Buzz Bits: Dow and Nasdaq End in the Green
Your daily Buzz & Banter highlights.
Minyan Mailbag: Yen Carry Trade - Mark Bloudek - 3:25 PM
Couldn't the last couple of days' action be explained by de-leveraging? Especially today with the Yen move? Reversals of the 130/30 type trades?
It is hard to know if your thesis is correct for a couple of reasons. First of all, the Yen carry trade has taken on many forms over the past few years. The traditional carry trade involved interest rate differentials using bonds, most specifically government bonds. As time went on, investors used the low interest rates in Japan to finance the purchase of all different types of assets (think stocks, real estate, and commodities). So it is hard to tell if the unwind is directly related to the unwinding of a specific strategy like 130/30 (which is a strategy that goes long 130% of ones capital while going short 30% of ones capital for a net position of 100% long).
One of the variables that I track very closely when watching the Yen carry trade is the interest rate differential between many different maturities using the US Treasury and the JGB (Japan Government Bonds) because the bond carry trade was/is the traditional form of the carry trade. And if you watch closely, you will notice that there is a very close correlation between the interest rate differentials and the USD/JPY exchange rates. With that being said, we must be careful about assigning causation to a specific strategy driving exchange rates like the USD/JPY.
Hope this helps,
Position in Dollar/Yen
The Tale of Two Tapes - Todd Harrison - 3:08 PM
I've been trading for a mighty long time and I'm not sure I've ever seen such a bipolar stroller.
Seriously, we've got Wells Fargo (WFC) and Freddie (FRE) up 10%, Bear (BSC) up 8%, Beazer (BZH) up 18%, General Motors (GM) up 8%. Heck, the trannies are up 4%. Trannies! Ewww!
And then we've got Google (GOOG) off $45. Apple (AAPL) down 17%. Amazon (AMZN) taking a 7% haircut.
I love it I hate it I love it I hate it I love it!!!!
A few random vibes:
- Picture Mel Brooks. "Rotation, rotation, rotation!!!"
- As goes the piggies, so goes the poke. This, we know (although it sometimes takes time, as we've learned). With that said, leadership is a bit narrow for my taste and I would still like to see participation by huggies and druggies (consumers and pharma). And tech, yeah, that tech thing.
- Every journey begins with a single step. Along those lines, after a 15% two-day step off the lows, watch BKX 88 as the first level of lore.
- There is quite the debate going on in The Exchange regarding this morning's missive. This is the Minyanville community coming alive and if you haven't checked it out yet, you're missing some good stuff. I've long said that the friction between opinions is where true education lies.
- Remember NYSE internals? Working nine to five. What a way to make a living.
- My thoughts? That I can't believe I have a 6:00 AM flight to the left coast tomorrow.
- Aside from that? I haven't pared much since I prematurely evacuated from the financials (not complaining). I reserve the right to make further sales as a function of price (either way) but so ya know.
- For what it's worth, Hoofy likes the fact that there are so many raised eyebrows on the upside.
- Asset Alligators wha?
- So you know and subject to change, I just picked up chatter of a monster S&P futures buyer. I concur, sir, at least for a trade.
Hacking Up a Rally - Jeff Macke - 2:46 PM
Greetings from the NASDAQ Market Site where I'm spending my day trying to get all my cold meds to peak from 5 to 6 pm. It's not a glamorous exercise but it does draw attention away from the hazards of this market. Here's what else I'm watching:
- Financials (XLF, Citigroup (C)) ripping, tech getting moidered and agricultural stocks going with them. If you figured out how to make money with any consistency over the last month you deserve a gold star.
- If it was just a matter of reversing your book from long to short, there would be nothing depressing about bear markets. The depression comes from the fact that no one makes money in bears.
- Also acting well are the retailers. A few good reasons for this, among them: easy money, the stocks have been pre-beaten and, again, bear markets are just hard.
- Pfizer (PFE) looked great, to me. The stock is up 3%. Apple (AAPL) looked okay, the stock is down 15%. That pretty much sums up the risk/ reward of a bear tape.
Real Estate, Interest Rate Sensitive Sectors on the Move - Michael Paulenoff
The standout sectors this morning have been retail, REITs, financials and homebuilders. Huh, really? Interest rate sensitive sectors that figure to benefit in a significant way from the Fed's intension to fight for growth, not against inflation...
Let's have a look at the Dow Jones Real Estate Index ETF (IYR). What a move in the real estate sector. No wonder, though, because the interest rate sensitive sector is reacting to a sense that the Fed will press rates continually lower to improve the profitability of the banks, which in turn will relax some of their recently imposed restrictions on lending to both residential and commercial borrowers -- or so the theory goes. From a technical perspective, all roads point to 65.00 next.
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