what macro indicators are needed to complement micro...
TRANSCRIPT
Wha
t mac
ro in
dica
tors
are
ne
eded
to c
ompl
emen
t mic
ro-
finan
cial
dat
aA
ngel
Ubi
deTu
dor I
nves
tmen
t Cor
p.7th
Ann
ual I
nter
natio
nal S
emin
ar o
n P
olic
y C
halle
nges
fo
r the
Fin
anci
al S
ecto
r M
ay 2
007
Mar
ket i
ndic
ator
s to
com
plem
ent
mac
ro a
nd m
icro
dat
a–
Bec
ause
they
may
sig
nal v
ulne
rabi
litie
s–
Bec
ause
they
may
cha
nge
the
fund
amen
tals
•su
bprim
e=>
cre
dit d
eriv
ativ
e ev
ent
–B
ecau
se th
ey m
ay im
prov
e as
sess
men
t of
risk
rew
ard
of p
olic
y ac
tions
–B
ob R
ubin
’s a
ppro
ach
Mac
ro a
naly
sis
may
be
inco
mpl
ete
–to
o co
arse
.M
icro
-fina
ncia
l ana
lysi
s m
ay b
e in
com
plet
e -s
naps
hot.
=> A
sses
sing
wha
t hap
pens
and
pre
dict
wha
t will
ha
ppen
Pla
n of
the
talk
•H
ow to
look
at m
arke
ts -
Wha
t hap
pene
d in
Feb
27?
•
Cou
ld th
e po
st F
eb 2
7 ou
tcom
e be
pr
edic
ted?
How
we
use
mar
kets
to
impr
ove
asse
ssm
ent o
f eco
nom
y an
d ris
ks.
•D
o ca
rry tr
ades
mak
e se
nse?
Feb
27-M
ay in
a d
ay
•Ex
trem
e ris
k ap
petit
e be
fore
hand
•S
udde
n sh
ift in
risk
and
unc
erta
inty
–un
mea
sura
ble
risk
of c
redi
t der
ivat
ive
cris
is in
duce
d by
col
laps
e of
sub
prim
em
ortg
age
mar
ket
•C
hina
cra
sh?
•G
reen
span
’s re
cess
ion
talk
+ v
ery
wea
k du
rabl
e go
ods
data
=>
glob
al re
cess
ion
fear
s?=>
Mov
e to
199
5-20
03 v
olle
vels
? =>
repr
icin
gof
as
sets
/mul
tiple
s
Pan
ic m
ore
than
reap
prai
sal o
f fu
ndam
enta
ls
•S
D: 6
in v
ols,
3 in
equ
ities
/fixe
d in
com
e, le
ss
than
2 in
fxca
rry
trade
s –
Blu
e sk
y ev
ent –
tippi
ng p
oint
–D
on’t
blam
e th
e B
oJ!
•49
8/50
0 st
ocks
in S
P d
own
=> a
irpoc
ket/s
tops
-m
utua
l fun
d tra
ding
pre
vale
nt•
Put
/cal
l rat
io s
kyro
cket
ing
to 9
/11
leve
ls•
Vol
ume
10:1
to d
owns
ide,
firs
t tim
e si
nce
1987
Whe
re a
re w
e to
day?
•U
S s
ubpr
ime
and
hous
ing
isol
ated
, de-
coup
ling
is th
e un
derly
ing
them
e–
Ban
king
sto
cks
wea
k as
bet
on
dow
nsid
e ho
usin
g ris
k –
but S
PX
at r
ecor
d hi
gh–
AB
X s
tabl
e bu
t low
er•
Ris
k ap
petit
e al
mos
t bac
k to
pre
Feb
27
leve
ls–
Stro
ng g
loba
l gro
wth
/dec
oupl
ing
–EM
BI
reco
rd lo
w, S
hang
hai u
p ov
er 5
0% y
td, s
trong
co
mm
oditi
es, w
eak
USD
It w
as fe
ar, n
ot u
nwin
ding
of c
arry
tra
des
•It
was
a s
care
–si
mila
r to
2005
(d
owng
rade
of G
M/F
ord)
, and
200
6 (in
flatio
n sc
are
lead
ing
to E
M s
ell o
ff).
•B
ut it
cou
ld h
ave
mac
ro im
pact
–tig
hten
ing
if le
ndin
g st
anda
rds
if C
DO
m
arke
t drie
s up
•It
had
real
ly n
othi
ng to
do
with
car
ry tr
ades
How
to d
o w
e us
e fin
anci
al m
arke
ts
to im
prov
e ris
k an
alys
is?
•Fu
ndam
enta
ls/V
alua
tion
(Q,M
)•
Flow
s (Q
,M)
•P
ositi
onin
g/S
entim
ent (
M,W
,D)
•Te
chni
cals
(M,W
,D)
•S
umm
ary
=> A
nalo
gues
Flow
s•
How
do
the
diffe
rent
pla
yers
beh
ave?
–
Equ
ity is
suan
ce–
Mut
ual F
und
dem
and
–M
&A
cro
ss b
orde
r flo
w a
nd p
ipel
ine
–B
uy b
acks
–B
ond
issu
ance
–P
ensi
on fu
nd/L
ife in
sura
nce
dem
and
–R
eser
ve m
anag
ers
dive
rsifi
catio
n–
Pro
fit re
patri
atio
n•
Est
imat
e de
man
d/su
pply
imba
lanc
e•
Por
tfolio
sho
cks
beco
min
g ve
ry im
porta
nt a
nd p
ersi
sten
t–
HIA
in 2
006
–su
ppor
t for
US
D–
Com
mod
ities
as
asse
t cla
ss –
com
mod
ities
infla
tion
–“G
reen
”pol
icie
s –
food
infla
tion
–E
xces
s de
man
d in
“new
mar
kets
”–lo
wer
spr
eads
Sen
timen
t/Pos
ition
ing
•Su
rvey
s –
Sur
veys
: Whe
re a
re m
arke
t pla
yers
taki
ng m
ore
risk?
–S
urpr
ise
indi
ces
(act
ual –
cons
ensu
s)•
Ris
k/se
ntim
ent m
easu
res
–V
IX/M
OV
E/B
ull-B
ear
•C
omm
itmen
t of T
rade
rs–
Non
-Com
mer
cial
Spe
cula
tive
Pos
ition
ing
(CB
OT)
=> Id
entif
y ex
trem
es
Posi
tioni
ng o
f Non
-Com
mer
cial
(Spe
cula
tive)
Tra
ders
Net
Pos
ition
(lev
el)
Posi
tioni
ngPo
sitio
n C
hang
es (U
S$ m
n)
Con
trac
tsU
S$ m
illio
n%
of o
pen
inte
rest
Scor
e*Lo
ng P
ositi
ons
Shor
t Pos
ition
sN
et P
ositi
on
(-10
to +
10)
(pos
itive
figu
re =
buy
ing
of th
e re
spec
tive
ccy/
seel
ing
of U
S$)
EUR
1.34
4EU
R12
5000
1043
9417
532
499.
615
51-1
0316
55
JPY
119.
1JP
Y125
0000
0-6
4841
-680
6-2
8-3
.860
969
9-9
0
GB
P1.
972
GB
P625
0048
417
5969
408.
2-4
1651
1-9
27
CH
F1.
217
CH
F125
000
-232
06-2
385
-40
-3.6
327
-85
411
CA
D1.
147
CA
D10
0000
-155
64-1
357
-14
-3.1
105
-157
516
79
AUD
0.83
AUD
1000
0074
355
6139
639.
5-4
8628
-514
MXN
11.0
1M
XN
5000
0013
744
624
18-3
.231
5-2
2854
3
US
D**
--
--1
9716
-19
-9.0
-752
2005
-275
7
* A
scor
e cl
ose
to +
10 in
dica
tes
that
the
spec
net
long
pos
ition
rela
tive
to o
pen
inte
rest
is a
t the
hig
h of
the
hist
oric
al d
istri
butio
n.
** A
ggre
gate
of a
ll 7
cros
ses
abov
e w
ith s
ign
inve
rted.
Exc
hang
e C
ontra
ct
Tech
nica
ls
•K
ey tr
ends
–“T
he tr
end
is y
our f
riend
”. C
an b
ecom
e se
lf-re
info
rcin
g –
–co
nvex
ity s
ellin
g fo
r fix
ed in
com
e–
CTA
pos
ition
ing
•K
ey re
sist
ance
-sup
port
leve
ls –
Ver
y im
porta
nt fo
r fx
mar
kets
, for
exa
mpl
e.
Ana
logu
es
•B
ased
on
all o
f the
abo
ve•
How
did
mar
kets
beh
ave
in th
e pa
st w
hen
(a,b
,c) h
appe
ned?
–
Fund
amen
tals
–C
orre
latio
ns–
Ris
k/se
ntim
ent/p
ositi
onin
g/te
chni
cals
•A
sses
smen
t of F
eb 2
7 –
don’
t wor
ry a
bout
eq
uitie
s, w
orry
abo
ut c
redi
t.
PRO
JEC
TED
PAT
H O
F S&
P B
ASED
ON
RIS
K A
PPET
ITE
TREN
DS
859095100
105
110
115
120
-120-115-110-105-100-95-90-85-80-75-70-65-60-55-50-45-40-35-30-25-20-15-10-505
101520253035404550556065707580859095
100105110115120
TRAD
ING
DAY
S FR
OM
EVE
NT
SPX INDEX (3/5/07 = 100)
EVEN
T: 5
MAR
07SA
MPL
E M
EDIA
NH
IGH
LY C
OR
REL
ATED
HIT
: 10A
UG
98AV
ERAG
E O
F C
OR
REL
ATED
HIT
S
FILT
ERIN
G:
RIS
K AP
P IN
DEX
LO
WER
BY
3.5
OR
MO
RE
OVE
R L
AST
10 D
AYS
MAR
KET
HIG
HER
OVE
R L
AST
120
DAY
S
03/2
1/07
Car
ry T
rade
s•
Bet
on
low
vol
atili
ty–
Sel
l opt
ions
–co
llect
pre
mia
–B
uy h
igh
yiel
ding
vs
low
yie
ldin
g cu
rren
cy•
Goo
d fo
r VaR
risk
man
agem
ent s
yste
ms
=>
prod
uce
smoo
th re
turn
s. B
UT:
nee
d to
get
out
be
fore
oth
ers
=> s
pike
s•
Alte
rnat
ive:
bet
aga
inst
car
ry. E
xpec
ted
retu
rn >
ca
rry
trade
s, b
ecau
se o
dds
of e
xtre
me
even
ts
are
unde
rest
imat
ed –
BU
T ca
n’t h
andl
e da
ily
mar
k to
mar
ket
•A
re c
arry
trad
es p
rofit
able
? It
depe
nds.
Do
polic
y m
aker
s pr
omot
e ca
rry
trade
s?
•To
the
exte
nt th
at c
entra
l ban
ks fo
cus
on
pred
icta
bilit
y an
d im
plem
enta
tion
of m
onet
ary
polic
y th
roug
h pr
ovis
ion
of fo
rwar
d lo
okin
g in
form
atio
n, y
es.
•To
the
exte
nt th
at c
entra
l ban
ks a
re a
sym
met
ric
with
resp
ect t
o de
flatio
n, y
es.
•To
the
exte
nt th
at E
uro
enla
rgem
ent
arra
ngem
ents
are
pol
itica
lly c
redi
ble,
yes
.=>
Doe
s po
tent
ial c
ost o
utw
eigh
ben
efit
from
this
po
licy
fram
ewor
ks?
Fund
amen
tals
of t
wo
carr
y tra
des
•JP
Y (z
ero
infla
tion)
–P
ortfo
lio s
hock
: Mas
sive
Jap
anes
e re
tail
outfl
ows
to
redu
ce h
ome
bias
–B
oJst
ill in
ant
i-def
latio
n m
ode
–“c
erta
inty
”of l
ow
rate
s•
Mor
tgag
es in
JP
Y in
Eur
ope
•G
loba
l com
pani
es fu
ndin
g in
JP
Y•
CH
F (c
lose
to z
ero
infla
tion)
–E
aste
rn E
urop
e co
nver
genc
e w
ith e
uro
area
–“c
erta
inty
”of f
xst
abili
ty•
EE
bor
row
ing
in C
HF
•N
o re
ason
to b
elie
ve fu
ndam
enta
ls w
ill c
hang
e in
nea
r ter
m –
“rat
iona
l car
ry tr
ades
”
Con
clus
ion
•Th
ere
is to
o m
uch
mar
ket i
nfor
mat
ion
•A
lot o
f it i
s no
ise
•B
ut th
e si
gnal
can
’t be
dis
rega
rded
, and
it im
prov
es
mac
ro/ri
sk a
naly
sis
•P
ortfo
lio s
hock
s/flo
ws
are
beco
min
g in
crea
sing
ly
impo
rtant
and
per
sist
ent –
wat
ch th
e “g
loba
l im
bala
nce”
•S
entim
ent i
s be
com
ing
ver
y im
porta
nt –
buy
the
dip
men
talit
y
•B
est a
dvic
e: h
ave
ongo
ing
and
dive
rse
dial
ogue
with
m
arke
ts –
at ti
mes
diff
eren
t mar
kets
sig
nal d
iffer
ent
view
s (i.
e., m
acro
vie
w o
f equ
ities
vs
bond
s).