Well, Richard Breslow is out with his first missive of the week and bless his heart, he’s still pining away for the days when trading made sense.
This week, the former trader hopes, will be “a bit of a throwback.”
That’s a nice thought, but unlikely to materialize. The RBA is going to be watched closely – perhaps more closely than Breslow suggests below and traders will be watching the BoE vote count more closely than they did the health care bill vote.
Breslow is right, however, to note that with Jackson Hole weeks away, risk assets likely have the green light. You can’t expect the hordes of pseudo-futures traders waiting to jump on XIV and basking in the green glow of their SPY to give a shit if the RBA comes out sounding more like the hawkish minutes and less like the dovishness we got from Debelle and Lowe.
Anyway, read below as Breslow longs for the days of yore in a piece that reads a lot like the market equivalent of SNL’s “Deep Thoughts, By Jack Handey“…
This is a bit of a throwback week. We should try our best to enjoy it. There’s no shortage of economic numbers, the central banks that are meeting are important, but not ours, and unlikely to rock our worlds and plenty of unsettling geopolitical circumstances. But no one need busily check their OIS runs to see if September is more or less in play today versus yesterday. There’s a becomingly moderate number of speakers on the docket intending to impart their latest wisdom concerning ancient models that do well describing a world that no longer exists. Jackson Hole is weeks away
- So, presumably, we can all get back to trading like the olden days. Unhindered by someone else’s reaction function. Maybe for a time we can put balance sheet tinkering aside and concentrate on whether the numbers fit the price action. Would that it were so, but I had to at least ask
- My guess is that many traders expect the economic numbers to be good, perhaps even small beats. But unlikely to change our perceptions of a growing global economy that nevertheless keeps throwing up anemic numbers just when we begin to start getting optimistic
- Inflation, except for what I buy, refuses to allow itself to be measured and will continue to keep monetary policies looser than the rhetoric. The actions of the RBA (tonight) or Bank of Canada will tell us more about the future trajectory of policy rates than G-3 speeches. But how might we look at things when trading here and now
- Equity prices have done nothing wrong and should be treated that way. Doesn’t matter if you love them or hate them. They’ll tell you when it’s time to sell, not the other way around. Multi-year trends don’t reverse by having a down day. There have been no actions by the central banks that would suggest that they believe there’s benefit in being the bubble popper
- The dollar will stay weak until other countries push back. And that will happen. But try not to have water or coffee in your mouth if any U.S. official trots out the “strong dollar is in our best interests” line. There’s nothing in the behavior of those in Washington that suggests there isn’t perfect willingness to tolerate, indeed encourage, a feeble currency. At least let’s pray some of their behavior is on purpose. Bounces are opportunities
- Sovereign yields are ruthless in suckering us into thinking the great bond trend is reversing then racing back to the low end of the range as soon as the shorts are set. It’s a tactical trading environment couched in all sorts of strategic language. The range can be your friend or relentless tormentor
- I realize that geopolitics are inordinately hard to handicap from a market perspective, but it’s not prudent, if indeed possible, to read the TOP page and conclude nothing can go wrong. I would suggest that with long rates insisting on staying lower for longer, the dollar swooning and bubbles under the protection of the authorities that more investors are indeed paying close attention than we think