Former trader and current man who thinks this already-shortened week should probably just end on Thursday, Richard Breslow, is out with his latest missive and it’s a fleeting affair.
Breslow has given up on this week and he thinks maybe you should too.
Because as it turns out, Kim and Irma have stolen the spotlight from Draghi and Poloz despite the latter’s best efforts to wake everyone up to the fact that it is in fact possible to hike rates in the post-crisis environment (or at least it’s possible in the short-term – whether hikes will have to be reversed in fairly short order is another discussion).
One of the scariest things about North Korea’s next missile launch (which, given founding day, is pretty much a foregone conclusion) and Hurricane Irma is that they’ll be unfolding when markets are closed. I mean, I guess the “scariest” thing about those two events is the fact that we’re talking about ICBMs and catastrophic hurricanes, but let’s assume we’re all traders first and human beings second for the purposes of Richard’s piece.
So how do you position heading into the weekend knowing that “Monday could look very different from Friday” (where that means Florida and Japan might no longer be places on the map)?
Well, the best answer is probably: “you don’t.”
There was a lot of market-moving news yesterday. More to come. Unfortunately for traders, the two items with the biggest potential lasting effects are virtually impossible to handicap. And to make matters worse, we won’t know their punch-line until the weekend: when markets are closed for business. I’m referring, of course to the North Korean threats of another missile launch as part of marking their nation’s founding and the massive hurricanes bearing down on the east coast of the U.S. Now, how are you left as you think about taking a position home Friday night?
- And it’s vital to be very circumspect in ascribing causality to market moves as we struggle to manage, adjust or, even, ignore the risks surrounding these events. Traders are trying to figure out how to survive, even more than thrive, with the realization that Monday could look very different from Friday — however things turn out
- It’s likely that we’ll try to carry on with the established trends for the balance of this week, as that seems to be the path of least resistance. But in a world where trying to pick a market turn is the most popular parlor game out there, it could end up being a very busy start to next week. Treasury yield at 2.08% could look either very cheap or dear, depending. Same for the dollar, gold, and so on
- I would strongly advise against throwing around words about risk on or off, safe havens, reassessments, and the like. They are meaningless in this instance. The best you can do is observe how positions are being tweaked. And try to get a sense of which way around are all the marginal positions. It’s a purer way than making a big deal about stale CFTC data
- And, please, don’t cry “eureka” and announce that you’ve discovered a new safe haven because it’s suddenly occurred to you that the renminbi has been trending for the last four months or that Canadian numbers have been consistently beating official, as well as private, forecasts
- You’re all excited about the start of the NFL season, but there could be a lot of people more intent on counting down to the Wellington open