Tuesday, November 27, 2007

Dearie Me...

Oh dear, what a spectacle! "I love it!", "I hate it!", "I love it!", "I hate it!". Today, I love it. Several things come to mind when epic battles of bulls and bears, such as this play themselves out in the markets, one being naked mud-wrestling. Of course this being a blog of highly outstanding moral character (Ha!), and Cassandra herself being rather prim, you'll have to settle for a gander upon a Sunday league match that probably should have been canceled due to the elements, to represent what we are all witnessing in markets over the past few weeks.

Yours truly has never - macro-ecnomically speaking - been tactically adept, unlike our wise friend, Macro-Man who exhibits steely detachment under the pressures of elevated daily price WOLATILITY! Knowing this, and my predisposition, helps me keep my perspective during the hairiest of short-covering bounces, or most extreme of vomit-like liquidations.
The only thing I might offer-up to those blue-in-the-arse today is that global real estate news flow is unlikely to improve soon; in the absence of a continuation of mindless credit expansion (and to all objective observation it has been stopped in its tracks) US & UK consumption is destined to disappoint despite diminished expectations, and this is true whether oil is $97bbl or $87bbl. Do note the bar-bell bounce at the extremes: at one end, those low-value, high-momentum with and higher-than-avg short-interest names so popular with specs, along with the the highly-shorted securities that everyone hates (financials, mortgage, housing, retail, etc.). And everything dragged up by exposure-scrambling in all FTF index things cap-weighted (SPX, RTY etc.). Yes, stocks were oversold. Yes, the reaction to financial distress now-across the popular media caught some me-too action. But the big story is, credit not only is - and will continue for at least the near future to be constrained - but that the constraint in itself will be a prime determinant of the bias of change in asset prices. Maybe authorities will eventually succeed in reflation, but NOT until after many-a-balance sheet shrinks, previously mis-marked securities find market value in the light of a new, more sober, era, with all the attendant ripples and cascades that this will cause. Do not take your eye off this medium-term tactical ball.

7 comments:

U.Unknown said...

"WOLATILITY!"

You wouldn't poking fun at a Swiss gentleman who uttered exactly that on CNBC a long while ago would you?

Peter said...

i was uttering the same words to myself on the way to work this morning.. and convinced myself that this time it will be "mind over matter" ..

oh and I agree Mr D.Kohn.. there is no need to worry about moral hazard. its simply too late for that.. the Titanic is sinking, too late for educating people on Health and Safety procedures

OldVet said...

Dollars are green and leafy in texture. Eat your wegetables, or use as compost for your Rupiah garden. That's what I was saying till Tuesday. Still am, but now under my breath.

Macro Man said...

Actually, OldVet, the rupiah is among that hardy band of currency turds that is actually WEAKER against the US dollar this year- and this despite being a favoured "China proxy" from those supposedly in the know. Oh, the humanity!

Anonymous said...

Yeah.. that Kohn chap, Lord
High Protector of innocent bystanders.

No doubt much to Cs disapproval,and like the weggies?, quite enough to make one's stomach turn Randian.

OldVet said...

Wait a minute, I'm not heavy in Rupiah (INR) but darned if I didn't get some when they were 45:1 and now they're 29.5:1. As good or better than my Swiss Francs, altho I love the gnomes more and Lac Geneve.

OldVet said...

"39.5:1" rather.

And I'm not holding my breath on China, either, or Japan.