Registered: Aug 2009
08-03-12 06:33 AM
Credibility sliding big time, is all I can say about Draghi's performance yesterday. I think he just traded in his credibility for saving his bullets for rainier days. Problem here is that a central banker without credibility is utterly worthless.
After much contemplation I can only conclude that it was not his choice to withhold every and all details of how he intends to stabilize sovereign yields. I think it was another attempt at bluffing Merkel and Germany into folding against incredibly weak hands. This time it did not work out, though. The other Mario (Monti) must have shared his moves with Draghi and how he trumped out Merkel at the EU summit. Last week Draghi announced bold steps just after Merkel left into her summer vacation WITHOUT coordinating with those country heads (aka Germany) that are supposed to stem this crisis and pay for everyone else. It did not work out. German power brokers must have been furious last weekend and I think they just clipped Draghi's wing . There is no other explanation to this. First, no central banker in the world, at least not of Draghi's caliber (really, he is ex Goldman...???) can be so stupid in believing they can promise bold moves to the market and utterly disappoint a week later without consequences...No way. Secondly, Draghi's displeasure with Weidman was felt very clearly, he referred to him several times during the press conference and made sure to let the world know how isolated he felt Weidman was with his views of how to step up to the plate. Ergo, it seems very clear to me that he was called back by some very powerful players in this game.
Trading in this market has just become again a level more complex and harder. We will now suck up each and every little economic release from one week to the next playing the guessing game of which central bank will make its move first and when.
Trying times to be a macro trader. But this is not the first time in my career, it pays to run my own shop, to not have any pressure whatsoever other than my fiduciary duty to my investors and my own pockets. I would never take on clients who demand turn over of investments even if I preferred to stay in cash. I do not even charge management fees, my incentive structure is perfectly aligned with my investors' interests and I think it comforts them as well. For me this week is done, I eked out a bit of pnl after having passed up 240 pips of profit last week and another 100 pips earlier this week.
TGIF, will hit the beaches this weekend at nearby Izu-peninsula (2 hours from Tokyo). Have a good weekend everybody.