Former FX trader Richard Breslow is in rare form on Wednesday.
We like Richard because he takes great pleasure in telling you what you’re doing wrong and he doesn’t mince words.
His first two missives this week were calm by Breslow-vian standards, but regular readers know that as the week wears on, you invariably wear on his patience.
Well this morning, he’s out calling you a “stargazer” who will likely end up broke if you don’t get your fucking head out of the clouds. Specifically, you need to:
- stop making grand pronouncements of where things are inevitably going to go
- stop basing your trading decisions on “wild projections fueled by an irrelevant and dangerous tincture of moral outrage”
- stop losing every battle you fight
- save your “grandiose portrayals of tectonic shifts for the history texts”
This is a riff on a persistent Breslow theme about how it’s dangerous to construct narratives. But to the extent this is one of many sequels to some original piece warning about trading “grandiose portrayals of tectonic shifts”, it is surely the funniest.
Stargazing Won’t Make You Money, Skepticism Will
- The euro has had some great trading ranges against all sorts of other currencies. But at the end of this day, at least, it’s nowhere. It’s belied the notion that it’s going to collapse. The corollary isn’t that therefore it’s going to do the mirror image of dollar performance in 2014. That’s a baseless assumption and fails to take into account the ECB’s defense mechanism
- It’s Europe’s turn to get everything right and be lucky in all things is a nice thought but not a solid investment thesis. Emmanuel Macron is good, but not that good. In any case, there’s nothing in the charts suggesting a breakout is imminent
- Equities have been bid. Passive funds and other long-term investors are in at great levels. They can afford to buy dips. But whether you buy it today or not is a completely different discussion. Whether you think it’s a bubble or not is irrelevant to any decision-making you do, unless you’re starting a new fund. Save the risk on/risk off debate for when something material and unexpected happens. The SPX made a new all-time high this past Monday. Great wealth hasn’t been destroyed since because some energy stocks are lower
- Bonds are bid and there’s an insatiable demand for flatteners. This really has been the most interesting trading story and it’s driving a lot of other things. It’ll last, until it doesn’t. The move’s been great. Not historic. It’s based on a great narrative. What’s the one lesson we should’ve learned by now? Market narratives have been novellas, at best, not tomes. And often hardly weighty.
- What we do know from this bond price action is only inflation numbers matter for now, especially U.S. ones. Next bite at that apple will have to wait until next week. Oil being lower has a big effect on trader psychology, but it was less than four weeks ago that the market was all bulled up. We’ve been here before
- And lest you forget, not all inflation and deflation are created equal. Lower oil has many positive benefits for economic growth, whatever some contrived CPI calculation suggests
- Furthermore, don’t get caught up in central bank speak. There’s a long way to go until September. Janet Yellen hasn’t panicked. Let’s hear what Bill Dudley says on Sunday. The rest is irrelevant. Need an example? Look what the pound did over the last two days on conflicting headlines. It means nothing until the calendar turns
- Seize the opportunities that keep being handed to you and save the grandiose portrayals of tectonic shifts for the history texts