“I’m so tired, I haven’t slept a wink.
I’m so tired, my mind is on the blink.
I wonder should I get up and fix myself a drink.”
I’m So Tired, The Beatles
Macro Man can sympathize with John Lennon’s 1968 lament. Not only is he weary of these treacherous markets in the “existentialist ennui” sense, but he struggled to get any sleep at all last night. Wondering the same thing as Mr. Lennon, he eventually decided in the affirmative and hauled himself out of bed for a bit of coffee and Special K.
There wasn’t any particular concern keeping him awake last night; it’s more of a general disgust at getting sucked into silly trades. One of his general trading maxims is to “know your market”- i.e., whether it’s a market that forgives mis-timed trades or punishes them brutally. He’s pretty sure that he’s not alone if feeling that the current market is among the latter.
It’s hard to believe that Spoos are now barely a percent off of last month’s highs. Man, that didn’t take long, did it? If yesterday’s price action is anything to go by, a break of the ~1100 cash top could generate the dreaded melt-up scenario.
There are some who posit that the fate of the market is tied up with the health care bill. Macro Man’s strong sense is that there is a real disparity in views over how important the bill is, depending on where one lives. Non-US residents seem to view the bill from a purely academic perspective, in terms of its impact on government and private sector finances, as well as on a company-specific level. It feels as if the issue is a much more emotive one for US residents, with the bill representing “the end of the American way of life” or “a badly overdue helping hand to the uninsured underclass”, depending on your viewpoint.
Your author will stay out of that fray, but finds the chart below to be of intense interest. Courtesy of Pareto Securities, it suggests that the famously profligate US consumer isn’t quite as profligate as we thought….he’s just trying to pay his health care bills.
Elsewhere, Fitch has made some menacing rumbles about the UK’s AAA rating, which has put sterling under a pit of pressure this morning. Gordon Brown’s Peso has had quite a strong run over the last few weeks, as short the pound was, in retrospect, one of the bigger flamingos out there.
These would, on the face of it, appear to be good levels to get back in. But this is a market that rallied sterling last week after the BOE was alone in doing more QE; just another slip of paper for the “things I don’t understand” drawer. One thing that Macro Man does understand is that he’s tired of getting whipped around; it’s time to raise the bar for trade entry.