“Monetary policy is an art.”
-Ben Bernanke (March 17, 2010)
Having your office on a college campus can certainly make you over-think things. Then again, thinking outside of Washington’s groupthink isn’t all that bad of a strategy. We think that the artists of the Bubble in Global Politics should consider doing the same. YouTube is a real crusher for those who aren’t used to being held accountable for what comes out of their mouths.
The Yale Poli-Sci department may not completely agree, but political science is an oxymoron. In fact, the word oxymoron is in and of itself an oxymoron (it’s a Greek term derived from oxy, "sharp", and moros "dull").
As I was watching the House Financial Services Committee testimony of Paul Volcker and Ben Bernanke I had to stop and rewind my DVR when I heard Bernanke make the aforementioned statement about art. The man is not only a revisionist historian – he is a self proclaimed artist of political science!
If Bernanke is an artist doing his mini-Maestro thing from the highest church of political science, that must make Greek politicians morons. Or does that make sense? Does any of this make sense? What would Einstein think about applying political art to an interconnected global financial system that’s driven by elements of science and math?
I have a headache again.
I see three major global macro stories to focus on this morning:
- German artists breaking rank with Greek artists
- American artists preparing their canvases for inflation storytelling (CPI report due out at 830AM EST)
- Chinese artists saying to heck with what European and American artists think about ours
So let me sprinkle a little macro math onto all of this and take these paintings on one by one:
- Greece’s ATHEX Composite is down -2.6% in early trading this morning, taking its cumulative losses for 2010 YTD and October 14, 2009 to -7.3% and -29.7%, respectively. Since we have intermediate term TREND resistance at 2139, this makes Greece’s stock market broken. Germany is basically breaking rank with socialists from France to the UK this morning saying, look, we need to be re-elected over here at home and it’s not politically palatable to say we trust these Greek morons, nor will we sign off on bailing them out – let the IMF do it.
- America’s SP500 closed up at its highest-high since Bernanke said his political and banking bosses were potentially going to have a Great Compensation Depression. After closing up another 0.58%, March 17th marked not only Bernanke’s proclamation of revisionist faith that “monetary policy is an art”, but a +72.5% deflation from the March 9th, 2009 Great Depressionista low. Wait, did I throw some art into that last sentence, or has this stock market inflation been deflationary? After seeing producer prices in America printed at +4.4% year-over-year yesterday, I guess the artists who want to tell you that this morning’s CPI reading is deflationary can go ahead and sound like Moronic Artists too.
- China’s Shanghai Composite Index closed down 0.14% last night, taking it’s YTD losses back down to -7% for 2010, after the Chinese government released more of the hounds on the domestic artists formerly known as loan sharks (actually, they call them “land developers” I think). The Chinese Council for Promoting International Trade also issued a release notifying all political artists around the world that they are in the midst of conducting Chinese Yuan “stress tests” of their own on 1,000 domestic companies across 12 industries. Said “communists” posing as political capitalists and medical scientists all at once? Impressive.
All the while, the artists formerly known as Derivatives Salesmen from Deutsche Bank, JP Morgan, and UBS are being charged with fraud by the City of Milan as America’s Made-off artist got beat up again in jail by an allegedly unhappy viewer of this gong show. At least Cramer regularly admits he is an artist (the SEC should give him a few points for transparency as they are investigating his Street.com).
What a wonderful world we global risk managers get to live in. My headache is actually going away now. Thanks for bearing with me and letting me vent. These Moronic Artists aren’t worth it. They are who they are and it’s our job to capitalize on their proactively predictable behavior.
My immediate term lines of support and resistance for the SP500 are now 1148 and 1175, respectively. I shorted the SP500 (SPY) and bought volatility (VXX) while hope was trading at a premium yesterday and I sold out of the trading long position we took in China (CAF).
Best of luck out there today,
VXX – iPath S&P 500 VIX — With the VIX down -38% since the SP500 bottomed -10.2% lower on February 8th, now (3/17/10) is a good time to buy some volatility for the immediate term TRADE as it is oversold.
USO – United States Oil — Despite a sharp correction in oil prices on 3/15/10, the price of WTIC oil remains in a bullish intermediate term position with TREND line support at $77.39/barrel. Buying on red.
XLV – SPDR Healthcare — Healthcare was down again on 3/9/10 in the face of “Obamacare” inspired fear. While we fear we may be early here, it’s better than fearing fear itself.
UUP – PowerShares US Dollar Index Fund — We bought the USD Fund on 1/4/10 as an explicit way to represent our Q1 2010 Macro Theme that we have labeled Buck Breakout (we were bearish on the USD in ’09).
CYB - WisdomTree Dreyfus Chinese Yuan —The Yuan is a managed floating currency that trades inside a 0.5% band around the official PBOC mark versus a FX basket. Not quite pegged, not truly floating; the speculative interest in the Yuan/USD forward market has increased dramatically in recent years. We trade the ETN CYB to take exposure to this managed currency in a managed economy hoping to manage our risk as the stimulus led recovery in China dominates global trade.
TIP - iShares TIPS — The iShares etf, TIP, which is 90% invested in the inflation protected sector of the US Treasury Market currently offers a compelling yield. We believe that future inflation expectations are mispriced and that TIPS are a efficient way to own yield on an inflation protected basis.
HYG – iShares High Yield Corporate Bond — Suffice to say, we aren't yield chasers with High Yield priced up here. There is a big difference between high-grade and high-yield; some hopefully learned this lesson back in 2007.
XLP – SPDR Consumer Staples — Consumer Staples was the best performing sector on 3/15/10 in our S&P Sector Model and was immediate term overbought.
SPY – SPDR S&P500 — We moved to neutral (from bearish) on the S&P500 on the week of February 22. At 1139, for the immediate term TRADE, we’ll go back to bearish. This market is finally overbought. We shorted SPY on 3/5/10 and 3/17.
EWP – iShares Spain — The etf bounced on 3/3/10 in part from a strong day from Banco Santander, the fund’s largest holding in the Financials-heavy (43.8%) etf. We added to our short position for a TRADE on 3/5 and 3/17 as every sovereign debt risk has a time and price to be short of. We have a bearish bias on the country; massive unemployment, public and private debt leverage, and a failed housing market remain fundamental concerns.
IWM – iShares Russell 2000 — With the Russell 2000 finally overbought from an immediate term TRADE perspective on 3/1/10, we shorted IWM and added to the position on 3/2 and 3/17.
GLD – SPDR Gold — We re-shorted Gold on this dead cat bounce on 2/11/10. We remain bullish on a Buck Breakout and bearish on Gold for Q1 of 2010, as a result.
IEF – iShares 7-10 Year Treasury — One of our Macro Themes for Q1 of 2010 is "Rate Run-up". Our bearish view on US Treasuries is implied.