasts for what seems like donkey’s years. All of which were extrapolations of how the markets were playing out in December
  • The important thing to remember is that, as long in the tooth as things might feel, it’s very early days. And we’ve no idea where and when the opportunities will come. The reality is you need to trade this year’s markets and manage this year’s P/L. Januaries are to trading as breakfast is to nutrition. Just one month of the year, but a great one to get right. And can leave lasting dyspepsia if abused
  • In today’s world, it’s rare for traders to carry much, if any, risk over year-end. It’s too bad, but how we’re incentivised. Calendars shouldn’t in theory matter, but they sure do. So everything you do now has to be considered in the context of having no positions
  • Analysts just pick up where they left off. Having the luxury of assuming you have loads of positions, deep in the money, and are playing with December’s profits. Because, of course, everyone had huge positions all of which were the right way around. It doesn’t work that way. And is why Januaries often exhibit such manic patterns. I have to get these positions on or I’ll miss the move of the year. I’m the only one in the market who doesn’t have it. Get me out, this is insane. What were you idiots thinking?
  • There’s no other time of the year that investors are more apt to buy the rumor and sell the fact. Primarily because they’ve no idea what the facts are going to be. Year-ahead forecasts are like campaign promises, while real-time asset prices respond to actual governance and events. Forward guidance versus actual numbers for you Fed watchers
  • On this Day 1, the old trends are intact. Have to be. No reason to think the world has changed over one long weekend. However, “trust but verify” should be your watchwords. Januaries don’t usually follow Decembers like the other months do their predecessors

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