Former FX trader Richard Breslow is out with a cynical take on “Super Thursday.”
Basically, he doesn’t think there’s going to be anything too “super” about it because your silly ass has forgotten that investing is about “employing steely rationality.” What you’ve done, Breslow goes on to lament, is decided to adopt “that’s my story and I’m sticking with it,” as a trading strategy.
He doesn’t think that’s very smart.
In short, it’s not so much that what’s going on today isn’t important, but rather that you will invariably mute the market reaction with your steadfast refusal to trade on anything other than your unshakable conviction in whatever narrative it is you’ve decided to adopt. This dovetails nicely with Breslow’s note from earlier this week (see here).
More below and do note that this one is pretty goddamn funny…
So, the eagerly anticipated Thursday has arrived. Waiting for bombshells, enlightenment or is it closure? Barring some black swan moment, you’re likely to be rewarded with none of the above. And it’s not that meaningful twists and turns can’t happen. Not even that consequential consequences won’t emerge. The problem is ours. No matter what we see and learn, no one is willing, nor is any longer able, to change their minds on anything.
- As an investing community we pride ourselves on employing steely rationality. Constantly updating our Bayesian priors and developing revised and better informed forecasts. Ready to react on a moment’s notice has been replaced with “that’s my story and I’m sticking with it”
- Of course the build-up to today was all wrong. ECB President Draghi was given two choices: keeping the status quo and promising more if needed, or confessing the German delegation has been right all along, the southern countries need to shape up and negative rates are a menace. That doesn’t leave him a lot of wiggle room
- So when he comes out somewhere in the sensible middle, we’ll be right back where we were before and the debates about monetary policy, growth, inflation, structural reforms will proceed as if never interrupted. Watch EUR/USD at 1.12 and 1.13 to define the day
- James Comey’s testimony has been portrayed as the making or breaking of the current presidency. Total vindication or that Perry Mason moment when he tearfully breaks down under questioning, repudiates his opening statement and confesses all. No one listening in today is going to budge one inch in their appraisal of our state of affairs
- This is such a serious moment that a swath of Washington DC bars and restaurants are having early morning “Happy Hours” to watch the goings on. “More powdered sugar for my French toast, please, to counter my horror and dismay.” It’s what the word “unseemly” was invented for. But I guess it’s not any worse than oiling one of your guns to calm your nerves during the questioning. Still, to see how the day went, watch 10-year yields and USD/JPY
- And in the U.K., it’s hard to believe that any of the seminal issues facing the country will be resolved from the outcome. Will we wake tomorrow and say, now we know how the EU negotiations will go, declare income disparity on its way out, buy property in Birkenhead before it becomes the next Mayfair or witness Nicola Sturgeon asking for forgiveness? Same debates to continue. Keep it simple, any pound move outside of 1.2850 and 1.3050 against the dollar will tell the story
- Just as an experiment, after it’s all over try to come up with something new you learned. It’ll be a start. And then get keyed up for Friday’s wholesale inventories number